Amid All the Debate Over Debt, Where Does Job Growth Fit In?
I came away from my interview with Republican Sen. John Cornyn of Texas on Tuesday’s NewsHour still curious about the answer to this question: Why aren’t employers hiring more people?
Discussing the budget and debt ceiling showdown gripping Washington, I asked Cornyn, who serves on both the Senate budget and finance committees, why Republicans won’t agree to some tax increases if Democrats are prepared to accept significant cuts in Medicare and Medicaid, programs dear to their base. He responded that any taxes would be another burden on “an already burdened private sector, which is reluctant to get back in investing in new jobs…”
I followed up by asking why he believes businesses would start hiring if there were no tax changes, when taxes overall — including corporate taxes — are right now the lowest they have been as a percentage of the country’s economic output in at least 60 years. I cited reports that also show many companies are sitting on large amounts of unspent cash, even at the current relatively low tax rates, and are still unwilling to engage in enough hiring to give a boost to the economy. The Texas lawmaker replied that “there’s a lot of anxiety out there that, if the president would — we could settle this issue that we’re not going to raise taxes…and a lot of job-creators would invest money into new jobs, which is exactly what we need.”
Cornyn added that government regulations and uncertainty over new rules under the president’s health care law add to employers’ “anxiety.” This is an argument Republicans have been making for the past year and a half, one they repeat with regularity. GOP presidential frontrunner Mitt Romney has said, “With over 20 million people who are unemployed or who have stopped looking for work, the last thing we should be doing is raising taxes on job-creators, entrepreneurs, and small business owners across America.”
But it is a concept fiercely debated in economic and business circles. At the liberal – leaning Center for American Progress, or CAP, economic experts argue that job growth over the past half century has been greater in years when the top income tax rate “was much higher than it is now.”
Michael Linden, who is CAP’s Director of Tax and Budget Policy, declares: “For instance, in years when the top marginal rate was more than 90 percent, the average annual growth in total payroll employment was 2 percent. In years when the top marginal rate was 35 percent or less — which it is now — employment grew by an average of just 0.4 percent.”
CAP credits the U.S. Bureau of Labor Statistics with this chart:
Meanwhile, over at the conservative-leaning Hoover Institution, Professor Richard Epstein lays blame for the lack of hiring at the feet of President Obama and his “pro labor union polices.” With these, Epstein charges that the president “badger(s) the very employers who can drive those unemployment numbers down.” Until Mr. Obama abandons or moderates his policies, Epstein contends, “the near-jobless recovery will continue apace.”
At another conservative think tank, the Heritage Foundation, the view is that jobs won’t be created until the Obama administration and Congress remove policy barriers to job growth, including repealing health care reform, reining in environmental regulations, expanding overseas trade agreements, and “reducing spending to mitigate the specter of enormous tax increases.” Heritage Senior Policy Analyst James Sherk says it’s up to Congress to erect or remove “barriers to entrepreneurship and encourage risk-taking and innovation.”
Those arguments don’t hold water, however, with economist and New York Times columnist Paul Krugman, who takes apart the view that “wage payers” will create fewer jobs if they lose any tax breaks, including on corporate jets. Krugman says “those ‘wage payers’ are sitting on lots of cash already, and not using it to pay wages or anything else.” He continues: “In fact, that idle cash has become a major conservative talking point, with right-wingers claiming that businesses are failing to invest because of political uncertainty. That’s almost surely false: the evidence strongly says that the real reason businesses are sitting on cash is lack of consumer demand.”
My search continues. It’s a good thing reporters are expected to keep asking questions, even when we can’t provide the answers.
Follow Judy Woodruff on Twitter.