09/10/2012; William Spriggs
William Spriggs is the chief economist at the AFL-CIO.
Here is an uncomfortable truth. Republicans’ obstruction of President Obama’s policies means they have gotten the policies they wanted. But, these policies have been least effective in growing jobs.
The Romney campaign argues that the path to American prosperity starts with lowering the taxes on American business and unleashing American entrepreneurial zeal. Republicans complain that President Obama has not cooperated with them to implement this vision. Of course, the truth is more nuanced. Republicans have won on getting President Obama’s version of helping small business. The Republican version is to give tax cuts to those with high income and then argue that high income and small business are synonyms. So, a hedge fund manager with a Swiss bank account who brokers sending a firm from Kokomo, Ind., to China is equated with the owner of a five-person start-up electronics firm in Newton, Mass. The president has targeted tax cuts to actual small business income and expenses—eight cuts in all, ranging from: the payroll tax holiday that lowers taxes for firms that are hiring workers; to tax credits for hiring workers who were veterans or long-time unemployed; to allowing firms a longer window to credit losses from earlier years onto current profits; to expensing investments in machinery and equipment; to relief on scheduled estimated tax payments allowing companies to hold cash longer; and, to a 75 percent exclusion of capital gains for small businesses. Many of the president’s proposals were included in the American Recovery and Reinvestment Act (ARRA) stimulus that Republicans dismiss as a waste and failure. Many were included in his Small Business Job Act of 2010.
Here are the uncomfortable truths for Republicans. Currently, Republicans dismiss the entire ARRA as a waste and every Republican in Congress voted against its passage. Yet, ARRA left the Bush tax cuts intact and added tax relief for small business. Glossing over the one-third of the ARRA that was tax cuts is misleading at best; and, at worse, it is deliberate to deflect claims of obstruction of the president’s efforts to create jobs.
The Small Business Jobs Act of 2010, objectively, addresses the view of Republicans that helping business is the way to help America. And, perhaps, aided by allowing small businesses to expense their capital investment and giving them a bonus depreciation rate did spur the recovery in business investment that took place in 2011.
But, here is the unpleasant part of these unpleasant truths; while business investment is up, and profits have rebounded to reach new records and the share of national income that goes to profit is now at new highs, jobs have not come back to the 2007 level and the wage share of national income continues to fall.
Oddly, the president has carried out, objectively, what Republicans want and clearly that set of policies is not enough. In fairness to President Obama, he made additional proposals that Republicans have blocked. Republicans refused to pass the portion of the American Jobs Act in which the president proposed to give states money to keep teachers in the classroom and police on the beat. While private-sector employment is now higher than in January 2009, when the president took office, public-sector employment continues to decline; and most disturbingly, with nearly 300,000 fewer in local schools.
Were Republicans to defend their approach on the basis of the president’s record, then they would have to acknowledge that he has succeeded with 30 straight months of job growth in the private sector and a private-sector labor market that is better than four years ago. But, that is not the story they tell on the campaign stump.
Republicans could double down on their view that the president’s investments in infrastructure or income support for workers would have been better “spent” on even more tax cuts for the wealthy. Of course, the consensus of those looking at the effects of ARRA show that the most effective dollars were spent on shoring up the incomes of those who lost jobs, and on infrastructure projects; the least effective dollars were those going to income tax cuts for high-income individuals. So, a switch from the president’s course of building an America for the future to the Republican view of subsidizing the lifestyle of Donald Trump would not have made the picture better for getting the economy to grow.
Can Mitt Romney do better than President Obama with continuing the economic recovery? Not hardly. Of course if Republicans continue their obstructionism to block the broader agenda of President Obama to increase investment in America, then we will continue to have the “recovery” Mitt Romney would deliver.