President Obama spoke to the nation today through an excellent op-ed in the Washington Post, “The Action Americans Need.”
After discussing the scope and seriousness of the economic debacle precipitated by years of bad ideology, bad thinking, bad decisions and incompetent, sometimes perverse governance, Obama focused on what those responsible are doing now.
In recent days, there have been misguided criticisms of this (economic stimulus) plan that echo the failed theories that helped lead us into this crisis — the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We’ve seen the tragic consequences when our bridges crumble and our levees fail.
To put one of many names and faces on the problem — Republicans obstructing what they fear will be a successful Democratic initiative to right the economy — consider the following. It’s Sen. Saxby Chambliss, R-Ga., speaking on the floor of the Senate yesterday.*
We must incentivize the creation of new jobs through favorable tax treatment of businesses and individuals. My friend from South Carolina mentioned an issue we are going to have in our amendment that is very critical, I think, to the long-term corporate structure in America. A solution that really will provide for the creation of jobs is the reduction of the corporate tax rate from 35 percent to 25 percent. We have the second highest corporate tax rate in the world. What are we doing about charging corporations that amount of money? What we are doing is exporting jobs out of America.
Anyone with a basic understanding of economics will recognize Chambliss’ statement as baldfaced blather. It’s exactly what Obama was talking about, and it’s most certainly suitable only for flat rejection.
Reducing the corporate tax rate will ensure bigger bonuses throughout the executive suite. It might mean bigger golden parachutes, higher executive pay, and a better-looking bottom line, maybe even bigger dividends for investors. What it won’t mean is more jobs.
First, a lower corporate tax rate won’t do anything whatsoever to increase demand for corporations’ goods and services. Quite the opposite. Since middle- and working-class Americans will ultimately have to pay higher taxes because corporations are paying lower taxes, they as consumers will have less to spend.
Second, reducing the corporate tax rate won’t do anything about the great disparity between what a Chinese, Korean, Indian or Mexican worker makes, compared to what a U.S. worker makes. Nor will it make U.S. health, safety and environmental regulations as business-friendly, or lax, as they are in countries U.S. businesses send jobs to.
Finally, with his predictably mindless Republican tax-cutting “remedy,” Chambliss would have us believe supply leads the economy, as he apparently does.
In case you haven’t heard this in brass-tacks terms before, be advised that demand leads the economy.
It’s an easily grasped concept in no small part because it jibes with common sense.
Consider: We could reduce the corporate tax rate to 1 percent and not spur the hiring of any additional workers. Why? Because if buyers aren’t buying what corporations produce, if demand has all but dried up, no CEO worth his weight in pink slips is going to hire more people to make more things people are not buying.
We can’t leave this without pointing out a telling passage from Chambliss’ blather dump. It’s the kind of thing our excellent college speech instructor would’ve rewarded with an F.
I talked to one of the leading economists in the country this morning who happens to be a resident of my state and is somebody whom I look to for guidance from time to time. I asked him, “If you could point to anything that would create jobs in America, what would the first thing be?” He immediately said, “Cutting the corporate tax rate.” He said it is ridiculous what we do and that what we are going to hear from folks on the other side is that what we are doing by cutting the corporate tax rate is looking after the big corporations. The fact is, according to this renowned economist, the big corporations don’t pay that 35 percent anyway. It is the guys on Main Street, the insurance agencies in my home State, the veterinary hospitals down the street, and all the other small businesses that are, in fact, paying that 35 percent. . .
How remarkable that while Chambliss holds this alleged source up as a “renowned economist,” the senator doesn’t bother to share the person’s name.
This is what Obama and Senate Democrats are up against. More importantly, this is what the U.S. public is up against.
To paraphrase someone we usually prefer to not paraphrase, Chambliss and his ilk aren’t the solution to our problem, they are the source of our problem. The real solution will have to come in spite of them.
*From the Congressional Daily Digest
Ironic that the same Republicans who had no problem running up record deficits and debt during the Bush years have somehow decided that now is not the time to increase government spending.
Well, now I understand the situation, thanks to Saxby Chambliss’ explanation. I used to think American jobs were being exported because it enabled CEOs to save millions of dollars by sleazing out of environmental regulations, workers’ safety standards and paying livable wages. Now I realize American jobs have been exported because of the socialist anti-business policies of our nanny state government.
Saxby Chambliss clarified it all for me. No wonder this genius just got re-elected by a landslide.
KP, it goes way beyond irony, all the way to hypocrisy.
Tom, they only had most of the past 30 years to wreck all the oversight and safeguards, replace conscientious public servants with pols, industry hacks and other cronies. As incompetent as they have proven to be, there were still vestiges of sanity — in their terms an anti-business, socialist nanny state.
The GOP is indeed the political party of the rich, by the rich, and for the rich. The fact that they are so capable of snookering so many millions of Americans into voting against their own best economic interests is a truly astounding achievement.
Republicans obstructing what they fear will be a successful Democratic initiative to right the economy
There are no such fears. This is a trillion dollar pork spending bill. This is Bush’s liberal spending policies on steroids. The CBO has scored it a net drain on the economy:
http://cboblog.cbo.gov/?p=205
Anyone with a basic understanding of economics…
Where are these people to be found? Basic economics is earning what you spend. I don’t see much of this in modern Washington DC.
Snave, Republicans and their backers, for awhile at least, are victims of their own success, which is to say their own inevitable excesses.
RSF, Rush Limbaugh let the cat out of the bag.
A careful reading of the CBO director’s very early preliminary take tells me he thinks the stimulus might or might not work as hoped in creating jobs and could possibly inhibit longterm economic growth a little. But then, maybe not. Significantly, Elmendorf’s assessment offers nothing about what to expect if a much smaller stimulus is applied or if no stimulus is applied.
One thing’s for sure. Your flat statement CBO has scored it as “a net drain” is quite a stretch.
“Basic economics is earning what you spend. I don’t see much of this in modern Washington DC.”
You must’ve been watching regulatory agencies during the Bush years.
RSF…since when has the GOP worried about pork spending? … (AND) … The only thing Bush ‘liberally’ spent money on was getting a lot of people dead.
Jerry, when Republicans shuffle a few billions to Big Oil and Halliburton, or a few hundred-billion to the financial industry, they call it investing to grow the economy. It’s only pork or socialism if it helps kids from needy families get medical care and keeps the elderly poor from starving and freezing in their apartments.
I think the Dems need to do a better job selling this to the people and working with the President. Granted the “liberal” media is only giving air time to dissent and not support (as you pointed out last week). I am interested to see what kind of support Obama can strum up over the next few days on his tour. He should have started this a while ago imo. The Republicans are going to fight him each step of the way regardless and we all know this has less to do with economics, but pure politics. They just need to get ahead of the curve.
Your flat statement CBO has scored it as “a net drain” is quite a stretch.
I’d say the stretch is in thinking this recent looting expedition by Democrats has any long term benefit for the country.
…since when has the GOP worried about pork spending?
I agree that there’s not much on which to hang one’s hat on the Republican side, but they are better than the Democrats. Sometimes you have to be happy with baby steps.
…getting a lot of people dead.
I notice the Left doesn’t fret too much if the body count suits their purpose.
DB, you’re quite right about the need for Democrats to do a better job of carrying this debate to the public. And it shouldn’t just be Obama or even just current officeholders delivering the message. Bill Clinton, Jimmy Carter, George McGovern, Bill Bradley and others should pitch in and help.
RSF, repairing roads and bridges, building wind turbines and sending money to the states to keep teachers teaching and school cafeteria staffs from being laid off isn’t looting. However, realizing you are one who will not see, I understand your blindness.
I find this all problematic. The Bush presidency was pretty much one big government stimulus spending spree, and look where it got us. Bush had the first trillion dollar budget, and his last one was 3.2 trillion. He should have had enough deficits to satisfy any Keynesian. Now the call is for even more spending, even more deficits, with the claim that NOW we will spend it right, NOW we know how to do it. Forgive me if I’m crabby.