Republicans blame uncertainty, plan to create more

Speaker John Boehner gave a speech this week where he laid out the Republican "plan" for jobs. In addition to fairly vague criticism of "excessive regulation", he discussed their plans on the fiscal side of things. Their entire fiscal plan is, you guessed it, to "simplify the tax code" by lowering rates and eliminating loopholes. They bash Obama's measures to cut payroll taxes and offer tax credits as "gimmicks", despite having supported similar measures in the past.

They talk about completely overhauling the tax while claiming, as Boehner did in his speech, that the big reason employers aren't hiring is "uncertainty" about their future taxes. So their plan to turn around the economy is to put every single line of the tax code on the table, endangering every subsidy, loophole and incentive that every business in America depends on to keep their doors open. Sounds like their plan would cause a lot more uncertainty for job creators.

It would be one thing if they thought they'd be able to do this quickly. But, given the current environment, heading into an election year, there's no chance it would be a fast process. And every lobbyist in town would prepare to fight tooth-and-nail against any elimination of their specific loophole.

Meanwhile, nothing would be done to help the economy in the short term. So we'll still be stuck with high unemployment even longer, with the Republicans not only standing in the way, but actually making things worse, according to their own rhetoric.

Why Obama's jobs bill makes sense

This recession and recovery has been terrible. More jobs were lost, and they're taking longer to come back. Why is that, and what can government do to help?

The recession was caused by the breaking of the housing bubble. Housing prices dropped by about a third. This had a particularly strong effect on consumers because many of them had a large percentage of their net worth tied up in their homes. As a result, the average Americans' net worth fell by almost 25% during the recession. To make up for this shock, and given the uncertainty in the labor market, many Americans have started saving instead of spending. Given that consumer spending makes up about 70% of the economy, that's a recipe for a recession and a slow recovery.

It's also a recipe for making Republicans' plans for across-the-board tax cuts ineffective. Untargeted tax cuts are likely to be saved, particularly those tax cuts given to top earners, adding to the piles of cash banks are already sitting on. Money saved is not as stimulative as money spent, as we need people buying things to mkae up for the drop in consumer spending. Untargeted tax cuts might also be used to buy things from overseas.

Republicans are also pushing for corporate tax cuts. Corporate income taxes in America already add up to a smaller total, as a percentage of GDP, than corporate income taxes in any other OECD country. Corporations are sitting on a record amount of cash. Corporate profits are at an all-time high. I have yet to see any convincing evidence that jobs will come if we just give corporations just a little bit more, but that's what Republican candidates are proposing.

Obama's preference in the American Jobs Act for targeted tax cuts, including payroll tax cuts and tax credits for hiring veterans and long-term unemployed, ensures that any lost government revenue is spent specifically on the best solution, American jobs. Instead of giving tax cuts to people who may or may not use it to add jobs, Obama's plans will only give tax cuts to job creators. And instead of labelling every rich guy and job-cutting corporation a "job creator" as the Republicans do, the only way to get tax benefits is to actually create jobs.