Since when do spending cuts equal job creation?

The political sphere has been so frustrating lately. The horrific midterm election brought into Congress waves of ultra-Conservative politicians with no real political strategy. Couple that with a never-ending recession, and it’s a political nightmare.

All they can talk about is “job creation” but all they can do is try and pass draconian spending cuts and abortion restrictions. I agree we need job creation and economic stimulus–when almost 10% of Americans are out of work, you bet we need more jobs.

But what does that have to do with spending cuts? Cuts on programs that improve the lives and health of Americans (saving money down the line) and, wait for it, EMPLOY PEOPLE. Lots of people. Mostly women, and many people of color too.

I may not be an economist, but can somebody explain to me how spending cuts and abortion restrictions magically create jobs?

Conservatives love to talk about how lowering taxes for the rich creates jobs via the “trickle down” theory. Do you really think that the richest 10% of our society, when faced with another lovely tax break, says hey, why don’t I go out and create a job today? That is not how business works, and that is not the kind of stimulus that is going to get 10% of people back to work.

I read a really interesting article in Inc Magazine a few months back which examines this idea that taxes hurt small businesses and job growth. Inc took this question to Norway, the country with the highest taxes in the world, to see the impact it had on entrepreneurship and small business. What they found is that despite the high taxes, or even because of them and the social safety net they create, entrepreneurship is alive and well in Norway.

I once heard someone say that Democrats are great at policy and terrible at politics. For Republicans, it’s the opposite. They are fantastic at spewing all sorts of rhetoric about the economy and bloated government, about job creation and main street, but when it comes to actual policy solutions to address these problems? Nada. Zip. Cuts cuts and more cuts, even ones that will definitely hurt their base and the economy.

If we’re going to get anywhere in 2012, the Democrats are going to have to step up to the plate and show exactly why we’re in the situation we’re in and who is to blame. We’ve got to push back on these illogical arguments about jobs and spending. We’re letting the Right win the war of words, and we’re having to pick up the pieces of a broken economy.

and tagged , . Bookmark the permalink. Both comments and trackbacks are currently closed.

8 Comments

  1. Posted August 5, 2011 at 1:38 pm | Permalink

    Step 1: Spending Cuts.
    Step 2: ?????
    Step 3: Jobs!

  2. Posted August 5, 2011 at 2:19 pm | Permalink

    “I may not be an economist, but can somebody explain to me how spending cuts and abortion restrictions magically create jobs?”

    Abortion restrictions? I dunno. I don’t think even their proponents argue about the economic value of such restrictions, so it’s unfair to lump the two together.

    Spending cuts? I don’t entirely agree with the argument, but the line of reasoning goes like this:

    There is not now, nor seems to be in the near future, the political will to raise taxes. I think this is unfortunate, as do many people, but in a democratic system our hands are tied in this regard.

    Without the option to raise taxes, we’re faced with two unpalatable alternatives: run massive deficits for about a decade, or gradually cut spending to reduce the impact of those deficits on our long-term budgets.

    The economic argument for job creation goes like this: large businesses with a stake in the ongoing operation of the US government need to have faith that the US government can manage its debts. If it cannot, this creates economic insecurity, which hinders job creation, as employers are less likely to make the economic decision to hire someone in a period of uncertainty.

    Since the US has shown that it will not manage its debts through raising taxes, it must therefore do so by cutting spending, or show to the world that it expects to simply spend a trillion dollars more than it takes in in revenue every year, a proposition that has no potential to work in the mid-to-long term.

    Spending cuts won’t create immediate jobs, but the argument is that long-term management of our debt obligations is paramount in comparison to short-term job creation.

    Now, if we were willing to raise taxes, this could all be a whole lot easier. We’d still need spending cuts, but we could really start managing our debt in a serious manner that would hurt bottom lines in the short-term for the sake of the long-term.

    • Posted August 5, 2011 at 7:29 pm | Permalink

      At this moment, deficit reduction should be the last thing on our agenda. Debt for a sovereign nation is not the same thing as debt for a person, or even a corporation. Nobody is going to repossess the United States of America; China cannot march in and announce it’s foreclosing on our country.

      The danger of high deficits and debt lies in their potential to create accelerating inflation and drive up interest rates. Most economists agree that a healthy level of inflation is around 2-3%. Right now it’s hovering around 1-2%. Interest rates are at unheard-of lows. We have the exact opposite of the problems created by excessive borrowing; investors are lining up around the block to lend to us.

      That’s what makes this whole business maddening. The United States has the means to get out of this slump. We could undertake a massive program to fix our crumbling infrastructure, feed our hungry, shelter our homeless, tend our sick, rebuild our cities, invest in new technology. Such a program would put millions back to work. In the short run, it could be easily financed by deficit spending. In the long run, it would more than pay for itself, because it would take people who were sitting at home sending out resumes and give them work that produces value for all of us.

      But we’re not going to do any of this, because of platitudes about “tightening our belts” and “living within our means,” as if investments in our people and our nation were a weekend in Vegas.

      • Posted August 6, 2011 at 3:30 am | Permalink

        “China cannot march in and announce it’s foreclosing on our country.”

        Only 10% of our national debt is to China. The largest holder of our debt is Japan, at roughly 40%.

        To address “Since when do spending cuts equal job creation?” Nobody claims they do, people claim tax cuts create jobs, tax cuts which are made possible by spending cuts.

        Tax cuts CAN create jobs. There is a point after which raising taxes actually decreases tax revenue, as counter-intuitive as that sounds. There is a cost-benefit analysis that goes on when large companies decide whether they want to do business in the US, and taxes weigh negatively in this analysis. The less business there is in the US, the less jobs there are.

        THAT BEING SAID, our tax code is nowhere near being at a point where business is being discouraged to a significant degree. In addition, the largest point of contention with regards to new taxes is personal income, which does not affect job creation.

        “We could undertake a massive program to fix our crumbling infrastructure, feed our hungry, shelter our homeless, tend our sick, rebuild our cities, invest in new technology. Such a program would put millions back to work. In the short run, it could be easily financed by deficit spending. In the long run, it would more than pay for itself, because it would take people who were sitting at home sending out resumes and give them work that produces value for all of us.”

        This is a good idea, if not for the reasons you think. It has to do with macro economics. Keynesian economics would dictate that it is appropriate for the government to spend a great deal of money during during economic slumps, and spend little during times of economic prosperity. It almost doesn’t matter which projects we fund from an economic standpoint, so long as funded projects are spreading the wealth around (it still does matter). Keep in mind these are not long term solutions, however they are appropriate for the time being.

    • Posted August 5, 2011 at 11:37 pm | Permalink

      If the government was willing to make even moderately aggressive action to raise taxes, we wouldn’t need a single dollar’s worth of cuts.

      It’s absolutely despicable to think that people are seeing their SS and medicare benefits cut while the richest americans aren’t asked to sacrifice a single damn thing. We need to get back to the days were marginal rates were >50%. Seriously…if you’re raking in hundred of thousands of dollars a year, you can afford to give 50%+ back. I’d love to see a cap on earnings as well, but that’ll never happen.

    • Posted August 5, 2011 at 11:50 pm | Permalink

      So boiled down it’s:

      1) raise taxes which would decrease the extra money large corporations and wealthy individuals get. This helps manage the debt in hopes that said large corporations and wealthy individuals create jobs. In the meantime, the government wouldn’t have to make drastic cuts so at least there wouldn’t be huge job losses for the majority of not-so-wealthy individuals.

      or 2) make massive cuts which would hurt the majority of not-so-wealthy individuals who need government services for a decent standard of living or some sense of security. This helps manage the debt in hopes that large corporations and wealthy individuals create jobs. In the meantime, more people are out of work and feeling extremely insecure because of huge spending cuts while the wealthiest individuals and corporate entities continue to enjoy their tax cuts as they wait until they feel more “secure”.

      Taxes definitely would be simpler and more ethical. The only way I’d support tax breaks is if there was a cap on how much money individuals could make. Apparently, actual happiness doesn’t increase much beyond $60k per capita so maybe cap it at a couple million in case you have a really big family. Then all those tax breaks really would trickle down because the wealthiest aren’t allowed to hold onto it.

    • Posted August 8, 2011 at 1:11 am | Permalink

      Regarding the abortion restrictions, I think the author may have read an article like this: http://www.huffingtonpost.com/jim-wallis/the-economy-and-abortion_b_174750.html or this: http://www.cbc.ca/news/health/story/2009/03/25/abortions-vasectomies.html or this: http://www.nrlc.org/news/2001/NRL01/laura.html

      It was odd to me at first as well, and as the Feminsting writer offered no cites on this issue, I needed to do a little research. Hope this helps answer your question!

  3. Posted August 7, 2011 at 1:46 pm | Permalink

    The problem is that you are looking at a single country and measuring the “unemployment rate.” This is inherently useless. We live in a global economy. As the countries of the world become more integrated economically, more and more jobs will move to areas where it is cheaper to have them. If a communications or manufacturing company can pay someone in India or China a living wage that is a fraction of the living wage in the US, the US is going to lose that job. There are only a few categories of jobs that have to be done locally with our ever advancing communications technology. The question that the politicians aren’t asking is:
    “Although we all agree that tax cuts create jobs, does cutting American taxes which provide revenue to the American government create AMERICAN jobs? How can we know that the increased cash reserves created by lower taxes will be spent here, on paying people here, who will then pay taxes here, buy goods here, and get housing here, as opposed to creating millions of jobs in Mexico or China?”

Feministing In Your Inbox

Sign up for our Newsletter to stay in touch with Feministing
and receive regular updates and exclusive content.

190 queries. 0.580 seconds