NCPA - National Center for Policy Analysis

Government's Proper Role in Creating Jobs

February 3, 2012

As the economy began its notorious downturn in 2008, politicians from the left called on the economic policies prescribed by John Maynard Keynes as a means to recovery.  Advocating high government spending in order to artificially boost aggregate demand, Keynesians created enormous stimulus packages that rapidly boosted government debt levels.  However, the results are at best lackluster several years later, says David S. Addington, vice president of domestic and economic policy at the Heritage Foundation.

  • In February 2009, when the American Recovery and Reinvestment Act (ARRA) became law, 12.5 million Americans (8.1 percent of the work force) lacked jobs.
  • In December 2011, with 80 percent of the ARRA's government "stimulus" money spent, 13.1 million Americans (8.5 percent of the work force) lacked jobs.

The disappointing impacts of the Keynesian policies and their inability to spend the country out of economic recession have caused many to look to other solutions to the United States' economic woes.  Thus, the Heritage Foundation has establish five general principles for creating a thriving economy that can grow its way out of recession while avoiding enormous government deficits.

  • Eliminate the individual income tax, payroll tax, capital gains tax, dividends tax, estate tax and corporate income tax and instead impose a simplified, single-rate flat tax on expenditures of individuals and businesses, thereby creating strong incentives to save.
  • Remove red tape for the exploration and exploitation of domestic energy resources, including Environmental Protection Agency regulations and administrative approvals, and support necessary supportive infrastructure such as the XL Keystone Oil Pipeline.
  • Grant the president greater, fast-track authority to negotiate trade agreements with other countries, thereby allowing for domestic businesses to more easily tap broader markets and giving American consumers access to cheaper, more efficient goods.
  • Cut overregulation of the economy by requiring that major agency rules be approved by Congress before they can be implemented.
  • Repeal the Davis-Bacon Act, which drives up labor costs on major federal projects by mandating wages that are, on average, 22 percent above the market level.

Source: David S. Addington, "Government's Proper Role in Creating Jobs: Top Five Actions to Take," Heritage Foundation, January 23, 2012.

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