I’m really unhappy with both Presidential candidates. I think Romney is slightly less horrid, but I’m not inspired. But both the Republicans and the Democrats have their tidy assertions for dealing with the world, some of which turn out to be untrue. Herewith three things that Republicans say that, well, don’t add up.
Tax Cuts Create Jobs: It’s true that nobody likes to pay taxes, and everyone likes tax cuts. But the one point that everyone overlooks is that, when running a business, wages and benefits paid to employees represent a tax deduction. One could argue that the government subsidizes employment through the tax deduction, in the same way that home ownership is subsidized through the deduction on mortgage interest. If tax rates for businesses are lowered the value of this deduction is diminished, and the incentive is provided to cut employee costs by reducing staff and lowering wages. Moreover, all the plans to ‘cut taxes’ are incremental. If you cut taxes by half, it might make a difference, but a change of 10-15% won’t do much. Certainly, there is no vast pool of jobs waiting to be brought on the market when tax rates are cut by, say, 10%.
Cutting regulation creates jobs: To some extent this is true: regulation promotes entrenched big business at the expense of new upstarts. But compliance and enforcement of regulation is an industry in itself, entailing millions of jobs and billions of dollars, in both the public and private sectors. Cutting regulation would allow some new companies to take the field, at the cost of broader unemployment elsewhere.
If we can just drill more, all our energy problems will be over: We like to believe that the energy companies are in the business of supplying us with energy. They are, like all other businesses these days, interested in making profits now at the expense of everything else. They’re more than happy with the current supply, and the market system that creates occasional hiccups that drive up the price without changing their operating costs. If restrictions on drilling and energy exploration were relaxed, there would be little difference after ten years: we’d still have a cantankerous supply, dependent on countries that don’t like us, with occasional events that drive up the price just for kicks.