Here is the most important take away on economic policy from last week’s debate:
- President Barack Obama plans to raise revenue by imposing $1 trillion in new taxes on the U.S. economy that will destroy nearly 1 million jobs;
- Governor Mitt Romney plans to raise revenues by pursuing policies that will create more taxpayers through increased private sector employment.
A study earlier this year by Ernst & Young concluded that the President’s tax plan would cost more than 700,000 people their jobs. Those results are consistent with a sophisticated statistical analysis performed by Christina Romer and her husband when she was serving the President as his first Chair of the Council of Economic Advisors. Their study, published by the prestigious American Economic Review, focused on tax changes meant to either increase the rate of economic growth (not simply offset a recession) or to reduce the budget deficit. Their conclusion:
The Obama approach channels austerity policies in Greece and Spain which have sought to narrow budget deficits by massive tax increases, but have only exacerbated the financial crisis in both countries. In Spain, a 3-percentage point increase in the Value Added Tax has pushed the unemployment rate up to nearly 27%; the jobless rate rising there 1.7% in September alone. Last year, more than half a million people left Spain seeking opportunity elsewhere in Europe and the rest of the world. At home, new organizations are forming spontaneously to facilitate barter and other forms of exchange that make possible economic cooperation that simply can’t take place when the gains from trade are overwhelmed by the now higher tax rates.
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