What's Missing in the GOP Debate: Consumer Demand

By Timothy King 11-10-2011

If you didn’t watch last night’s debate, I’ll save you some time and sum it up for you in seven words and a em dash.

Taxes and regulations — we’ve got too many.

Now, this isn’t surprising. Last year, in President Obama's State of the Union address, he talked about cutting bureaucratic red tape and reviewing regulations that would hurt businesses.

I think you would have a pretty broad consensus among Americans that a corporate tax system is broken. We have one of the highest corporate tax rates in the developed world on paper at least -- when it comes to what corporations actually pay we are about average -- and yet we allow some profitable corporations to pay no taxes at all.

In fact, according to a Citizens for Tax Justice report, the nation's 280 most profitable corporations received a total of nearly $224 billion in tax subsidies from 2008-2010.

What was missing from the GOP debate was a discussion of consumer demand.

McClatchy News Service did some digging around about claims that taxes and regulation hurt small businesses:
 

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.


The National Federation of Independent Businesses (pretty sure none of these guys have joined #OccupyWallStreet) surveys their members about top business concerns.
For 2010, the numbers showed that small business owners cited their number one problem as weak sales. In contrast, their concern about taxes actually had decreased since the 1990’s.

The good news is our country can tackle poverty and the lack of demand in the market at the same time. According to a report by the Center on Budget and Policy Priorities the effect of the 2009 Recovery Act:

  • Expansions in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) kept 1.6 million people out of poverty.
  • The Making Work Pay tax credit, which expired at the end of 2010, kept another 1.5 million people out of poverty.
  • Expansions in the duration and level of unemployment insurance benefits kept 3.4 million people out of poverty.
  • Expansions in SNAP benefits kept 1.0 million people out of poverty


That means nearly 7 million people have been kept out of poverty, but it also means 7 million people have been boosting consumer demand.

Low-income people are likely to spend additional income on food and basic consumer products. This is good for sales. When sales go up, so does hiring.

We don’t have to make a choice between helping low income people and helping small businesses. We can do both.

We all benefit when parents are able to feed and clothe their children.

 

Tim King is Communications Director for Sojourners. Follow Tim on Twitter @TMKing.

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