Republicans are dragging their feet on the “fiscal cliff," still arguing that extending tax cuts for the wealthy will add jobs. But the delays are putting our economic recovery at risk, says David Cay Johnston.
Republicans are dragging their feet on the “fiscal cliff,” still arguing that extending tax cuts for the wealthy will add jobs. But the delays are putting our economic recovery at risk.
“Our economy is moving forward, but it could be growing at a faster rate if Republicans had taken up and passed some of President Obama’s jobs initiatives and had passed the middle income jobs cut,” House Democratic Leader Nancy Pelosi said on Friday.
David Cay Johnston, Pulitzer Prize-winning journalist and author of The Fine Print, joined Ed on Friday’s The Ed Show on MSNBC to sort it all out (get ready for the charts!)
First, do tax cuts create jobs?
“No,” Johnston said. “You create jobs when you have more customers with more money to spend on more products and services. It’s getting money throwing through the bottom ranks—the bottom 90 percent of the economy—that will result in more jobs.”
Johnston credits the Obama stimulus package for turning around the employment crash that started under the Bush administration, but said it would have been even better if the Republicans had allowed a bigger stimulus.
“Not only that we did not spend enough, but we wasted 40 percent of it on tax cuts for small business, which is inherently savings and not stimulus,” said Johnston. “It was a real policy mistake.”
Still, the Center on Budget and Policy Priorities says the stimulus package added nearly one million more jobs.
Johnston says the decision to extend unemployment benefits also brought down the unemployment rate by fueling consumer confidence.
“Every 50th person you meet, statistically, only has food stamps today as income. And that’s the result of these years of the Republican’s policies,” Johnston said. “So having unemployment and extending benefits next year would be very important to continuing to bring this [unemployment] number down and having businesses hire more people because they have customers with money in their pockets to buy products and services.”
And even though the unemployment rate dropped to 7.7 percent in November, we are still seeing record levels of long-term unemployment (people have been out of work for 27 weeks or more). And long-term unemployment benefits expire on December 29.
Will Republicans agree at least to extend the unemployment benefits in a fiscal cliff deal or are they just ideologically opposed to it?
“This is a really important thing to do to improve the lives of young people,” Johnston said. “We don’t want to have a society where we get cynical young people [who say], ‘Well, there’s no point in playing by the rules and working hard because you won’t get a job any way.’”
While there is risk in going over the cliff, Johnston says there would be an upside to raising taxes on the wealthy to the Clinton rates (which created more jobs in eight years than the 20 years of Reagan and the two Bushes).
“The government would then have all of this revenue,” Johnston says. “If the government gets all that revenue and we push it back out the door [in the form of stimulus], then that will help the economy grow.”
So why are the Republicans fighting stimulus spending now?
“They are trapped, Ed,” Johnston said. “They have sold the public on the same idea that we once had sold to us, that the Earth was the center of the universe that everything revolved around it. And they—it’s dogma. They can’t abandon their dogma”