Despite repeated federal stimulus initiatives, economic recovery continues to fall far short of the Obama administration’s goals. With unemployment hovering around 9% and stock exchanges plunging wildly, there is good reason to question whether the economy is recovering at all. For the last three years, Americans have looked to President Obama to fix our economic woes, but despite his administration's efforts, millions of Americans are still struggling to make ends meet.
Rather than promote another deficit-driven federal stimulus, the Obama administration should instead focus on removing obstacles to the private sector.
It is critical for President Obama to resist calls for yet another stimulus. The Bush administration spent $152 billion in February 2008 and $61 billion in September 2008. The Obama administration similarly spent $787 billion in early 2009, $26 billion in August 2010, $30 billion in September 2010, and included stimulus measures in the December 2010 deal to extend the Bush tax cuts. Yet unemployment remains at 9.1%, over 45 million Americans are on food stamps, the federal debt is climbing dangerously high, and the federal government has suffered the first of what could be a series of credit rating downgrades. Obama’s own Council of Economic Advisers admit that the $787 billion stimulus cost $278,000 per job created. Serious problems clearly continue to plague the American economy.
Instead of allocating more money, Obama should pursue a more thoughtful, sustainable approach that will yield benefits now and into the future. Removing federal roadblocks to deficit-free private sector growth is essential in this process.
At 35%, the U.S. corporate income tax rate stands as the second highest in the developed world, encouraging American businesses to relocate abroad, discouraging foreign investment, and encouraging American companies with an off-shore financial presence to keep their income out of the United States. The New York Times recently noted that “Apple has $12 billion waiting offshore, Google has $17 billion and Microsoft, $29 billion.” Experts estimate that S&P 500 companies were holding $1.3 trillion of capital overseas at the end of 2010 and argue that a corporate income tax decrease could bring as much as $1 trillion of fresh capital back to U.S. shores.
This “repatriated” money would use existing, efficient market forces to legitimately boost the American economy and create jobs without increasing the federal deficit or debt. A recent CBS News report revealed that Ireland’s 12.5% corporate income tax rate has attracted 600 American companies and 100,000 jobs to Ireland. A more competitive corporate income tax code will help American job seekers by keeping American companies in America, encouraging foreign companies to relocate to the United States, and encouraging American companies to benefit everyone by bringing their money home.
An obvious criticism of lowering the corporate income tax rate is that federal tax revenues will decline. However, the decrease would be largely offset by tax revenue from the billions added to the corporate income tax base, as well as income taxes collected from the newly employed and savings on unemployment benefit spending. Since corporate income tax accounted for only 8.9% of all federal tax receipts in 2010, the impact on federal revenues would be minimal.
With six consecutive stimulus failures within the last few years, it is unreasonable to believe that a seventh attempt will bring the job-heavy recovery that American families need and deserve. Federal stimuli have left unemployment near 9%, and the American economy has actually lost 1.9 million jobs since Obama’s $787 billion stimulus was passed. It would be injudicious for Obama to add to the dangerously out-of-control federal debt by supporting stimulus measures that have consistently fallen short of their goals.
The natural circulation of money, goods, and services, relying not on federal deficit spending but on personal choices, is more effective than government action at putting people to work in industries that use resources efficiently and raise the standard of living for everyone in our society. Obama needs to stand firm, and take a step toward relying more on market forces by lowering the corporate income tax rate.
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