Republicans have blanketed the airwaves in the past week, carrying a single message that’s been well-amplified, with almost no skepticism, on MSNBC …
[Sen. John] ENSIGN [R-NV]: You know, politically, what we’re trying to do is choose the right policy, something that actually stimulates the economy, that creates jobs. … If we could lower the corporate tax rate, that would be one of the best things that we could do to make American business more competitive in the world and actually help stimulate the economy.
… not to mention CNBC:
[Rep. Spencer] BACHUS [R-AL]: We have said let’s do tax cuts, let’s let the American people make the decisions on how they’ll spend the money. That will stimulate the economy more than bringing all that money to Washington and then distributing it out in all sorts of government programs.
… and, of course, on Fox News:
[Rep. Mike] PENCE [R-IN}: What House Democrats have done here is get out a dusty old wish list of liberal spending priorities, dump it all in a bill, and throw in a few token tax cuts on top of it. That’s not going to create jobs. It’s not going to put this economy back on its feet.
There’s only one problem with the stimulus debate’s focus on whether the percentage of spending on tax cuts should be 40 or 20, as opposed to the outright merits of such breaks: Tax cuts are an ineffective economic stimulus.I’ll repeat it again, just for emphasis: Tax cuts are an ineffective economic stimulus.
Mark Zandi, a Republican economist who advised John McCain’s presidential campaign, has been stressing this point for months. Zandi’s research showed a corporate tax cut delivering $0.30 in real GDP growth for every $1 invested, an alternative minimum tax patch delivering $0.48 for every $1 invested, and a regular tax rebate delivering anywhere from $1.02 to $1.28 for every $1.
Compare that to aid to state governments, which Republicans have roundly criticized: $1.36 for every $1 invested. Infrastructure spending delivers a whopping $1.59 in GDP for every $1.
But it’s not just Zandi making this point. The Congressional Budget Office — you know, the guys with the incomplete stimulus report that Republicans absolutely loved last week — deemed last year that corporate tax cuts are “not a particularly cost-effective method of stimulating business spending.”
So why is Washington still having this conversation about tax cuts? It’s time to talk about why business tax breaks in the stimulus bill amount to $24.9 billion — a small share of the overall package, yes, but more than double the amount that was invested in rail and mass transit.