Monday, January 27, 2014

Tea Party Lies: Lie #5

Lie #5. 

The economy would improve if we cut the budget deficit right now. Baloney. 

As long as many Americans are still out of work – remember 8.8 million lost jobs because of the corporate/banking criminal behavior -- the first priority must be jobs and growth. Government spending counteracts the shortfall in private spending. Until employment and growth are restored to normal levels, budget cuts only increase unemployment and reduce tax revenues. We should start cutting the federal budget only when the economy is back on track, when unemployment drops to around 5% and growth is back to 3%.


Don’t get me wrong. The national debt is a problem, but the ratio of debt owed by the government to the economy’s total output of goods and services in 2012 wasn’t nearly as high as it was after World War II— when it reached 120%. If we move more quickly toward a full recovery, the debt-to-GDP ratio will fall, as it did in the 1950s. Revenues will flow into the Treasury, and much of the current “budget crisis” will evaporate. Growth and jobs ARE the key. When more people are working, more companies are profiting, the economy is expanding, revenues pour into national treasuries, and the debt declines relative to the economy. When the economy grows more slowly or contracts, the opposite occurs. Economies can fall into vicious cycles of slower growth and lower tax revenues. It comes down to a question of timing.

Robert Reich 

Tea Party Lies: Lie #4

Lie #4. 

We’d have a stronger economy if we had fewer regulations. Untrue.

Corporations exist for one reason only— to make a profit and thereby increase the value and safety, fairness to small investors, and a sustainable environment are all public goods. Without them, we’d be the poorer for it. 
Regulations make sense where the benefits to the public exceed the costs, and regulations should be designed to maximize those benefits and minimize those costs. Look what happened in the bank debacle. Period.

   Robert Reich

Tea Party Lies: Lie #3

Lie #3. 

We’d have more jobs and a better economy if we shrank the size of government. Wrong. 
Shrinking government results in fewer government workers— including teachers, firefighters, police officers, and social workers at the state and local levels, and safety inspectors and military personnel at the federal level. And it results in fewer government contractors who therefore employ fewer private sector workers. This is the same crap the Tea Party extremists have been mouthing for decades. Their ultimate goal, in the words of the regressive guru Grover Norquist, is to take government “down to the size where we can drown it in the bathtub.” When asked to explain the logic, they simply parrot, “Government is the source of all our problems.” When you point out government spending brought the economy out of the Great Depression, he disagreed. “The Depression ended because of World War II,” he pronounced, as if government had played no part in World War II.

   Robert Reich

Tea Party Lies: Lie #2

Lie #2. 

American corporations would create more jobs and spur the economy forward if their taxes were lower. Wrong again. American corporations don’t need tax cuts. Many of them, like General Electric, manipulate the tax code so they don’t pay any taxes at all. Besides, large and middle-sized companies are having no difficulty getting loans at bargain-basement rates, courtesy of the Fed. Big companies are sitting on more than $2 trillion of cash right now that they don’t know what to do with.  The reason they’re not investing in additional capacity or many new jobs has nothing to do with taxes. It’s that they don’t see enough customers with enough money in their pockets to buy what the additional capacity would produce. Businesses are spending as much as they can justify economically. Almost two-thirds of the measly growth in the economy in 2011 came from businesses rebuilding their inventories. But without more consumer spending, businesses won’t spend more. 

A robust economy can’t be built on inventory replacements. The wrongheaded idea that corporations need tax cuts to create jobs is also being used by regressive governors who are cutting business taxes willy-nilly in order to compete with other states that are doing the same. They’ve entered into a giant zero-sum game that doesn’t create a single new job overall but robs the states of money needed for critical investments in schools and infrastructure. In 2012, Florida’s governor, Rick Scott, said his corporate tax cuts “will give Florida a competitive edge in attracting jobs.” But Florida simultaneously cut education spending by $3 billion, when the state already ranked near the bottom in per-pupil spending and had one of the nation’s lowest graduation rates. Even if Scott’s tax cuts created jobs, the jobs would pay peanuts.

   Robert Reich

Tea Party Lies: Lie #1

Lie #1. 

The rich are “job creators,” so tax cuts for the rich trickle down to everyone else while higher taxes on the rich hurt the economy and slow job growth. Untrue. Look at recent history. George W. Bush cut taxes on the rich, and what happened? A fraction of the number of jobs were created under Bush than had been created under Bill Clinton, and the median wage dropped, adjusted for inflation. Trickle-down economics is a cruel joke; from the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70% or above. Under Dwight Eisenhower it was 91%. Even after all deductions and credits, the top taxes on the very rich were more than 52% — far higher than they’ve been since. Yet the economy grew faster during those years than it has since. During almost three decades spanning 1951 to 1980, when the top rate was between 70% and 91%, average annual growth in the American economy was 3.7%. Between 1983 and the start of the Great Recession, when the top rate dropped to between 35% and 39%, average growth was 3%.

Tea Party extremists say small businesses would be hurt by a higher marginal tax. Don’t believe this, either. Only just over 1% of small-business owners earn enough to be taxed at the top rate— and that’s just on the portion of their incomes exceeding $379,000. The rich don’t create jobs. Jobs are created when the vast majority of Americans buy enough to make companies add capacity and hire more workers. But that won’t happen unless the vast majority has enough money to do the buying; when a disproportionate amount of national income goes to the rich, the middle class no longer has the purchasing power to create these additional jobs.

Robert Reich