Some people — including a Presidential front-runner and many leading Democrats in the RI General Assembly — love to insist that government spending does not create jobs, and that therefore we should continue cutting taxes for the wealthy in order to generate economic growth. The problem with the trickle-down argument, other than the fact that there is little evidence to support it, is that the opposite is actually true – especially when it comes to getting out of a recession. In fact, history shows us that:
when economic times are bleak, there are doable steps that a government can take that make a difference to get the economy back on a path of growth and job creation.
For a really good example of exactly how this works, we don’t even have to go back to the Great Depression, nor do we have to travel to Detroit (even though I really love cars and trees that are the right height). Here’s a personal story from right here in Rhode Island — my own.
In the fall of 2009, we bought our first home — a small bungalow that was built in the 1920s. We got an FHA-insured mortgage, and we knew that when we filed our taxes for that year, we would be eligible for a first-time home-buyers’ tax credit of $8,000. With a baby on the way, we were motivated to buy a home — but if the tax credit hadn’t been offered, I doubt we would have been able to do it as quickly. It took some Keynes to help get our keys on closing day.
During the run-up to closing, we hired a home inspector and a lead inspector. When it came time to move, we needed movers to carry most of the big stuff (and I won’t lie, they carried plenty of the small and medium stuff, too). We called the cable company and got our new house wired up. We installed a new stove, and a washer & dryer — and had the broken-down old ones removed.
We had to buy furniture to prepare a room for our daughter, as well as one for visiting grandparents. Got a good price on a truckload of wood for the fireplace which we planned — and still plan someday — on converting to wood-stove insert. Not to mention countless trips to the hardware store for tools and materials for DIY projects (and as big as my tool set has grown, it still feels like the tool I use the most is my wallet). Suffice to say, the $8,000 credit meant a lot that first year.
Our house still had some of its original windows, with layers of lead paint and and potentially dangerous friction zones. So we just kept those windows shut until the spring of 2011, when we looked into finding a lead-safe contractor to replace them. We learned about an energy efficiency tax credit that reimbursed some of the cost of new windows – and so we got the work done.
Then in the late summer, we saw some news about a Home Energy Audit that we could get — for free — to determine what areas of our home need more insulation and where we could stop air from leaking out/in. If we decided to contract with someone to do the work, not only would we save on future energy bills, but about 75% of the total cost of insulation work and air leakage sealing would be paid for. (The program also replaced — at no cost to us — our old incandescent bulbs with CFL bulbs, saving us more money.)
During the energy audit, the inspector also discovered some old knob and tube wiring that would become a fire hazard, were we to cover it with insulation. Before we could proceed with the insulation work, we had to replace that wiring. Now we have hired a licensed electrician to do this work — because while I like to keep up with current events, I don’t want to become one.
And with every check we wrote, and with every swipe of the debit (and occasionally the credit) card, knowing that tax credits were coming or that we were only paying a fraction of the cost made it easier to make the purchase. Each time we did — SURPRISE! — there were actual workers with actual jobs getting actual paychecks who did the work. And though I can’t tell you exactly where each of them spent their money, I’m fairly certain it was a lot closer to Broad St. than it was to Wall St. – creating ripple effect throughout our state’s economy.
(As a side note: in addition to the broader economic benefits that our spending generated, from a purely selfish standpoint, these home upgrades have helped protect my family’s health and safety, and they will save us money in the long run, too. So thanks, Uncle Sam!)
Ours is just one example, but there are many other families and individuals in Rhode Island that have been making made similar decisions. And I’m willing to bet that our actions — spurred by government policies and investments — have actually created more jobs and economic growth in our state than all of the recent tax cuts that the richest Rhode Islanders received from the General Assembly or the ones that they got from Bush.
You won’t create jobs or growth by cutting spending. The best way to create jobs is, quite simply, to create jobs — like our grandparents did with the Works Progress Administration. So instead of continuing to ride Dr. Supply-Side’s bomb, our elected leaders ought to learn from history, and choose policies and investments that help bring us out of our own Great Depression.
I’ll bet you $10,000 it will work.