You'll Never Guess Rove's New Ideas For The GOP

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JONATHAN CHAIT JULY 8, 2010

You'll Never Guess Rove's New Ideas For The GOP

In today's Wall Street Journal op-ed page, Karl Rove offers a "growth agenda" for Republicans. See if this has a familiar ring:

A GOP growth agenda would keep intact the 2001 and 2003 tax cuts. ...

Laying out a positive agenda also requires GOP candidates to connect the dots between public policies and real-world consequences. So Republicans must make a compelling case that allowing the tax cuts to expire will result in history's largest tax increase—killing jobs, punishing hard work and enterprise, damaging growth, wounding small business, and postponing the moment government finally restrains spending.

They need to explain that raising taxes on dividends and on capital gains would lower economic growth for years to come. Retirements would be less secure, capital more expensive for every enterprise from manufacturing to commercial real estate, and investment in American jobs and companies less attractive.

So the Republican growth agenda is to leave all the Bush administration's policies in place. My favorite twist in the argument is where Rove calls this a "positive agenda" and immediately segues to arguing about all the terrible things that will happen if we restore Clinton-era tax rates. It worked so well under Bush, of course it's the solution to our problems now! (Also note that the Bush-era tax rates have not yet expired, so they've literally been in effect throughout this entire crisis.)

Also in that op-ed, you can watch Rove try to grapple with Keynesian economic theory:

Last Thursday House Speaker Nancy Pelosi joined the president in his bad bet by offering up the economic gem that extension of unemployment benefits "creates jobs faster than almost any other initiative you can name." Really? Faster than, say, cutting personal income tax cuts or slashing the corporate tax rate?

That's Rove's entire rebuttal: "Really?" He thinks it's self-evidently absurd to claim that extending unemployment benefits would create jobs more quickly than cutting taxes for business or upper-income taxpayers. In fact, the unemployed have a high propensity to consume marginal dollars -- they've seen a huge loss of income and are trying desperately to pay their bills and maintain some level of consumption. Businesses are sitting on enormous piles of cash.

The superiority of unemployment benefits as stimulus is economic conventional wisdom. Here's a chart from economy.com:

As you can see, extending unemployment benefits has several times the bang for the buck as extending the Bush tax cuts or cutting corporate taxes. So yes, Mr. Rove, really.

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posted in: jonathan chait, wall street journal, karl rove, nancy pelosi, republican party

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