Republicans' two-point plan to create jobs: Can it work?
Don't like what Democrats have offered so far to cure unemployment? Here's a look at the Republican plan to create jobs – and what economists think of it.
Republicans in Congress are urging two simple steps they say will help put Americans back to work: Freeze all tax rates at current levels and reduce federal spending.Skip to next paragraph
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This is very different from what the Democrats have been pursuing, and in some ways it flies in the face of conventional economic theories. Cut government spending when the private sector is in slow gear? That's not what the textbooks typically offer as a way to rev up growth.
But these things are for sure: An improving job market is Americans' top election-season priority, and they're not happy with the status quo.
Economists are divided on these questions, but fairly broad agreement exists on a few points. One is that it would be beneficial to provide clarity on tax rates – which the first part of the Republican plan seeks to achieve and critics say President Obama has failed to do. Another is that spending cuts hold less promise than tax-rate policy as a lever for job creation.
Supporters and critics of these GOP proposals concur on one more thing: Voters shouldn't expect a quick fix. Good policies can help the job market heal faster, but the process will still take several years, forecasters predict.
"Is [the GOP plan] a panacea for what ails the economy? Probably not," says Sean Snaith, who heads the Institute for Economic Competitiveness at the University of Central Florida in Orlando. But "in the sense that this provides a little stability, it could be beneficial."
The stability he's referring to is as much psychological as financial.
"There's a real sense that we're without a rudder right now," Mr. Snaith says. "We're seeing program after program put up [by Washington] ... and really little effect as far as job growth is concerned."
In this view, a key merit of the Republican proposals is that they represent a less-is-more approach to policy after two years of emergency intervention in the economy and record stimulus spending by the government.
But Representative Boehner's plan also has plenty of critics. The House leadership is set to elaborate Thursday on its "governing agenda" should it win in the midterm elections, which may include more detail about a jobs-creation plan. In the meantime, here's a closer look at the arguments for and against the Republican two-point plan.
The case for federal spending cuts
The Boehner plan would bring federal spending back to 2008 levels, excluding national-security expenditures and programs for seniors and veterans, such as Social Security. That means some big one-year cuts (about $100 billion worth, according to House Republicans) in an Obama budget proposal that totals $3.8 trillion in spending for 2011.