According to conservatives, the Obama stimulus package passed in early 2009 hasn’t worked, and it’s time to try something else. Every single Republican candidate for president believes that the “something else” in question ought to be tax cuts.
We all familiar with the mantra by now: Tax cuts create millions of jobs. Tax cuts boost the economy. Tax cuts increase government revenue. Tax cuts cure cancer, and if global warming were real, tax cuts could probably cure that too. All we need to do is remove government from our wallets, and the recovery would bloom.
However, there’s a serious problem with that analysis — well, more than one, really, but let’s just deal with them one at a time for the moment. You see, economists agree that the most accurate way to measure a nation’s tax burden is to look at federal revenue as a percentage of the nation’s gross domestic product. That number tells you how much of the nation’s economic output is being siphoned off to finance government each year, and how much is being left in private hands.
Since the end of World War II, the federal government has collected an average of 18.5 percent of GDP. However, as the chart below demonstrates, in fiscal 2009, 2010 and now 2011, that percentage has fallen dramatically.
This year, total federal revenue is expected to be just 14.4 percent of GDP, the lowest rate since 1950. Over the past three years, it has taken a smaller share out of the economy than in any three-year period since 1941-43.
That’s real money. If federal revenue as a share of GDP were at its historic norm, the government would be collecting another $600 billion a year in taxes. But it’s not.
So my question is, with federal revenue as a share of GDP at a 60-year low, where are the jobs? And with federal revenue as a share of GDP well below its historic norms for most of the past decade, why did the jobs disappear in the first place?
As always, responses with a basis in fact are appreciated.
– Jay Bookman