New Hampshire Republican Senate nominee Kelly Ayotte has based her campaign on an anti-government zeal and a promise to “take a hatchet to spending” (despite her embrace of budget-busting policies). But when it comes to constructive ideas about the nation’s high unemployment, Ayotte made it clear during a debate last week that she has no solutions.
When asked what specific bills she would sponsor in order to reduce unemployment, Ayotte simply reiterated her support for extending all of the Bush tax cuts, which are set to expire at the end of the year:
The last thing we should be doing right now is raising taxes, but that’s what Congressman Hodes wants to do. When he talks about letting those tax cuts expire, let’s call it for what it is: it’s keeping tax rates stable at a time when we are facing a very difficult challenge nationally. And those taxes impact 750,000 small businesses in this country, half the business income in this country, and employ 25 percent of the workers in this country. So I’ll tell you how we create a positive climate: lower taxes on our small businesses.
First, Ayotte’s stat regarding half of small business income is flat-out wrong, and the 750,000 number she cited is only valid if you consider Bechtel and the Tribune Company to be small businesses. Second, Ayotte fails to mention that her desired job creation plan will cost nearly $4 trillion over the next decade, including $830 billion to pay for the tax cuts for the richest two percent of Americans alone.
But most importantly, Ayotte’s proposal is obviously nothing new, and we already know that it falls flat as a job creation step. According to the Congressional Budget Office, extending the Bush tax cuts provides just 10 to 40 cents in economic activity for every dollar spent. “A permanent extension [of the Bush tax cuts] would entail large revenue losses after the recovery is over, so its effects on output and employment in the next few years per dollar of total budgetary cost would be much lower” than other tax and spending policies, CBO said.
In fact, as Josh Picker found, following the Bush tax cuts, the country “registered the weakest jobs and income growth in the post-war period”:
Overall monthly job growth was the worst of any cycle since at least February 1945, and household income growth was negative for the first cycle since tracking began in 1967. Women reversed employment gains of previous cycles. And for African Americans, the worst job growth on record was matched by an unprecedented increase in poverty.
Extending the Bush tax cuts will definitely further the Republican goal of having marginal tax rates for the rich be as low as possible, but the only thing such a move will create from a federal policy perspective is a bigger deficit.