Republicans have held a few positions adamantly during the law few years. Obamacare is a disaster. The government shouldn’t act to stop climate change. Maybe most notably, they have continually warned of impending doom due to the budget deficit—and, in turn, have opposed government spending to create jobs.
Or maybe not. Last Thursday, House Republicans passed a “jobs” bill that includes a smorgasbord of traditional conservative ideas. But it would also increase the deficit by $590 billion over the next 10 years, according to the Committee for a Responsible Federal Budget. And these aren’t temporary costs, like the stimulus (which wasn’t that much larger, money-wise than this new GOP “jobs” plan anyways). After the first decade, the costs will only increase.
What’s actually in the bill? A few things: It would make permanent a collection of tax breaks, mostly targeted at research and investment. These are part of the nearly 50 so-called “tax extenders” that expired at the end of 2013. It would require Congressional approval for any regulation with estimated costs over $100 million. The bill would also change Obamacare’s definition of a full-time employee from 30 to 40 hours and, oh yeah, repeal the medical device tax.
Even worse, the GOP’s “job” policies still don’t actually address what most economists say is the real reason the economy isn’t creating jobs: a lack of demand. After the financial crisis, consumers cut back on spending, forcing businesses to lay off workers, who then cut back their spending, causing more layoffs. The government used fiscal and monetary policy—i.e., deficit spending and lower interest rates—to fill some of this hole in aggregate demand, but it was not enough to return us to full employment. And we still aren’t there.
Business tax cuts and reduced regulations can spur on greater investment when the economy is at full employment. But these supply-side policies are ineffective when the problem with the economy is a lack of demand. The problem isn’t that business lacks money to expand or invest; it’s that there’s not a big enough market for more goods and services. Even so, this is what the GOP has consistently proposed year-after-year during the Obama presidency, demonstrating a fundamental misunderstanding of the current economic environment.
The practical effects of proposing this agenda are small. Democrats oppose the provisions about Obamacare and regulations. They are more open to renewing the tax extenders, although it won't do that much for the economy. That’s why the Senate Democrats’ plan to temporarily extend all of them is smart policy. Eventually—after the midterms—both sides will likely reach an agreement on how to handle just that part of the agenda.
But House Republicans have sent a clear and important signal with this new agenda: They have explicitly abandoned their commitment to reducing the deficit. And that tells you something about why they opposed the stimulus and other Obama proposals. They don’t really care about increasing the deficit. Clearly, they’re fine with that in certain situations. They just didn’t like the fact that those programs and proposals increased the deficit through government spending, rather than business tax breaks. To Republicans, that’s the real flaw.