Ahead of last night’s vote on the $819 billion House stimulus bill, which no Republican supported, House Minority Leader John Boehner (R-OH) frequently asserted that his party’s alternative stimulus plan — consisting largely of tax cuts — would create 6.2 million jobs.
That sounds great. After all, it’s double the 3 million jobs that the president aims to create or save. But where did the Republicans get that number? By drawing some fuzzy conclusions from a 2007 paper by Dr. Christina Romer, chair of Obama’s Council of Economic Advisers.
If you look at page 3 of the GOP’s document, you’ll see this passage:
In fact, a year before being tapped to serve as the Chairman of President Obama’s Council of Economic Advisers, Romer co-authored a report echoing the view that tax cuts can have a very large economic stimulus effect. As the authors noted at the time, ‘tax cuts have very large and persistent positive output effects.’ … Using different assumptions and different sample periods, they estimated that a change in taxes equal to 1 percent of GDP resulted in a 2.2 percent to 3 percent change in GDP, with tax cuts increasing GDP.
We find Dr. Romer’s previous conclusions on the economic impact of change in tax policy as an appropriate multiplier for examining the impact of stimulus proposals.
Except that the Romer analysis used by the GOP (linked to in the third paragraph of this page) never examined the effects of tax cuts on a deflationary economy — it looked at the effects of tax increases on the economy as a whole and found a negative effect of 2.2% – 3% on GDP.
The Republican analysis simply flipped those numbers to positive and applied them to the GOP-backed tax cuts, then multiplied the result by a broad job creation estimate used in a recent paper from Romer and Jared Bernstein, an economic adviser to the vice president. If you read the Republicans’ document, you can see the caution advised in assuming that 6.2 million jobs would be created by their plan.
But if you listen to Boehner’s rhetoric, well, Congress just missed the chance to create more jobs than Obama.