What Do Republicans Want? Warmed-Over Bush Economics!

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[1]

It is well-known that not a single Republican voted for the Obama economic recovery plan in the U.S. House of Representatives. Less known is the Republican alternative, which almost every member of their party supported: GOP Whip Eric Cantor’s Amendment #195.

The Republican alternative [2], costing $478 billion, contained nine tax cuts and an extension of unemployment benefits—in other words, no infrastructure spending, no assistance to the states, and almost no help to struggling Americans.

So far, all the debate has centered on what is good or bad about the Obama/Democratic economic recovery plan. It’s time we nailed the Republicans for their pitiful plan.

The Republican plan is warmed-over Bush economics. As the Center for American Progress demonstrated [3], all of the principal features of the GOP plan were previously proposed by George W. Bush. Those are the policies that got us into this mess in the first place!

The Republican plan is primarily more tax cuts for the rich. The centerpiece of the plan, a lowering of the bottom two tax brackets for individuals, would cost $291.3 billion, more than 60 percent of the overall cost of the Republican plan. As the Center on Budget and Policy Priorities pointed out [4], “Higher-income households would get a much bigger tax cut than less-affluent ones. A married couple with two children with income of $100,000 or more would get a tax cut of $3,395. This is 17 times the $200 tax cut that the couple would receive if its income were $30,000.” And “Roughly 23 million lower-income tax filers would receive no tax cut at all.” The second biggest part of the GOP plan would give tax breaks totaling $88.6 billion to "businesses with less than 500 employees"—which, with a straight face, they call "small businesses." These corporations would get a flat 20 percent tax deduction for 2009 and 2010 and an additional deduction for large purchases of property. No one has analyzed exactly how much money the Republican package would give to the wealthy, but clearly (and not unexpectedly) it is a lot.

The Republican plan provides very little stimulus. Mark Zandi, the Chief Economist for Moody’s Economy.com [5]and the former chief economic advisor for John McCain, testified that tax cuts are a far less effective form of stimulus than infrastructure spending or direct payments to low income Americans (like food stamps). The reason for this is simple: tax cut recipients, whether individuals or businesses, are more likely to use the money to pay off debts or increase savings than to spend it now. In fact, that’s exactly what happened to the 2008 tax rebates promoted by George W. Bush—only about 20 percent was actually spent [6]; they did very little to help the American economy.

The Republican plan is simply too small to boost our economy. Their proposal to spend $478 billion over two years is too small to keep America from plunging into a long and deep recession. Our nation’s Gross Domestic Product is about $14 trillion per year. The Republicans would be spending only 1.7 percent of GDP on stimulus, an amount that virtually all mainstream economists consider to be insufficient to help our failing economy. In fact, most economists believe that the Democrats’ $819 billion stimulus plan will need to be increased [7].

The Republicans are now lying about their plan. Through the magic of phony numbers [8], they are arguing that $478 billion in mostly tax cuts for the rich would trickle-down to create 6.2 million jobs. The Center for American Progress [9]has thoroughly debunked this claim.

Let’s not let the conservatives get away scot-free from their hit-and-run amendment. Americans would be irritated, if not angered by the Republican substitute—if they knew what was in it. Let’s tell them.

The writer is a Senior Fellow at Campaign for America’s Future and author of the recent book, Framing the Future: How Progressive Values Can Win Elections and Influence People [10].