It has taken about half a year for bankrupt conservative economic policies to reaffirm themselves. Conservatives took control of Congress and several state and local governments following last fall's elections. Since then, the employment situation in the United States has changed from showing signs of improvement (unemployment receded to a recent low of 8.8% in March) to showing signs of serious weakness (unemployment increased to 9.2% last week). The cause of the recent decline is simple: government downsizing eliminates jobs and tax breaks for businesses and wealthy individuals do not replace lost government jobs.
The recent job statistics reveal that the greatest decline in jobs lies in the public (government) sector. That decline is the result of government downsizing. Governments are downsizing to close budget gaps caused by lost tax revenues. A lousy economy and tax cuts are responsible for the lost tax revenue.
Private businesses are not hiring fast enough to replace the lost government jobs. Apparently businesses recognize that they can be productive with their current workforces, so they are not hiring new employees. Instead, they are sitting on huge cash reserves, which, if employed to hire more workers, would help fuel economic growth and improve the unemployment rate. By not employing their cash to hire more people, businesses are abusing the tax breaks they were given. Their lack of responsible stewardship of resources is deplorable, and it must end.
The current economic situation confirms that tax breaks for businesses and wealthy individuals do not create jobs, but conservatives continue to demand tax breaks for those groups. By continuing to downsize government and offer tax breaks to businesses and wealthy individuals, elected officials are simultaneously increasing our debt burden, eliminating jobs, and encouraging irresponsible business practices.
This leaves Democrats in an enviable position. In 2009 and 2010, they had a chance to implement meaningful change, but they blew that opportunity by allowing the Bush-era tax breaks for wealthy individuals to continue. By doing that, they took more money away from the middle class and gave it to a small minority of the population. Now they can redeem themselves by insisting upon tax increases (through rate hikes and loophole elimination) for wealthy individuals and irresponsible businesses.
Politicians should work to fix the economy, unburden future generations from the growing debt, and provide jobs for the increasing number of people who are currently unemployed. Unfortunately, the Republicans fail to acknowledge the economic and political damage that tax and budget cuts cause. For example, Republican Representative Eric Cantor is willing to talk about eliminating loopholes, if Congress replaces them with other loopholes. He should realize that loopholes create inequity and insufficient revenue causes deficits. Consequently, he should be working to eliminate loopholes. Changing the form or recipients of the loopholes will not fix the deficit and probably will not create more jobs.
Meanwhile Senate Minority Leader Mitch McConnell's office is baffled "that the president and his party continue to insist on massive tax hikes in the middle of a jobs crisis." They shouldn't be baffled. A majority of the population, including a majority of Republicans and a majority in swing states, favor tax increases. With that level of political support, increasing taxes on the wealthy makes political sense. Tax increases will allow the government to continue to provide services and create jobs without incurring unreasonable debt, so tax increases also make economic sense. In fact, the jobs crisis requires tax increases. It's baffling to observe politicians ignoring such overwhelming political and economic evidence.
Elected officials find themselves at a crossroads. To slow the growth of the national debt, the politicians have two options: (1) cut spending or (2) raise revenue. If politicians cut spending, people will lose jobs. If politicians truly care about jobs, they cannot cut government spending. That leaves increasing revenue through tax hikes as the primary means for reducing the deficit.
Tax increases have not received the attention they deserve. The government spends money to improve education, build infrastructure, facilitate scientific research, care for the poor and elderly, and provide a host of other much-needed services. Businesses don't provide these services in sufficient quantities, so we should stop compensating them with tax breaks.
The deficit-ceiling negotiations provide an opportunity to reconsider very difficult questions, but the discussion should not focus primarily on the debt ceiling. As representatives of the American people, politicians should think first about the American people, not the abstract notion of an arbitrary debt ceiling. Jobs will do more to help the American people, and jobs should be the focus of the current deliberations. A smaller government will hurt job growth, and should not be the objective at this time.