Skip to comments.Reclaiming Reagan's Economic Voice
Posted on 06/08/2014 4:10:32 PM PDT by Kaslin
Despite a shrinking economy in the first quarter and outright declines for consumer spending and manufacturing in April, the May jobs report delivered the fourth-straight monthly gain above 200,000, with nonfarm payrolls jumping 217,000. This is the best four-month increase since late 1999. And finally -- after five years -- total U.S. payrolls rose above the previous employment peak set in January 2008. (On the 10th anniversary of Ronald Reagan's death, it's worth noting that the Gipper's supply-side policies reclaimed all the lost jobs from the 1981-82 recession in a matter of months.) As for the unemployment rate, it held steady at 6.3 percent. And the underemployment rate (U-6) dropped a tenth to 12.2 percent.
So overall, this was a positive report. And it's good to see more Americans working. But there are still some serious warts in the jobs story.
One of those warts is a low 2.1 percent wage gain for the workforce. Wage growth for the last couple of years has been stuck around 2 percent. Even optimistic economist Mike Darda calls this "unimpressive take-home pay." Worker wages are barely running ahead of inflation.
Another blemish in the jobs picture is the rock-bottom employment-to-population ratio. It's sitting at only 58.9 percent, versus a pre-recession peak of 63.4 percent. And the labor-force participation rate didn't move in May. It's stuck at 62.8 percent.
Looking at working-age demographics, some believe there's a jobs gap of nearly 7 million. And economist Scott Grannis notes that while private-sector jobs have been growing at roughly 2 percent for years, productivity has slumped to less than 1 percent.
So putting it all together, overall economic growth is still trapped in a sub-par growth zone. And it will remain there, Grannis says, "Unless and until policies in Washington become more growth-friendly (e.g. reduced tax and regulatory burdens)."
Aha! Growth-friendly policies.
As you know, this is an election year. So let's see where the two political parties stack up on the subject of growth.
The Democrats want a minimum-wage hike. That may sound great on the surface, but it's actually a big job loser for the least-skilled and poorest among us. President Obama and his EPA have launched a war on coal, which will cost hundreds of thousands of jobs if implemented. And then there's Obamacare, which the CBO estimates will cost at least 2.5 million jobs.
Not a lot of growth-friendly policies coming from the Democrats.
But what of the Republicans? Where are their growth policies? Alas, with some notable individual exceptions, I fail to see a united GOP growth message.
The YG Network, chaired by Republican House Majority Leader Eric Cantor, has put out a white paper called "Room to Grow." Nice title. But the chapter on tax reform actually attacks supply-side economics, and it never even mentions corporate tax reform.
Readers know that corporate tax reform is my single-favorite pro-growth policy. Actually, I'd like to abolish the corporate income tax altogether -- including all the cronyist, big-government special favors, carve-outs, deductions and exemptions. Out with all the K Street mischief.
You know who the biggest winners would be? Wage earners. That's right. Corporations don't pay taxes. They merely collect, and then pass on the tax cost in the form of lower wages and higher consumer prices.
Want to maximize wages? Forget the minimum wage and embrace corporate tax reform.
Know which European country has the fastest growth rate right now, at 3 percent? Great Britain. And the Brits have a 20 percent corporate tax rate. Compare that to our 35 to 40 percent rate.
It's no secret why corporate profits are going overseas, and thus destroying American jobs at home. High corporate tax rates.
I go back to the work of Laurence J. Kotlikoff, economics professor at Boston University. In his models for the elimination of the U.S. corporate tax, the real wages of unskilled and skilled workers rise by 12 percent, real GDP growth increases 8 percent and capital investment soars 23 percent.
In other words, significant U.S. corporate tax reform would jack up wages and jobs -- predominantly middle class wages and jobs. It would attract investment from all over the world. And to U.S. companies that shelter profits overseas, we'd be able to say, "Come home to America."
The growth impact of significant corporate tax reform would also drive up the value of the dollar and allow the Federal Reserve to normalize interest rates much more quickly. That, by the way, was the Reagan policy. It worked for two decades, producing nearly 45 million jobs and roughly 4 percent wage growth.
Lower tax rates and King Dollar. It's a recipe for prosperity. Will any of you Republicans who claim to be Reagan followers make that case? Where is your Reagan economic voice?
**** Eric Cantor.
If that was true, they wouldn't avoid paying them.
This guy flunked econ 101. When corporations are competing with suppliers from other countries, they cannot simply raise prices by the same margin as the tax.
It is Economics 1o1: ALL COSTS of producing and selling a product (including wages paid to workers, the cost of facilities used, energy used, and yes TAXES) are passed onto the end consumer.
The final price of any good or service reflects the taxes the Corporation will pay for producing that good or service.
Kudlow's argument is spot on. Employees will make more and (if our capitalist system still works correctly after years of government interference in it) consumer prices WILL GO DOWN.
Economics 101. Anyone who's had it in High School should remember these basic facts.
Not necessarily. If they have a competitor who operates in a different tax regime, such as a foreign producer, they cannot raise their prices by a margin equal to the tax. Won't happen.
It is Economics 1o1:
Then you flunked it, while I got my degree in economics from a very top level college.
What’s your favorite flavor of Kool_Aid? Just curious what you have been drinking.
You've failed to mention TARIFF'S which are used as equalizers against foreign competitors (such as China) to equalize prices and "level the playing field" for domestic workers.
Tell me again about your bullshit Econ degree.
They don't and you know it. So does Kudlow.
I already did. If corporate taxes didn't matter to corporations, if they could simply pass them on, then they wouldn't lobby for tax breaks. They do. You lose, again.