Wednesday, June 8, 2011

The potential consequences of 2012

Republican presidential hopeful Tim Pawlenty announced his economic plans today. It was pretty typical Republican policy. What is striking about his plan is his preference for taxes. And coincidentally, it was released on the ten year anniversary of the Bush tax cuts. Ezra Klein has a great rundown of both those tax cuts and Pawlenty's plan. Here is the comparison of employment and GDP under Bush and Clinton:




























And here is what Pawlenty proposes:

His tax cuts, he wrote, will boost annual economic growth from two percent to five percent and, in doing, “generate $3.8 trillion dollars in new tax revenues” and “reduce projected deficits by 40 percent.” In other words, you can have your cake, eat it too, and fit into those pants you haven’t worn since high schools. All you need are tax cuts.

Pawlenty also promised that “the real slog of the next administration will be an unrelenting trench battle against overregulation.” Bush wasn’t a big fan of regulations either. So we got a test of the low tax/low regulation approach in the Aughts. And how did it work out? “That business cycle was the first one in the postwar period where the income for a typical working-class family was lower at the end than at the beginning,” says Larry Mishel, president of the Economic Policy Institute.

I don't have much to add to what Ezra says. He is spot on in saying that Republicans didn't learn a thing from the Bush tax cuts. In fact they took the complete opposite lesson the evidence would suggest they should. That's not surprising though since their main policy goal is lower taxes for rich people. At this point they don't need a justification for it, or at least not a good one.

Aside from pointing out the evidence from the Bush economy I also wanted to remind people what the stakes will be in the next election. Sure, Obama extended the Bush tax cuts. But he is at the very least open to repealing them once the economy is in better shape. Pawlenty and the other Republican candidates don't even seem willing to entertain that option. And even though I'm not a deficit hawk they will surely not fix the deficit problem with higher revenue if they continue to push for these tax cuts.

Perhaps worst of all, the only people who will really benefit from their tax cuts are rich people. At least under another four years under Obama everyone else will have a chance. So even for you conservatives out there, whose economy do you seriously think a non-rich person will be better off under?

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