Boehner Fails Econ 101
No doubt, Friday's disappointing jobs report was bad news for President Obama. But the Republican response augurs much worse for the American people. After all, while Obama was visiting a Chrysler plant in Ohio to tout his auto industry rescue which ultimately saved hundreds of thousands of jobs, Speaker John Boehner took to a podium in Washington to put on a stunning - and dangerous - display of economic know-nothingism.
After claiming paternity for four months of strong job growth, the Republican leadership team Friday predictably announced May's weak tally was President Obama's bastard love child. As John Boehner, one of the legion of GOP officials falsely claiming "tax cuts pay for themselves," diagnosed the problem:
"One look at the jobs report should be enough to show the White House it's time to get serious about cutting spending and dealing with our ailing economy.
It's clear from this morning's jobs report that the economy still isn't creating enough jobs. You talk to job creators around the country like we have, they'll tell you the overtaxing, overregulating and overspending that's going on here in Washington is creating uncertainty and holding them back."
Boehner's statement isn't just repeatedly wrong as a matter of basic economics. As an amazed Andrew Leonhard put it, "How many untruths can Boehner squeeze in a sentence?"
For starters, Americans are far from being overtaxed. As a percentage of the U.S. economy, the CBO and a host of other analysts have explained, the total federal tax burden is at its lowest level since 1950. (As ThinkProgress reported, that inconvenient truth came as an unwelcome surprise this week to House Republicans who learned that the Uncle Sam's tax bite was higher under Ronald Reagan.) The Obama stimulus plan didn't merely provide tax relief to 95% of working Americans, it also delivered the largest two-year tax cut in U.S. history. December's two-year, $800 billion tax cut compromise package delivered yet another windfall for John Boehner's so-called "job creators."
And speaking of Boehner's job creators, recent history shows they did a much better job for America when their tax rates were higher. After all, the last time the top tax rate was 39.6% during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.
On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The dismal 3 million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover.
But Boehner's biggest problem is a simple one of definition. When he claims "it's time to get serious about cutting spending and dealing with our ailing economy," Boehner's fuzzy math runs afoul of that age old equation for gross domestic product:
GDP = C+I+G-T+(X-M)
Cutting government spending (which does not include transfer payments) by definition reduces GDP, and by implication, jobs. This includes both direct staffing (i.e. government payrolls) and indirect employment (i.e. multiplier effects of government spending on private hiring). The flip-side is also true. More government spending, especially on high "bang for the buck" programs like infrastructure and aid to the states, by definition increases GDP.
For recent proof, John Boehner need look no further than the federal stimulus versus the state anti-stimulus.
By last June, the nonpartisan Congressional Budget Office (CBO) estimated the Obama stimulus program had saved or created up to 3.3 million jobs, lowered the unemployment rate by as much as 1.8% and boosted GDP by 4.5%. For his part, former John McCain adviser Mark Zandi in August concluded that the combined federal interventions beginning in the fall of 2008 prevented the Great Recession from becoming Depression 2.0.
But in the states, 49 of which must run balanced budgets, the picture is an employment disaster. As the New York Times summed it up this morning:
Since the end of the recession in June 2009, private employers have added roughly a million jobs. During that same period, however, governments have cut 1.1 million jobs, underscoring the impact of reductions in public spending.
In the span of just a few days in December, the Washington Post, the New York Times, Reuters, Bloomberg and the Wall Street Journal described the fiscal triple-whammy facing state and local governments. Even with spending now well below 2008 levels, the downturn-induced drop in revenues and increased demand for social services coupled with the looming end of the American Recovery and Reinvestment Act (ARRA) is producing yawning gaps in state budgets. And the states, all but one of which must balance budget each year, are responding with sharp spending cuts, massive layoffs and deferred payments to state employee pension funds. As the Times explained Thursday, total spending by the states is down $17.8 billion since 2008, with more cuts to come:
States have been forced to cut spending and raise taxes for several years. By the survey's count, states have closed shortfalls of $230 billion between 2009 and 2011, and were faced with gaps of $75.1 billion for the coming fiscal year.
The survey projected that states would only have around $2.8 billion in federal stimulus money to balance their budgets in the coming year, down from $51 billion this year and $60.7 billion last year.
For his part, Moody's Mark Zandi concluded that the Ryan budget's draconian spending cuts supported by 235 House Republicans and 40 GOP Senators would make the job creation picture much, much worse. While acknowledging that "Congressman Ryan's budget plan is too heavy on near-term spending cuts, while President Obama's is too light on long-term deficit reduction," Zandi nevertheless warned that the Boehner party would lead the U.S. to a staggering loss of 1.7 million jobs over the next two years:
In the Ryan plan, lower future deficits and debt result immediately in lower interest rates than under the president's plan. Ten-year Treasury yields are more than 60 basis points lower in 2012 and more than a percentage point lower by 2014. Yet this is not enough to offset the negative near-term economic consequences of the Ryan plan's more aggressive spending cuts. Real GDP in 2012 under the Ryan plan is $123 billion lower than in the president's plan and there are 900,000 fewer payroll jobs in the U.S. By 2014, real GDP is almost $200 billion lower and there are 1.7 million fewer jobs under the Ryan approach than is the case under the president's.
As for John Boehner's perpetual worries about "uncertainty," on one topic - the debt limit - that GOP talking point gets shelved. While Boehner is one among many Republicans admitting failure to raise the $14.3 trillion U.S. debt ceiling would be a "financial disaster," he nevertheless is continuing his economic hostage taking.
And that price of that GOP failure would be staggering. As the Center for American Progress suggested, not boosting the debt ceiling could produce "an economic contraction worse than we experienced during the depths of the Great Recession." As the reliably Republican Wall Street Journal put it starkly in May:
"95 -- Days required to wipe out this year's economic growth, if the U.S. doesn't raise the federal debt limit."
Conventional wisdom, as expressed by Politico, claims the jobs crisis is politically without solution:
"What can Barack Obama do to fix the economy? Not much."
What he cannot do is cave to John Boehner and the Republican policy of national economic suicide. As Ezra Klein and David Leonhardt, more stimulus now could be a boon to both today's jobs woes and tomorrow deficit reduction. Sadly, as Klein lamented, "that deal isn't on the table."