I am sick of hearing Republican talking points about the economy which can easily be refuted with simple facts. So, hopefully to make that job a bit easier for everybody, here is a list of the seven things everybody needs to know about the American economy. A lot of this is basic economics; however, it seems that is all that is needed to successfully argue against Republican arguments.
1) Fight Unemployment, not deficits. The primary job of the government right now is to stimulate the economy. Deficits and the debt are a long term problem, and simply correcting the economy will definitely brighten our fiscal outlook. Jobs are what we should primarily concern ourselves with right now, even if that leads to short term higher deficits. The sooner people can get back to work, the sooner there are more tax-payers, which leads to more revenues and lower deficits. Don't believe me? An April 2011 Pew Study showed at least 27% of the current deficit was created by the current recession.
2) Call me a tax and spend liberal, but at least I support economic policies which work. Stimulating the economy requires government spending. The stimulus package (which was much too small for the catastrophe of this recession) still saved or created between 2.5-3.6 million jobs. Extending unemployment insurance, for example, expands the economy by $1.61 for every dollar spent, and increasing food stamps expands the economy by $1.74 for every dollar spent. Both programs have been targeted by Republicans as wasteful spending; however, if you do the math, they are an intelligent way to spend funds. Basically, because the economy is in bad shape right now, that means consumer purchasing power is way down. Because of that, businesses don't make enough profit and cannot hire/must lay off workers, further driving down consumer purchasing power. It is a vicious cycle. Therefore, to fill the void of purchasing power, the government must temporarily spend much more to increase the money flowing through the economy, and thus restart a healthy cycle. Modern history shows spending helps stimulate the economy. Let's look at the Great Depression. It didn't really end until World War 2, when the government had an excuse to go on a spending binge. We ended up having our debt go above 100% of our GDP -- however, the spending ended the worst economic calamity in our history. To say that the government should do little is like wanting the government to respond to economic troubles like Hoover did -- and we all know how that turned out.
3) Tax cuts are not worth it. Tax cuts, considering the rate they are currently at, are NOT an effective stimulus. Though they do stimulate the economy, they do it at a rate that is not efficient or cost-effective. The Bush tax cuts, for example, will cost the United States nearly $4 trillion dollars over the next decade (assuming they are extended). An April 2011 Pew Survey showed the Bush tax cuts account for nearly 13% of our current deficit. The Obama stimulus, comparatively, only caused 6% of our current deficit. These tax cuts were supposed to help the economy, though it's apparent they didn't. In fact, for every dollar of revenue lost from the Bush tax cuts, the economy only grows 32 cents -- meaning it provides way less stimulus than things like unemployment insurance (pg. 16 of http://www.moodysanalytics.com/... ) . Taxes are currently way below the Laffer Curve and thus provide little stimulus.
4) Stop coddling the rich We live in a massively unequal society. The wealthiest 1% of American households control over a whopping 40% of our wealth. The wealthiest 10% control 85% of the wealth. You know we have a weak economy when 90% of people control only 15% of the total net worth. In fact, even though America's economy has grown over the past 30 years, nearly all of those gains have gone to the rich while wages have stagnated for everybody else. And yet, in that time frame, the rich (earners above $250,000) have seen their tax rate go from 70% to 35%. We need to return a significant amount of the purchasing power to the middle class to ensure a fair and viable economy. Here is a great video on the dangers of our current wealth inequality.
5) Democrats simply do better The average modern Democratic president has expanded the economy more and reduced the deficit more than the average Republican president
6) The rich must pay more. The rich do not pay too much in taxes. This is one of the complaints I am most tired of hearing. When FICA taxes are included, the top 400 income filers in this country (who earn at least $48 million) pay less taxes as a percentage of their income than people who make $64,000. Does that sound like too many taxes on the rich to you?
7) Fun Fact Under Obama, taxes are significantly less than under Reagan, as a percentage of GDP. With Obama, total federal revenues are only 14.9% of GDP compared to up to 19.6% of GDP under Reagan.