Kai Ryssdal: The best hope to keep the economy from slowing down even more would seem to be getting more people working. To that end, Republicans in the House of Representatives introduced what they’re calling new job-creation plan today. The ideas in the proposal aren’t exactly new — some of them were in the GOP’s Pledge to America last year.
We asked Marketplace’s Nancy Marshall Genzer to find out how exactly things like lowering the top corporate tax rate to 25 percent might create some more jobs.
Nancy Marshall Genzer: For some economists, it’s a no-brainer. Of course corporations would plow money from a tax cut back into the business, creating jobs. And that would start a ripple effect.
Robert Dye is senior economist at PNC Bank.
Robert Dye: Tax cuts create jobs, jobs create income, income creates more jobs in other companies.
Dye says that was the rationale for tax cuts that were included in a compromise agreement between President Obama and congressional Republicans late last year. Does that mean tax cuts create jobs?
Bill Gentry says not necessarily. He teaches economics at Williams College. He says many companies are sitting on piles of cash right now, and not hiring. He doesn’t think extra money from a tax cut would change that. Gentry says things would be different in a healthier economy.
Bill Gentry: Because if the economy is booming and companies are saying, “Wow we need cash,” then that would be a different story.
Gentry says, right now, companies would be more likely to use money from a tax break to buy back stock, or increase dividends for shareholders. But Nomura Securities chief economist David Resler says, hey, what’s wrong with that? Resler says the shareholders would use the money to create jobs.
David Resler: They’re going to invest it in either other companies or they’re going to use some of that money to buy goods and services that will require increased production by somebody.
But would that somebody be in the U.S. Or would the shareholder invest the money abroad? Or use it to buy something made in China? More tough questions for economists to chew over.
In Washington, I’m Nancy Marshall Genzer for Marketplace.
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