Today’s economic news was not good. The Commerce Department lowered its estimate of second quarter growth from an annual rate of 2.4% to an annual rate of 1.6%. That’s down from 3.7% in the first quarter of 2010 and 5.0% in the last quarter of 2009. Although the revision was smaller than many economists had feared, it’s nevertheless a sign that the recovery—if that’s what this is—is stalling.
The poor economy threatens to turn the November midterm elections into a complete rout for Democrats. With the official unemployment rate at 9.6%—and the actual percent of people who want more work than they can find maybe twice as high—Americans are suffering. More people now disapprove of President Obama’s performance than approve, and Republicans lead Democrats by 5 points on a generic Congressional ballot. The political futures market Intrade gives the Republicans a 76% chance of retaking the House. FiveThirtyEight’s Nate Silver projects they will also pick up 6-7 seats in the Senate, and even have a shot to win a majority in the Senate as well. President Obama and the Democrats may not have created the financial crisis, but they are going to held responsible for not having done more to manufacture a recovery.
With the Republicans likely to make major gains in Congress on the strength of frustration with the Democrats' inability to fix the economy, it’s fair to ask just what Republicans would do differently. In a speech to the City Club of Cleveland on Tuesday, House Minority Leader—and prospective Speaker of the House—John Boehner (R-OH) laid out his alternative to the Democratic plan. First, he wants to keep the Bush-era tax cuts—including the unpopular tax cuts for families making more than $250,000/year—from expiring at the end of the year. Second, he opposes both a cap-and-trade scheme to limit the emission of greenhouse gases and card-check legislation that would make it easier for labor unions to form. Third, he called for repeal of the health care reform bill’s so-called “1099 mandate,” which starting in 2012 will require businesses to report more of their income to the government. Fourth, he wants “aggressive” cuts in government spending. And, fifth, he wants Obama’s economic team—and in particular Secretary of the Treasury Timothy Geithner and National Economic Council Director Larry Summers—to step down.
What’s striking about Boehner’s plan is how little it actually would do. Extending the tax cuts and rolling back the stimulus would simply be a return to the economic policies of the Bush administration. Cap-and-trade schemes, card-check rules, and the 1099 provision of the health care bill clearly aren’t to blame for the weak economy, since none of those laws have gone into effect or are likely to any time soon. Boehner doesn’t seem to have any positive ideas for how to address the our economic crisis. His whole argument seems to be that we would be better off we had simply continued doing we what we were doing under Bush.
That’s hard to believe. While the stimulus package failed to get the economy really going again, the consensus among economists is that we would be in even worse shape without it. The non-partisan Congressional Budget Office estimates that the Recovery Act has saved between 1.4 and 3.3 million jobs that would otherwise have been lost. And, as Gary Burtless argues, the stimulus package is what kept disposable income from falling dramatically as wages were cut and people lost their jobs.
Meanwhile, as Andrew Romano explains, although getting rid of the stimulus by itself would save money, the savings would be more than offset by repealing health care bill—which the Congressional Budget Office says will actually save money—and extending the Bush tax cuts. The net effect of Boehner's plan would be to increase the deficit by more than $300 billion. Nor would his plan be likely to create jobs. As William Gale points out, most of the benefits of the keeping the tax cuts will go to the rich, which is typically the least effective way to stimulate the economy. Any jobs that keeping the tax cuts would create would be more than offset by the jobs lost without the stimulus. So if Boehner had his way the deficit would be larger and the unemployment rate would be higher.
“Bush economics on steroids,” is what Democratic Congressional Campaign Committee chair Chris Van Hollen calls Boehner’s proposals. That’s the case the Democrats have to make. They have to convince the public that if Boehner had his way things would be even worse. Fortunately, for Boehner and the Republicans, as long as people are struggling to make ends meet, it’s going to be a hard sell.