The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Ho Hum

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Yesterday, the President traveled to Tennessee to discuss his “new” proposal for spurring on the economy and creating jobs.  He proposes to lower the corporate tax rate and simplify the tax code by closing tax “loopholes.”  Currently, the federal tax rate in the U.S. for corporations is 35%, one of the highest among industrialized nations.  Under his plan, the corporate rate would be lowered to 28% and manufacturers to 25% but that he would only agree to the new rates “as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs.”  The president said the one-time money gained from closing corporate tax loopholes would be spent on infrastructure such as roads and bridges, job training, and investing in high-tech manufacturing hubs.

The plan was criticized by Republicans on Capitol Hill.  Senate Minority Leader Mitch McConnell (R-KY) said of the plan, “It’s just a further-left version of a widely panned plan he already proposed two years ago – this time, with extra goodies for tax-and-spend liberals.”  McConnell also said that the plan, “lacks meaningful bipartisan input, and the tax hike it includes is going to dampen any boost businesses might otherwise get to help our economy.  In fact, it could actually hurt small businesses.  And it represents an unmistakable signal that the President has backed away from his campaign-era promise to corporate America that tax reform would be revenue neutral to them.”

Not being revenue neutral creates a problem for Democrats, particularly members of the Senate Finance Committee.  For example, Senator Chuck Schumer (D-NY) said in a speech at the National Press Club on October 2012 that, “to preserve our international competitiveness, it is imperative that we seek to reduce the corporate tax rate from 35 percent and do it on a revenue-neutral basis.  This will boost growth and encourage more companies to reinvest in the United States.”

The president also belittled the building of the Keystone XL pipeline, a privately-funded venture that would transport oil from Canada and the northern United States to refineries located primarily on the Gulf Coast.  He said, “they [Congressional GOP] keep on talking about this -- an oil pipeline coming down from Canada that’s estimated to create about 50 permanent jobs -- that’s not a jobs plan.”

But those figures are incorrect.  According to his own Department of State, the pipeline will support over 42,100 jobs during construction.  Plus, the Consumer Energy Alliance in Houston points to a study they released in January that showed job creation just in Nebraska as a result of the pipeline would create 5,500 direct and indirect positions right away and approximately 300 afterward.  Furthermore, while he disparages the low number of permanent jobs for building the pipeline, his taxpayer-funded “investments” for the construction of roads, bridges and other forms of infrastructure aren't permanent jobs either.  It seems the only really important infrastructure jobs are the ones he picks and uses tax dollars to build, not the infrastructure private industry focuses on.

The president also pointed to a recent Congressional Budget Office (CBO) report, which estimates that current cuts due to the sequester will cost the economy 750,000 jobs this year and 900,000 fewer jobs next year.  What he conveniently forgets to mention is the CBO also said, “although output would be greater and employment higher in the next few years if the spending reductions under current law were reversed, that policy would lead to greater federal debt, which would eventually reduce the nation’s output and income below what would occur under current law.  Moreover, boosting debt above the amounts projected under current law would diminish policymakers’ ability to use tax and spending policies to respond to unexpected future challenges and would increase the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates).”

In other words, the whole point of the sequester was to begin to bring federal spending under control, which is too high, stifles growth, and creates enormous fiscal risks for the nation in the long run.

All in all the speech was just a rehash of past ideas of more taxpayer-funded spending and “investment,” more big government programs, more debt, and more taxes.  These policies haven't worked so far, why would the work now?  After all, today's report on GNP growth was a measly 1.7%.   When Reagan was president, growth at the end of his first term was over 8%.

And while he promised the audience in Tennessee the moon, he didn't mention this fact:  In November of 2006, before all the big government interference in the economy such as the stimulus, the hiking of the minimum wage, and the raising of taxes were implemented, Tennessee’s unemployment rate was 4.8%.  It is now at 8.5%.

Let’s try something different that has worked before, like lowering taxes and reducing regulations to businesses.  These actions will encourage economic growth and create more private sector jobs.

Oh, and repeal Obamacare.

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