Tuesday, Presidential candidate Mitt Romney unveiled his “jobs plan”. Unfortunately, many items in the plan have no direct or indirect connection to increasing jobs. The vast majority of the proposals are either deficit reducing measures and/or typical Republican platitudes that are more about keeping wealthy donors happy and finding ways to reduce or eliminate programs to support everyday Americans. A few highlights of his proposals along with my reactions are included below.
Suggestion 1 – Cutting corporate tax rates from 35% to 25%
The economic theory behind this proposal is failed “trickle-down” Reaganomics which asserts that if corporations have more profits they will use those funds to create jobs, thereby creating wealth and prosperity for all. However, it has not happened. As I noted in my article, The Path to Economic Recovery, second quarter profits for corporations were outstanding. Yet, job growth is still flat because corporations have decided to sit on their cash. The trickle-down approach didn’t work under Reagan. It didn’t work under George W. Bush. And there is no reason to believe that it will work if we try it one more time.
Aside from the flawed theory behind these types of cuts, this proposed cut is meaningless because many corporations are already paying much less than 25% in taxes. We have a large number of corporations now that pay 0% tax due to all the various deductions, loopholes, exemptions, subsidies, etc. If you are already paying nothing, why do you need a 10% cut?
In our current system, published marginal tax rates mean absolutely nothing. We need to look at what individuals and corporations actually pay – effective tax rates – and set clear and reasonable parameters that eliminate the game playing and give-aways in the current system. (I plan to devote an entire article to this topic in the near future.)
Suggestion 2 – Domestic Energy
I wholeheartedly agree that a focus on domestic energy could be a boon for job creation. However, in his remarks, Romney only mentioned additional oil drilling. In order to maximize job creation, we must embrace a comprehensive approach that focuses on our unique opportunities for wind and solar energy. This step forward would not only create manufacturing, construction, engineering, management, and oversight jobs, but would enhance our independence and security as a nation by reducing our need for foreign oil.
Suggestion 3 – 10% cut in the federal workforce
In what bizarre universe does cutting hundreds of thousands of jobs sound like a measure to promote job growth?
Suggestion 4 – $200 billion per year cut to medicaid
How does cutting medical support for families in need create jobs? This appears to be an attempt to recover revenue that can be used to cover the cost of some of the proposed tax cuts that will benefit the wealthy.
Since we currently have $276 billion in federal revenue allocated to medicaid benefits (source, PDF), by the end of the second year of Romney’s theoretical first term, his plan would have defunded and eliminated medicaid.
We need leaders who understand the difference between economic recovery and job growth versus deficit reduction and promoting partisan ideology. We cannot afford to waste time with those who would distract us with bait and switch tactics. Calling a set of ideas a “jobs plan” doesn’t automatically make it a real jobs plan.
I am looking forward to President Obama’s speech on Thursday night and I hope it has more to offer than the Romney plan.