President Obama’s proposal of a “grand bargain” linking a cut in corporate taxes with new federal spending on infrastructure and job creation got the brush-off from GOP leaders in Congress last week. That used to be called cutting off your nose to spite your face. Reducing corporate taxes has been a longtime Republican goal, but these days party leaders seem so fixated on rejecting any presidential initiative that they can’t even support their own ideas.
For years, Republicans have complained that the U.S. rates are so high that they discourage investment and economic expansion. They called the 35 percent U.S. rate a job-killer because it’s the highest nominal corporate tax rate in any of the world’s developed economies. Actually, loopholes in U.S. tax law brought the effective corporate rate in 2011 to 12.1 percent, the lowest in decades, according to a report in The Wall Street Journal. But even so, a cut in corporate rates might just be the switch that can turn on the economy.
The offer made by the president is precisely the sort of deal that Americans would like to see Democrats and Republicans working on to get the economy back on track. Corporate tax reform can’t pass Congress on its own. A stand-alone infrastructure bill faces equally bleak prospects. So a bargain to cut the top corporate tax rate to 28 percent, and manufacturing to 25 percent, coupled with a guarantee to underwrite new spending on roads and infrastructure and other programs would seem to be a good compromise.
But Congress left town for the summer recess last week without paying much attention to Mr. Obama’s proposal, except to disparage it.
The most bizarre response came from Rep. Paul Ryan of Wisconsin, the GOP’s 2012 vice presidential candidate, who has previously characterized the president as a socialist. This time, he likened the president to some sort of corporate patsy: “The president claims his economic agenda is for the middle class. But it’s actually for the well-connected.”
Congress won’t be back until after Labor Day, but the president’s critics are unlikely to give his offer a more positive response even then. Their unwillingness to reach any sort of compromise with Mr. Obama ensures that the recovery will remain bumpy and uneven.
On Friday, the federal government reported that employers added a disappointing 162,000 jobs in July, well below the expected figure. The unemployment rate fall two-tenths of a percentage point to 7.4 percent, but that still leaves millions of able-bodied Americans searching for non-existent jobs.
Meanwhile, strikes by fast-food workers last week called attention to the plight of workers with minimum wage jobs who can’t make ends meet no matter how hard they strive.
Mr. Obama should continue efforts to break the gridlock in Congress with job-creating proposals because it’s the best way to spark demand, the cure for a depressed economy. The corporate tax reduction encourages companies with profits stashed overseas to repatriate their money. On the other side of the ledger, the projects he envisions would create well-paying jobs that go to workers hired by the private sector.
And it’s not as if there’s no real work to be done. America’s decaying roads and bridges sorely need sprucing up. During the August recess, voters in South Florida and elsewhere should let their members of Congress know that it’s time to set austerity aside and start investing in the economy.