At present, the most contentious legislative issue in the U.S. House of Representatives is whether temporary reductions in taxes for wealthy Americans should be made permanent. The tax reductions were made in a time of federal government budgetary surpluses, with the idea that the reductions should be a reward in a time of economic prosperity.
Now, the United States is in a prolonged economic slump, with record breaking budget deficits, but Republicans are arguing that the temporary tax reductions should be made permanent in order to stimulate job growth. They assert that when wealthy Americans save lots of money, they spend that money in ways that the Market uses to create jobs more efficiently than the government ever could.
Representative John Yarmuth addressed this claim yesterday, by looking at the facts of the economy of the last decade. He observed that the facts don’t match Republican theories about a trickle down economy. Yarmuth explained that the wealthy “had a great decade. On average, $100,000 savings on taxes during that time. Did they create more jobs because they cut their taxes? No. In fact, we had actually the most stagnant period of private sector job growth in modern history.”
Why the gap between Republican economic theory and economic reality? Why did the temporary tax reductions for wealthy Americans fail to create jobs? One possible answer is that manufacturing in the United States is sharply down, as corporations outsource production to factories in foreign countries in order to evade American fair labor laws and environmental regulations. Jobs may have been produced, but they were low-paying jobs in dangerous sweatshops, outside the United States.