|Dodging bullets: Mr. Congressman has no answers...|
One of these wonderings involves the Bush tax cuts and their impact (er, lack thereof) on unemployment.
A couple weeks or so ago, a republican member of congress held a townhall meeting in his district. One of his constituents stood up and asked him questions about the Bush tax cuts, and wanted proof that they have created jobs. The congressman tried to dodge the question because, well, he had no answer for it. The conversation went like this:
Stimulating? Um, I have a headache...
I mean, the tax cuts been in place for a looooong time--what, about 8 years now? And even Mr. Obama agreed to extend them back in December 2010 because, um, that's what the republicans wanted. Anyway, with all the table pounding and assumptions by the right about who important it is to give trickle down a chance, well, that's gotta amount to something, right? Well, no, that's wrong. Because, apparently, it never amounted to much of anything. According to the Congressional Budget Office, tax cuts for the rich don't have a stimulating effect (unless, of course, you're rich!). But why? Well, this piece from the Washington Post summarizes it well:
According to the Congressional Budget Office and other authorities, extending all of the Bush tax cuts would have a small bang for the buck, the equivalent of a 10- to 40-cent increase in GDP for every dollar spent.
Why? As the CBO notes, most Bush tax cut dollars go to higher-income households, and these top earners don't spend as much of their income as lower earners. In fact, of 11 potential stimulus policies the CBO recently examined, an extension of all of the Bush tax cuts ties for lowest bang for the buck. (The CBO did not examine the high-income tax cuts separately, but the logic it used suggests that extending those cuts alone would have even less value.) The government could more effectively stimulate the economy by letting the high-income tax cuts expire and using the money for aid to the states, extensions of unemployment insurance benefits and tax credits favoring job creation. Dollar for dollar, each of these measures would have about three times the impact on GDP as continuing the Bush tax cuts.