CBO Director Doug Elmendorf’s testimony before the Senate Budget Committee Tuesday was full of bad news for the unemployed, and thus for President Obama. This is the stuff Republicans blasted out to reporters: Unemployment will likely be sky high through next year, GDP growth has been and will continue to be anemic.
But his prepared remarks confirm this is in part a product of the GOP’s unwillingness to pass the big-ticket items in Obama’s jobs bill. And they also imply that the GOP’s economic counter-proposals would do almost nothing to actually improve things.
Move down the top two ladders and you’re basically moving from Democratic priorities to Republican priorities. And as you see the plans conservatives favor don’t really do much to reduce unemployment and grow the economy. Cutting income taxes across the board is less effective than anything that puts money in the hands of people who need it to pay for necessities (extending unemployment insurance and the payroll tax holiday are both top Obama goals). Letting corporations repatriate foreign-earned profits tax free (as Republicans want) does almost nothing, while creating incentives for firms to hire has a fairly substantial effect.
Or as Elmendorf put it in his official testimony:
Policies that would have the largest effects on output and employment per dollar of budgetary cost in 2012 and 2013 are ones that would reduce the marginal cost to businesses of adding employees or that would be targeted toward people who would be most likely to spend the additional income. Such policies include reducing employers’ payroll taxes (especially if limited to firms that increase their payroll), increasing aid to the unemployed, and providing additional refundable tax credits in 2012 for lower- and middle-income households.
Policies that would primarily affect businesses’ cash flow but would have little impact on their marginal incentives to hire or invest would have only small effects. Such policies include reducing business income taxes and reducing tax rates on repatriated foreign earnings.