The Republican Party’s job creation plan, if implemented, will lead to job losses of over one million, according to the Economic Policy Institute, a nonpartisan, Washington D.C.-based think tank.
Republican Minority Leader John Boehner has proposed a two-step jobs that entails extending the Bush-era tax cuts on all Americans, including the wealthiest 3 percent and cutting non-security related domestic spending, to reduce the deficit.
But EPI says that this proposal will have a devastating impact on the U.S. labor market which is already struggling, while marginally improving the fiscal outlook.
Cutting non-security related spending (according to the Boehner proposal) will translate into a cut of $105 billion in 2011, and overall $356 billion or 22.7 percent, implying major cuts to education, infrastructure, including roads, bridges, and energy grids.
“If the 22.7% non-security discretionary cut were enacted across the board, it would undermine opportunities for our children and hurt American competitiveness in the 21st century. For example, spending on education would drop nearly $10 billion in one year alone. Funding for research at the National Institutes of Health would fall more than $7 billion. And spending on ground transportation and infrastructure investments would decrease nearly $8 billion—all in one year”, says EPI.
The second step in the Republicans jobs plan is to freeze all current tax rates, meaning that the 2001 and 2003 Bush tax cuts would be extended for all taxpayers, regardless of income.
President Obama’s proposal is to extend tax cuts for 97 percent of Americans and allow rates to rise on those earning incomes of $250,000 or more.
According to the EPI, Republicans’ tax proposals will cost the country $629 billion more over the next decade than Mr. Obama’s proposal, and $30 billion more in 2011 alone.
So, next year if the two-step Boehner proposal is implemented, the deficit would be cut by $105 billion, while extending the Bush tax cuts to the wealthiest Americans will increase the deficit by $30 billion, thereby creating a saving of $75 billion or merely reducing the deficit by 5.5 percent.
“We found that GDP would shrink by 1.1%—or about $171 billion—due to this proposal. The tax cuts themselves would modestly expand GDP, but permanent tax cuts demonstrate one of the lowest bang for-the-buck options of any stimulus policies”, the EPI said. “We estimate that this loss of GDP will correspond to a loss of roughly 1.1 million jobs, relative to a fi scal path that maintains spending at the president’s proposed 2011 levels and a tax policy that did not extend tax cuts for upper-income taxpayers.”
Mr. Obama has vowed to continue making productive investments, in areas such as education, clean energy and technology.
The EPI recommends that priority be placed on job creation and belt tightening (spending cuts) be delayed until the economy has recovered and unemployment has returned below 6 percent. They further propose that the U.S. long-term fiscal challenges be tackled by curbing health care cost and modernizing the tax code that currently raises insufficient revenues.
