Just yesterday, as talks over taxes and spending grew a little louder in Washington, House Speaker John Boehner (R-Ohio) cited an “independent” report that found tax increases on the wealthy would “cost our economy more than 700,000 jobs.”
The argument, not surprisingly, was debunked months ago. But the rhetoric raises a worthwhile question: what would happen if a bipartisan agreement fails to materialize, and tax increases automatically kick in on Jan. 1?
Yesterday, the non-partisan Congressional Budget Office reported the looming tax hikes and spending cuts would undermine the economy in 2013, but the “least harmful component of the coming fiscal consolidation is precisely what Democrats are demanding: the expiration of the Bush tax cuts for high earners.”
CBO doesn’t examine the top bracket Bush tax cuts directly. But it does look at two competing scenarios: One where all of the expiring tax cuts except for the payroll tax cut are extended; another where all of the expiring tax cuts except for the payroll tax cut and the Bush tax cuts for top earners are extended.
The former, CBO says, would increase employment by 1.8 million full time equivalent employees in 2013 relative to allowing everything to lapse. The latter would increase employment by 1.6 million. The difference, 200,000 full time equivalent jobs, is attributable to the expiration of the top bracket Bush tax cuts alone.
By comparison, other layers of the fiscal cliff save less money and have far greater economic consequences. Failing to extend the expiring payroll tax cut and expiring emergency unemployment benefits through 2014 would cost the economy about 800,000 jobs, according to CBO. The two halves of the sequester – the defense cuts and the domestic cuts – would each cost the economy about 400,000 full time equivalent jobs.
So, according to the CBO, the Democratic priorities do more to help the economy, and the Republican priorities do less. The 700,000 figure cited by the House Speaker has no basis in reality at all.
Maybe Republicans will try to suppress this, too?