The economist Alan Blinder has a column in yesterday’s Wall Street Journal entitled “Fiscal Fixes for the Jobless Recovery” where he deplores the apparent complacency about our stubbornly high unemployment rate of 7.6% after four years now of recovery from the Great Recession. His solutions: 1) boost government employment with greater deficit spending, 2) offer businesses a tax credit equal to 10% of the increase of their wage bills over the previous year, and 3) offset the high 35% corporate tax rate by taxing a company’s repatriated profits at a super low rate, based on the increase of its wage payroll.
What Mr. Blinder describes as complacency about the high unemployment rate is rather just huge frustration about the likelihood of a divided Congress being able to reach agreement on any fundamental reforms which would be able to boost economic growth. His proposals illustrate why the philosophical chasm between the two political parties is so great. In the first place, boosting government employment by increasing deficit spending is a total nonstarter. Our enormous and rapidly increasing national debt is a major part of the problem. We need to decrease government spending, not increase it.
We need to simplify the tax code, not make it more complicated with a new 10% tax credit. Lowering tax rates overall, offset by eliminating special tax preferences for the well connected, is the type of fundamental reform which will truly boost the economy, by giving everyone the same greater opportunity to create wealth.
Since Republicans think that a 35% corporate tax rate is too high and Democrats think that too many companies are able to shelter their profits abroad, then why can’t we just lower the rate and change the rules to the point where multinational corporations will want to bring their profits home, pay taxes and reinvest in America. A new tax credit just makes things more complicated!
What is needed to break the log-jam is leadership from our elected representatives, not more ideological name calling. There are practical solutions to our economic and fiscal problems if we simply had more leaders who are focused on finding solutions rather than scoring points on the opposition!