President Obama sent his jobs plan to Congress today, where the $447 billion package will be deconstructed, disassembled, and perhaps disposed of entirely before the end of the month. In the meantime, we'll get a debate about jobs, Social Security, and taxes.
If these debates sound familiar, it's only because we've been having them every week for the last two-and-a-half years. The White House believes that deficits created by lower taxes and higher spending are good for jobs and growth, and Republicans disagree. If you're reading this article, you've probably picked a side. I have. Republicans and Democrats worry that reducing payroll taxes will speed up the demise of Social Security. But if you see general revenues as one big bucket used to pay for various services, from penny production to pensions, then it's easier to see how we'll pay for Social Security. We'll could raise general revenues later when the economy is stronger and use it to fill any hole in Social Security.
That brings us to taxes. Conservatives like to say that we shouldn't raise taxes on anybody right now. The White House prefers to say that the rich can afford to pay "their fair share." Both sides can be right. Tying tax increases to benchmarks in the economic recovery (consecutive quarters of plus-three-percent growth; consecutive months of sub-seven-percent unemployment, etc) would elude the Republican complaint that we can't raise taxes today. Starting those tax increases at the top would help protect the poorest Americans who are suffering the highest unemployment.
But make no mistake: We have to raise taxes at some point this decade and the sooner we schedule those tax hikes the less they'll pinch. What's more, paying for the stimulus and the trillion-dollar promises to sick and elderly Americans cannot be the exclusive burden of the rich. It's not feasible to raise rates on the top two percent until we're satisfied that our budget is healthy. Taxes have fallen for all Americans in the last three decades and they will probably have to go up for most Americans sometime in the next decade.
The bottom line is that the country is stuck in a truly pernicious gyre of gloom, and businesses are holding off hiring until they see a steady recovery in aggregate demand. We know how to increase aggregate demand. The government takes fewer taxes and spends more money. The president's plan represents a coherent argument for stimulating the recovery: More money for workers, cheaper workers for businesses, and more money for school and infrastructure projects. As a political matter, Republicans can probably "win" the debate by sitting on their hands and saying "the American people are tired of stimulus." (They're certainly tired of hearing about it, I imagine.) But what is their coherent argument for why hand-sitting is better for today's economy than tax-and-spending stimulus? And where is the evidence that austerity accelerates a recovery?
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