The Killer Question that couldn't be answered

History hasn't been kind to GOP arguments about taxes.

Jonathan Cohn Senior National Correspondent, The Huffington Post



Tuesday night's Republican debate was devoid of flashy moments. Nobody said anything particularly embarrassing. Nobody said anything particularly memorable. Even Donald Trump failed to stand out.

But the debate did have one moment that may loom large when the voters cast ballots a year from now. It was a question to Carly Fiorina from moderator Gerard Baker, the editor-in-chief of The Wall Street Journal. Here's the critical part: 

...in seven years under President Obama, the U.S. has added an average of 107,000 jobs a month. Under President Clinton, the economy added about 240,000 jobs a month. Under George W. Bush, it was only 13,000 a month. If you win the nomination, you'll probably be facing a Democrat named Clinton. How are you going to respond to the claim that Democratic presidents are better at creating jobs than Republicans?

The question was arguably harsher than anything from the infamous CNBC debate that Republicans and their supporters found so offensive. And that’s because it called into question not just a single Republican argument, but a basic premise of the party's case for taking over the White House.

After sharing an anecdote about a voter she had met, Fiorina responded with a generic pitch for smaller government, lower taxes and fewer regulations -- a strategy, she promised, that would boost growth, create jobs and raise wages. It was the same argument that other Republicans made, in different forms, throughout the evening. And it was consistent with their economic policy proposals, which consist primarily of massive tax cuts that would mainly benefit the wealthiest Americans. 

But neither Fiorina nor her counterparts could explain away the premise of Baker's question. After all, George W. Bush reduced taxes on the wealthy, while Clinton and Obama raised them. Bush did his best to roll back Clinton-era regulations; Obama introduced the Affordable Care Act and moved aggressively to reduce carbon emissions. In short, Bush tried the preferred Republican strategy while Clinton and Obama tried the opposite -- yet job growth under Bush was the worst and the numbers aren't even close.

Of course, this correlation between Democratic administrations and stronger employment doesn’t prove that one caused the other. Clinton benefited mightily from the internet boom of the 1990s. But there are other reasons to question the Republicans premise that their strategy -- particularly their focus on large tax cuts for the wealthy -- will deliver the economic results they promise.

Some of it comes from other countries. Historically, the highly taxed countries of Western Europe have performed no worse than their American counterparts. On the contrary, many experts consider the Scandinavian economies, where taxes gobble up more than half of national incomes, a prototype for balancing strong growth with widely shared prosperity.

Partly that's because the taxes finance a generous welfare state that reduces poverty and produces a well-educated workforce, making it easier for the population to thrive in the volatile global economy. As the economist Jeffrey Sachs wrote in a widely cited 2006 Scientific American editorial:

On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP.

Plenty of academic research backs this up. Analysts at the Congressional Research Service conducted a thorough literature review in 2014 and concluded that "both labor supply and savings and investment are relatively insensitive to tax rates." 

That obviously isn't an argument for raising taxes or regulations frivolously. Some taxes and regulations make sense. Some don't. Timing makes a huge difference, as do the trade-offs and policy nuances. (To take one current example, raising the minimum wage to $12 might not have a big effect on jobs while raising it to $15 might.) And it's not like the Obama-era recovery has been ideal. Job growth has returned but wage growth hasn't. A debate over how to raise living standards makes a lot of sense right now.

But the available evidence from the U.S. and abroad puts the burden of proof on Republicans, who are making the same old arguments on taxes and regulations that they've been making for decades. They need to provide evidence that their solutions will unleash a more robust economy -- one that's good not just for the richest 1 percent, but also for everybody else. That’s not an easy case to make.