The GOP Tax Bill Won’t Create Jobs — Here’s Why

By on December 21, 2017

One of the biggest talking points in defense of the Republican-backed tax bill that is set to be signed by President Donald Trump is that the huge tax cuts for corporations will result in tremendous jobs growth. That couldn’t be further than the truth.

The reason why is pure economics. Republicans suggest that, by supplying corporations and the wealthy with more capital, they will spend that capital on hiring more workers, or failing that, increasing the pay of their current workload.

But why would they do that? Presuming that the output of those workers stays exactly the same as it was before, an influx of added capital in the form of tax breaks won’t change anything, with the exception being it will fatten the pocketbooks of CEOs. Jobs won’t get created because there isn’t a need for more jobs — the demand for those those products (which would require more people to build or sell them) hasn’t increased, because the consumer base hasn’t been significantly strengthened.

Consider what motivates corporations: capital itself. It’s true that capital is needed in order to hire workers also, but that capital is spent in the pursuit of gaining more capital. If additional capital is already given to corporations in the form of tax breaks, then there’s no incentive to spend money to make money.

How do I know all of this? I’ve seen it firsthand, in my home state of Wisconsin. Tax breaks were given to corporations and the wealthiest in the state. And over the course of the past five years, jobs growth has slowed down — to the extent that the private sector in 2016 only grew by around 12,937 jobs, a stark departure from 2010 when it grew by nearly 3 times that much, under a Democratic governor who raised taxes (and embraced social safety net programs during his tenure) in the state.

The larger point is this: trickle down economics doesn’t usually do any good for the economy or for workers. Tax cuts like these meant to benefit the rich don’t create jobs, and this latest round of trickle down could lead to another recession. Republicans and anti-tax folk are celebrating this week, but their merriment will likely be short-lived, once the effects of this bill start to shape the economy.