April 5 Rep. Ryan, R-Wis., unveiled a long range budget plan with the grandiose title “Path to Wealth. Reducing tax rates is the gist of supply side economics, which contends that such action leads to job creation and the resulting increase in government revenue. Supply side economics were the principle behind the Bush tax cuts of 2001, which gave record profits to corporations while producing the weakest job growth since the Great Depression.
Supply side economics versus reality
About $100 billion in tax revenues could be created if spending and taxes are cut, Ryan believes. By 2021, this is supposed to bring joblessness down 2.8 percent. Ryan wrote “Path to Prosperity” with the help of the Heritage Foundation, a conservative Washington think tank formed to advance supply side economics. The unemployment will fall to 6.4 percent from 8.8 percent in just one year if the corporate tax rate drops from 35 percent to 25 percent. There can be runaway inflation though if joblessness got to 4 percent in just four years. Interest rates would be elevated a lot by the Federal Reserve to make it stop.
The job-killing Road to Prosperity
The tax cuts will create a ton of jobs booming, the “Path to Prosperity” suggests. In Ryan’s plan, next year’s housing investments look really good. He says it would be $89 billion in just the one year. The foreclosures backlogged and unsold homes worry several though. This and the falling home costs make several believe the housing market is not getting better anytime soon. By 2012, 200,000 jobs would be lost if 61 billion in spending cuts happened like the GOP wants, according to Fed chairman Ben Bernanke. Another issue is the decrease in GDP predicted by Goldman Sachs. It forecasted a 2 percent decrease. The poor, elderly and disabled are the only ones impacted by the “Path to Prosperity” tax cuts Ryan suggests. The report didn’t talk about the U.S. businesses with billions of dollars. These businesses aren’t hiring anyway.
One example is the Bush tax cuts
The best predictions for the future of the “Path to Prosperity” lie in the past. When George W. Bush signed the 2001 and 2003 tax cuts into law, he boasted that he had launched a new era of sustained economic growth and prosperity. In reality, from 2001 to 2007 United States millionaires and billionaires got richer while average household income fell for the first time in history, jobs grew at the weakest pace in more than 60 years, the federal deficit rose to record amounts, and the financial industry careened to the brink of collapse. While jobs weren’t growing, a brand new bill was passed to give companies a break on taxes. About $362 was lost due to this. Shareholders got most of this money rather than hiring.
Information from
Fortune
finance.fortune.cnn.com/2011/04/08/lower-corporate-taxes-wont-create-more-jobs/
Huffington Post
huffingtonpost.com/jake-berliner/the-magical-economy-broug_b_845233.html
National Journal
nationaljournal.com/budget/ryan-plan-pushes-optimism-to-the-outer-limits-20110405
Political Correction
politicalcorrection.org/factcheck/201011190001
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