Sec. 601. Policy statement on economic growth and job creation
745 words·~3 min read·
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The House finds the following: Although the United States economy technically emerged from recession nearly five years ago, the subsequent recovery has felt more like a malaise than a rebound. Real gross domestic product
(GDP)growth over the past four years has averaged just over 2 percent, well below the 3 percent trend rate of growth in the United States. The Congressional Budget Office
(CBO)did a study in late 2012 examining why the United States economy was growing so slowly after the recession. They found, among other things, that United States economic output was growing at less than half of the typical rate exhibited during other recoveries since World War II. CBO said that about two-thirds of this growth gap was due to a pronounced sluggishness in the growth of potential GDP—particularly in potential employment levels (such as people leaving the labor force) and the growth in productivity (which is in turn related to lower capital investment). The prolonged economic sluggishness is particularly troubling given the amount of fiscal and monetary policy actions taken in recent years to cushion the depth of the downturn and to spark higher rates of growth and employment. In addition to the large stimulus package passed in early 2009, many other initiatives have been taken to boost growth, such as the new homebuyer tax credit and the cash for clunkers program. These stimulus efforts may have led to various short term pops in activity but the economy and job market has since reverted back to a sub-par trend. The unemployment rate has declined in recent years, from a peak of nearly 10 percent in 2009-2010 to 6.7 percent in the latest month. However, a significant chunk of this decline has been due to people leaving the labor force (and therefore no longer being counted as unemployed ) and not from a surge in employment. The slow decline in the unemployment rate in recent years has occurred alongside a steep decline in the economy’s labor force participation rate. The participation rate stands at 63.0 percent, close to the lowest level since 1978. The flipside of this is that over 90 million Americans are now on the sidelines and not in the labor force, representing a 10 million increase since early 2009. Real median household income declined for the fifth consecutive year in 2012 (latest data available) and, at just over $51,000, is currently at its lowest level since 1995. Weak wage and income growth as a result of a subpar labor market not only means lower tax revenue coming in to the Treasury, it also means higher government spending on income support programs. A stronger economy is vital to lowering deficit levels and eventually balancing the budget. According to CBO, if annual real GDP growth is just 0.1 percentage point higher over the budget window, deficits would be reduced by $311 billion. This budget resolution therefore embraces pro-growth policies, such as fundamental tax reform, that will help foster a stronger economy and more job creation. Reining in government spending and lowering budget deficits has a positive long-term impact on the economy and the budget. According to CBO, a significant deficit reduction package (i.e. $4 trillion), would boost longer-term economic output by 1.7 percent. Their analysis concludes that deficit reduction creates long-term economic benefits because it increases the pool of national savings and boosts investment, thereby raising economic growth and job creation. The greater economic output that stems from a large deficit reduction package would have a sizeable impact on the Federal budget. For instance, higher output would lead to greater revenues through the increase in taxable incomes. Lower interest rates, and a reduction in the stock of debt, would lead to lower government spending on net interest expenses. According to CBO, this dynamic would reduce unified budget deficits by an amount sufficient to produce a surplus in fiscal year 2024. It is the policy of this resolution to promote faster economic growth and job creation. By putting the budget on a sustainable path, this resolution ends the debt-fueled uncertainty holding back job creators. Reforms to the tax code to put American businesses and workers in a better position to compete and thrive in the 21st century global economy. This resolution targets the regulatory red tape and cronyism that stack the deck in favor of special interests. All of the reforms in this resolution serve as means to the larger end of growing the economy and expanding opportunity for all Americans.