Last week, the Heritage Foundation released its proposed economic stimulus plan. It contained two parts: extend the Bush tax cuts as far into the future as possible and cut taxes across the board for individuals, businesses and corporations through 2013.
These measures — like those proposed by other conservative organizations like the Club for Growth — are woefully ineffective at offering immediate and substantial stimulus when compared with other, progressive alternatives. A new analysis by the Center for American Progress Action Fund finds that the Heritage Foundation’s conservative proposals have far less job creating potential than progressive proposals of the same magnitude.
As Matt Yglesias wrote of the Heritage proposal, “this plan would deliver nothing to those in the greatest need and would stimulate demand in the least-efficient way possible. All in pursuit of the right-wing’s never-ending goal of further enriching the richest.”
Every $10 billion in taxpayer money that goes towards extending the Bush tax cuts would create or save just 10,000 jobs versus nearly 60,000 jobs which could be created or saved by extending unemployment benefits and food stamps (stimulating demand for goods and services) or investing directly in energy, transportation and education infrastructure.
As has been extensively documented, the most effective way to close the GDP gap and lay a foundation for long run growth is by getting money into the hands of people who are most likely to spend it (struggling families), helping to shore up state budgets to prevent service cuts and property tax hikes, and through direct investment by the federal government. What we don’t need is simply more tax cuts for corporations and the wealthy.
Methodology notes after the jump.
Job estimates are based on data from the Bureau of Labor Statistics, GDP multipliers from Moody’s Economy.com, 2009 GDP estimates from the CBO, and a conservative application of Okun’s law, which projects a 1 percent decrease in unemployment for each 3 percent increase in GDP.