Analysis of media issues, politics and current events.
A common claim. Cutting taxes would “unleash” the power of the market.
This fact may beg to differ. Canada has cut corporate taxes by 30% over six years. 21% in 2006 with cuts to 16.5% in 2011 and to 15% in early 2012. For all the cuts, the Canadian economy grew at 1.8% in the second quarter of 2012. In the same period, the US has grown at 1.7%. If 0.1% is the difference between huge tax cuts and America’s current economic program, do we still want to go with the talking point “The stimulus didn’t work?” If it didn’t, tax cuts have a lot of explaining to do too.
What’s more. Some reports say despite the series of tax cuts in Canada, companies have simply pocketed the freed tax cut money than use the money for reinvestment and growth. As I researched this story on the web, I ran across so many articles boasted how the Canadian tax cuts would lead to prosperity. Like this one from Downsizing Government, “What policymakers can learn from Canada’s corporate tax cuts.”
In fact, tax cuts and austerity advocated by fiscal conservatives as roaring economic drivers don’t seem to be working as planned in the real world.
Quick. Name a country that’s imposed harsh government cuts to programs, staff and infrastructure and has the growth to show for it?
None. UK, Greece, Spain and Italy all implemented austerity measures to cut government spending and infrastructure. Italy, Spain and Greece had to cut so because they simply couldn’t borrow money. So let’s focus on the UK. The United Kingdom leaders positioned austerity as “expansion austerity.” That is, cuts in government spending that will position them to stimulate economic growth. An idea that as some in the US like Mitt Romney, Paul Ryan and most deficit hawks have advocated.
Just like the countries forced into austerity at gunpoint, the UK was pushed further into a deep economic recession AFTER enacting austerity. What’s more, in a measurement of total investment (fixed capital formation) shows, investment, including business investment in Britain has declined from 2010 when austerity was pushed vigorously and 2012. Now the International Monetary Fund (IMF) estimates austerity measures have cut the country’s gross income by 2.5% between 2010 and 2012, while little confidence has been nurtured in the economy.
So much for that plan. For the UK, it’s their country and their choice. But thanks to them and others countries around the world we have guinea pigs for austerity.
America did the opposite. The stimulus and TARP. Deficit critics claims that this is driving us dangerously in debt are very true, and very serious. No debate on that. Though it’s not happy days are here again. We aren’t in negative territory like the austerity pack, growth as been small but consistent.
So if the stimulus didn’t work according to some critics. Just how would describe the austerity to prosperity attempt by the UK? Or the austerity the rest of the P.I.G.S (Portugal, Italy, Greece, Spain)? Or the idea that cutting taxes is directly tied to explosive economic growth? Canada would beg to differ.