The Big Question: How should Congress pay for a jobs package?


Our earlier question:

Should Democrats offset the costs of their new jobs bill and if so, how?

Dean Baker, co-director of the Center for Economic and Policy Research, said:

It would be counterproductive for Congress to pay for any jobs bill with current taxes or spending cuts. Tax increases slow the economy. Spending cuts slow the economy. Anyone who suggests paying for a jobs bill with deficit reduction in the current year should just be booted out of Congress for intolerable ignorance.

However, we can pay for spending for the longer term with a financial transactions tax. A modest set of transactions taxes can easily raise more than $100 billion a year ($1 trillion over the next decade), while having little or no impact on ordinary savers or businesses. This speculation tax would be especially justified, since it was machinations of the Wall Street crew that caused the economic crisis that led to mass unemployment and out-sized deficits. It is only fair that they pay for the clean-up.

We know that such taxes work. The United Kingdom raises the equivalent of almost $40 billion a year (relative to its economy) by just taxing stock trades. We could raise much more by also taxing trades in options, futures, credit default swaps and other derivative instruments.

There are some who say that we can't do such a tax because of international competition. This ignores the example of the UK, but this claim also seems to imply that the United States is helpless in international forums. This is of course ridiculous. Most other major countries have been pushing for financial transactions taxes. If the Obama administration actually embraced a speculation tax, there is no doubt that it could gain international support to facilitate enforcement. This international cooperation is absolutely not necessary for implementing a tax, but it would be easily doable if we wanted it.

Herb London, president of The Hudson Institute, said:

The way to offset the costs of this proposed bill is to cut corporate taxes at the rate of 25k for each new job that is created. It seems to me that the way to create jobs is to incentivize businesses rather than go through a government sponsored public works program.

Hal Lewis, professor at U.C. Santa Barbara, said:

They seem not to distinguish between jobs per se and jobs that contribute to the national productivity. The former impoverish the country and the second enrich it. Jobs that contribute pay for themselves in the end, but the others must be paid for by those who do contribute. Guess who.

Chris Edwards, director of Tax Policy Studies, The Cato Institute:

When it comes to jobs, the Obama administration needs to take off its ideological blinders and consider that its massive deficit spending is enslaving the next generation while doing nothing for economic growth. Private business investment has plunged over the last year and remains in the tank even as the government has cranked up deficits to more than $1 trillion.

The administration’s big spending and anti-business agenda is a loser for the economy and for Obama’s political prospects because it simply won’t create jobs. Instead—like Nixon going to China—Obama should make a bold pro-growth move and outflank the Republicans by proposing to dramatically cut the job-killing U.S. corporate income tax. That would encourage businesses in every industry to build new factories and expand production and hiring.

Justin Raimondo, editorial director of Antiwar.com, said:

The Democrats' new job bill isn't going to produce any jobs -- except in the government sector, which is the entire point. The whole idea of this "jobs program" is to expand the power and reach of government -- the federal government -- and that is what it will achieve. As far as generating real wealth -- no.

My understanding is that, by way of financing this rapid expansion in spending, the Federal Reserve is monetizing the debt: That is, printing money. There's no reason to believe this policy will change, because, after all, the Obama administration is ideologically committed to this course of action. According to the orthodox Keynesians who are currently running the country, government spending is good, per se, and, what's more, it's the only way to get us out of the recession. So why should they "offset" anything?

Of course, if we abandoned our crazy foreign policy, withdrew from Afghanistan (and -- finally! -- Iraq), and started closing down our hundreds of bases all over the world, the savings would offset whatever recovery programs (no matter how ill-starred) President Obama wants to implement. But of course that will never happen: the empire comes first, the American people come second (if at all).

Michael J. Wilson, national director of Americans for Democratic Action (ADA), said:

We send troops to Afghanistan and there is no question about offsetting the costs.  But with nearly 1 in 5 Americans looking for work (the real unemployment rate is 17.2%) we worry about offsetting costs regarding jobs programs.  Is dealing with terrorism in Afghanistan more important than dealing with the Great Recession here at home?  The only people who would answer yes to that question have jobs, have health care, aren’t facing foreclosure, and their kids don’t have a worry about paying for college.  What’s good for the goose is good for the gander; either do both, or do neither.  With millions of Americans suffering through the worst economic downturn in more than 50 years, we need a real battle plan to combat unemployment.  We need everybody to do their share, government, private sector, Democrats, Republicans and Independents.  And the most important point is not how much it would cost now, but how much it will cost if we don’t.  You can count this as either a yes or a no, but certainly count it as support for doing as broad and robust a jobs program as possible.