Want jobs? Kill the Bush tax cuts and extend Emergency Unemployment Compensation
The American public wants Congress to get the economy moving and create jobs. Rightly so, given 7.9 percent unemployment and 23 million workers underemployed. So why is Speaker of the House John Boehner focused on something else? Why, for example, does he support continuing the Bush tax cuts for the very rich, which do almost nothing to boost the economy, and oppose continuing Emergency Unemployment Compensation for the long-term unemployed, which is a proven job creator, in addition to being financial life support for millions of families?
Extending just the upper-income Bush tax cuts would boost GDP growth by 0.1 percentage point, increasing nonfarm payroll employment in 2013 by only 102,000 jobs—far less than one-tenth the impact of continuing the temporary ad hoc stimulus measures. Continuing EUC would do three times as much in terms of GDP growth and support 300,000 to 400,000 jobs. In terms of jobs created per dollar of budget deficit, EUC is more than five times as effective as the Bush income tax cuts for the wealthy. Combine them with the Bush estate tax cuts and they are one-seventh as effective as EUC.
FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond
It’s easy to see why helping the unemployed has a bigger effect on economic growth than helping the very rich. Unemployed workers with no other source of income would have no funds to spend on consumer goods if they weren’t receiving weekly unemployment compensation benefits. In fact, they spend virtually all of the unemployment compensation they receive, yet many are still forced to cut back on medical treatment and purchases of clothing and food. Their weekly unemployment benefit check goes right back into the local economy, allowing the businesses that sell to them to meet or even increase their payroll and supporting the production, shipping and warehousing of the goods the unemployed buy with their benefits. By contrast, the rich save large parts of their income so another tax cut won’t get spent in the local economy or create many jobs in the U.S.
President Obama was right to include Emergency Unemployment Compensation in his offer to solve the budget crisis. House and Senate Republicans would be wrong to reject it. Even if they don’t care about job creation, ending the Bush tax cuts for the top 2 percent and investing half the 10-year revenue into up-front stimulus (including expanding EUC) would do far more to lock in medium– and long-run deficit reduction and reduce the debt.