Our current economic woes as voiced by the electorate seem to revolve around three subjects: jobs, taxes, and the deficit. The voters want to see more jobs, less taxes, and a reduced (or eliminated) budget deficit. The Republicans are promising just that. How will they deliver it? They don't say, but they claim that reducing taxes and "cutting government spending" will produce the other two. It's the same ol' same ol' that didn't work before and doesn't even make sense.

What happens when government spending is cut? The Republicans call for cutting "discretionary" spending. However, considering the majority of government spending covers defense, social security, Medicare, and interest on the national debt, there's not a lot left to cut. It's a lot more subtle this time (no talk of "welfare queens"), but the soft-around-the-edges focus is still safety net programs. Considering the tea partiers themselves have (ironically) said "keep the government out of my Medicare", and all but young people look at Social Security as sacrosanct, that leaves defense spending. Chris Coons (Senate candidate for Delaware) took a step in that direction during the recent debate indicating a willingness to cut certain defense programs.

That seems like it would work to help with the deficit. The problem? It will hurt the job market. In fact - any program that cuts government jobs will hurt the job market, and when that happens, there is a downstream effect. The laid off stop spending money, which effects the jobs of others. Clearly, cutting government jobs will hurt the economy.

So how can we maintain jobs? What has worked twice so far (in FDR's New Deal, and Obama's jobs program) is to increase government spending on infrastructure. The downstream effect of people working is that they buy stuff, and buying stuff drives the economy and produces more stuff, as people are needed to make, ship, and sell the stuff. This creates more jobs than just the jobs created directly by the bill.

What about tax cuts? If people have more money to spend, won't their spending help create jobs? Well... no. Studies have shown that the economic return on tax cuts is less than a dollar on the dollar; creating jobs is more than a dollar on the dollar. Tax cuts are the least efficient mechanism to stimulate the economy.

As I mentioned in a previous blog, the focus on taxes is misplaced. Americans think they're paying more in taxes, yet they are paying less now than they ever have. Pull out your paycheck stub and do the math. See what the actual percentage is. Now see how much difference it would make if your federal income tax went up 1%. It's not very much.

For all the nonsense about tax cuts for the rich and trickle-down economics, the reality is that increasing taxes will reduce the deficit AND create jobs. As mentioned in the aforementioned link:

This also keeps the money in the lower-paid masses, who will spend most of it, thus driving the economy and job growth. Think about the late '50s and early '60s when tax rates were at their highest for the richest. The economy was good, and the middle class had a good life.

Does raising taxes on the rich sound like socialism? It does to some people, and perhaps it is in some small way (that would also mean Eisenhower was a socialist). But saving the country from drowning in debt and giving people the chance to earn an honest dollar for an honest day's work is much more important than some label attached to the means to accomplish it. It will not reduce our liberties, it will not give government more power, it will not kill competition. On the contrary, it will raise everyone's boats.