The lame duck session is the final gasp of a Congress that consistently failed to recognize the priorities of the American people over the past two years. This week, Congress failed to renew funding for unemployment benefits, to extend current tax rates past this year and fund the federal government for the coming year.
Today's announcement that unemployment has risen to 9.8 percent comes during the same week that the federal emergency unemployment compensation expired. The Senate has not considered an extension. Instead, it spent much of the week working to pass a massive expansion of food safety regulations.
In the House, Speaker Pelosi tried to push an unemployment extension outside of the normal rules and without any opportunity for amendment. Her extension would have increased the national debt by more than $12 billion. Because of the unusual way that she brought the bill to the House floor, it required a two-thirds majority for passage. With 11 members of her party voting against the bill, it failed to achieve the votes needed.
The Speaker chose not to send the bill back to the House under regular order so that Members could consider a way to pay for the extension by reducing other government spending. Instead, the House finished its business for the week on Thursday evening.
Before leaving on Thursday, the House passed legislation that would extend only some of the current tax rates. The bill would raise taxes on small businesses and investors, the very people that are mostly likely to create new jobs. In fact, taxes would be raised on half of all small business income.
The director of the non-partisan Congressional Budget Office indicated that this tax increase would reduce the growth of GDP by nearly 25 percent. This difference could mean slower job growth and more time spent on unemployment assistance for laid off workers.
There's been a lot of talk about cutting taxes for the rich. The simple fact is that without Congressional action, taxes will go up. Republicans are not pressing for a tax cut; we are supporting an extension of the rates that people are currently paying. Let's also not forget that half of all small businesses pay taxes as if they were people. The choice we face is about whether or not the federal government should raise taxes on these businesses.
The Congressional Budget Office estimates that the Democrats' tax bill will raise an additional $700 billion over ten years. But there is good reason to question this estimate. Because of rules governing CBO reports, they do not account for how a tax increase may change the behavior of those being taxed.
For decades now, Stanford Economics Professor Kurt Hauser has documented how the top tax rate may change, but government revenue remains consistent. Writing in the Wall Street Journal this week he notes that, "Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90)."
He makes the case that if we raise taxes now, the government will collect far less revenue than projected. Money available for investment will decrease, and economic growth will stagnate.
At the end of the day, raising taxes won't reduce our deficit and could actually make the problem worse. We need unemployment assistance that is paid for Americans who are searching desperately for a job. But ultimately, private sector economic growth will create jobs, not government taxing and spending.
Only 50,000 net private sector jobs were created over the last month. To fully recover, our economy needs to start creating hundreds of thousands of new jobs in a given month. We won't do this by discouraging investment in new and existing small businesses.
The House we have today has been woefully negligent in its responsibility to create a climate where the private sector can grow and flourish. However, we can't wait until the beginning of the year to provide for the unemployed and to provide certainty for businesses. Other items can wait; our economy needs to be priority number one.