by Daniel Gardner
The problem with our economy is politics; DC knows it, but doesn't know what to do about it. Progressives say, "Raise taxes on millionaires and billionaires and fight the economy with all the spending we can muster! Spending increases demand, and demand increases jobs." Conservatives say, "Reform taxes, get rid of oppressive 'Big Brother' regulations, and let small businesses create jobs again."
The public and pundits alike see Washington as largely to blame for our stagnant economy because ideological partisan bickering has created nothing but gridlock this year.
Where are the jobs anyway? According to the U.S. Bureau of Labor Statistics, small businesses (500 or fewer employees) employ nearly 60-percent of all American workers. Not only does the small business sector employ more workers than big business, but small businesses also create more jobs than corporate America.
Think about that. If you wanted to reduce unemployment - now at record levels - what would you do? Raise taxes on small businesses or lower them? Add more regulations and costs to small businesses or reduce burdensome regulations?
When President Reagan inherited one of the worst recessions in our history, he instituted business-friendly economic policies and within three years began to grow GDP by between 5 - 8-percent. In the same length of time Mr. Obama's policies have created a stagnant GDP around 1-percent.
And, what about all the talk of increasing taxes on large corporations as well as millionaires and billionaires? The U.S. already has the highest corporate tax rate of any industrialized nation. President Obama is recommending raising taxes on anyone making more than $1 million annually - about 233,000 households. This might play well with voters, but any revenue generated would likely be offset by cost of jobs lost.
For the first 24 months of President Obama's term, Democrats enjoyed comfortable majorities in both houses of Congress. Together they passed nearly $1 Trillion in stimulus bills (not counting Obamacare) and created thousands of new regulations estimated to cost business owners hundreds of billions of dollars.
To his credit, Mr. Obama stopped the EPA (Environmental Protection Agency) from implementing new regulations estimated to cost businesses about $90 Billion which would have shut down coal power plants in several states and increased unemployment significantly in those states.
Washington (not counting state and local regulations) has generated more than 25,000 pages of regulations for businesses. These regulations are on top of more than 16,845 pages of the U.S. Tax Code.
Washington has tried Big Government, Big Spending, Big Taxing policies to help our economy recover, but it's not working.
Revenue and jobs are intimately related. When more people work, we generate more tax revenue. When more people are unemployed, not only do we lose revenue but we also spend more money to help the unemployed.
Washington needs to reduce regulatory burdens on small businesses and reduce taxes on employers to encourage more hiring. We don't need penny-ante tweaks to the Tax code aimed at garnering votes. We need a wholesale overhaul to help small businesses flourish