Studies Challenge Wisdom of GOP Candidates’ Plans
Key proposals from the Republican presidential candidates might make for good campaign fodder. But independent analyses raise serious questions about those plans and their ability to cure the nation's ills in two vital areas, the economy and housing.
Consider proposed cuts in taxes and regulation, which nearly every GOP candidate is pushing in the name of creating jobs. The initiatives seem to ignore surveys in which employers cite far bigger impediments to increased hiring, chiefly slack consumer demand.
"Republicans favor tax cuts for the wealthy and corporations, but these had no stimulative effect during the George W. Bush administration, and there is no reason to believe that more of them will have any today," writes Bruce Bartlett. He's an economist who worked for Republican congressmen and in the administrations of Presidents Ronald Reagan and George H.W. Bush.
As for the idea that cutting regulations will lead to significant job growth, Bartlett said in an interview, "It's just nonsense. It's just made up."
Government and industry studies support his view.
The Bureau of Labor Statistics, which tracks companies' reasons for large layoffs, found that 1,119 layoffs were attributed to government regulations in the first half of this year, while 144,746 were attributed to poor "business demand."
Mainstream economic theory says governments can spur demand, at least somewhat, through stimulus spending. The Republican candidates, however, have labeled President Barack Obama's 2009 stimulus efforts a failure. Instead, most are calling for tax cuts that would primarily benefit high-income people, who are seen as the likeliest job creators.
"I don't care about that," Texas Gov. Rick Perry told The New York Times and CNBC, referring to tax breaks for the rich. "What I care about is them having the dollars to invest in their companies."
Many existing businesses, however, have plenty of unspent cash. The 500 companies that comprise the S&P index have about $800 billion in cash and cash equivalents, the most ever, according to the research firm Birinyi Associates.
The rating firm Moody's says the roughly 1,600 companies it monitors had $1.2 trillion in cash at the end of 2010. That's 11 percent more than a year earlier.
Small businesses rate "poor sales" as their biggest problem, with government regulations ranking second, according to a survey by the National Federation of Independent Businesses. Of the small businesses saying this is not a good time to expand, half cited the poor economy as the chief reason. Thirteen percent named the "political climate."
More small businesses complained about regulation during the administrations of Bill Clinton and George H.W. Bush, according to an analysis of the federation's data by the liberal Economic Policy Institute.
Such findings notwithstanding, further cuts in taxes and regulations remain popular with GOP voters. A recent Associated Press-GfK poll found that most Democrats and about half of independents think "reducing environmental and other regulations on business" would do little or nothing to create jobs. But only one-third of Republicans felt that way.
The GOP's presidential hopefuls are shaping their economic agendas along those lines.
Former Massachusetts Gov. Mitt Romney says his 59-point plan "seeks to reduce taxes, spending, regulation and government programs."
Businessman Herman Cain would significantly cut taxes for the wealthy with his 9 percent flat tax plan. Rep. Michele Bachmann of Minnesota said in a recent debate, "It's the regulatory burden that costs us $1.8 trillion every year. ... It's jobs that are lost."
The candidates have said little about another national problem: depressed home prices, as well as the high numbers of foreclosures and borrowers who owe more than their houses are worth.
After the Oct. 18 GOP debate in Las Vegas, a center of foreclosure activity, editors of the AOL Real Estate site wrote, "We didn't hear any meaningful solutions to the housing crisis. That's no surprise, considering that housing has so far been a ghost issue in the campaign."
To the degree the candidates addressed housing, they mainly took a hands-off approach. "We need to get government out of the way," Cain said. "It starts with making sure that we can boost this economy and then reform Dodd-Frank," which is a law that regulates Wall Street transactions.
Bachmann, in an answer that mentioned "moms" six times, said foreclosures fall most heavily on women who are "losing their nest for their children and for their family." She said Obama "has failed you on this issue of housing and foreclosures. I will not fail you on this issue." Bachmann offered no specific remedies.
Romney told editors of the Las Vegas Review-Journal: "Don't try and stop the foreclosure process. Let it run its course and hit the bottom. Allow investors to buy homes, put renters in them, fix the homes up and let it turn around and come back up."
Perry spokesman Mark Miner said the Texas governor's "immediate remedy for housing is to get America working again. ... Creating jobs will address the housing concerns that are impacting communities throughout America."
Bartlett, whose books on tax policy include "The Benefit and the Burden," recently wrote in the New York Times: "People are increasingly concerned about unemployment, but Republicans have nothing to offer them."
The candidates and their supporters dispute this, of course. A series of scheduled debates may give them chances to explain why their proposals would hit the right targets.