Pro-Growth Budgeting Act of 2013

Floor Speech

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Mr. FOSTER. Mr. Chairman, I rise today in opposition to H.R. 1874 and to explain to my Republican colleagues why their tax policies have not worked and will not work to produce economic growth and jobs.

I am a scientist who has spent over 20 years at Fermi National Accelerator Laboratory conducting research and a successful businessman before that, and a scientist proceeds on the basis of facts. The historical facts on Republican tax policies are clear.

Tax policies during the Clinton years, predicted by the Republicans to restrict economic growth, in fact generated the strongest uninterrupted period of job growth in our lifetimes--over 22 million new American jobs in 8 years.

Then the Bush tax cuts enacted in 2001 reversed those policies, and in the following 8 years, the net number of new jobs was essentially zero--actually, slightly negative. Twenty million Americans entered the workforce during the Bush years, and the Republican policies produced zero net jobs for them, opening up a jobs gap of over 20 million jobs, a jobs gap that we are still closing today.

So to the extent that there is a causal link between tax policies and job creation, the data is clear: Republican policies have destroyed jobs and Democratic policies have created them.

I will now attempt to explain why this is and why the simplified macroeconomic modeling promoted by this legislation will fail to match the real world.

Generally speaking, Democratic tax breaks deliver benefits to the middle class while Republican tax breaks deliver benefits to the very wealthy, and, as it turns out, the very wealthy spend and invest their money very differently than the middle class.

Mr. Chairman, the macroeconomic models promoted in this legislation typically model our economy with a single aggregated consumer. Like the Republicans, they pretend that giving an extra dollar to a billionaire is no different than giving an extra dollar to a working class family. However, if you give an extra dollar to a middle class family, they will spend it in the local economy, increasing local economic growth, or they will invest it in some of the highest return investments available to anyone, investing in their children's college education or, perhaps, buying a second car so that their spouse can get a job.

Now, if you give that same dollar to a very wealthy individual, they will not change their spending habits because they are already spending as much as they feel like spending and this will not change, so there will be no local economic growth.

The investments of the very wealthy are also very different since they no longer have available to themselves the high-return investments available to the middle class. The very wealthy have already spent everything they can to send their children to the finest schools. They already have seven Cadillacs in their garages. So the marginal investments of the wealthy are intrinsically less productive due to the basic principle of economics known as the ``law of diminishing returns.''

Since economic growth is equal to investments times return on investment--sorry about the equation--the economic growth from channeling money to the wealthy is far less than the same relief being given to the middle class.

Democratic middle class policies are pro-growth policies, and Republican policies are not.

Mr. Chairman, there is also another important effect not captured by the single-consumer macroeconomic models in this legislation, which is the increasing propensity for wealthy people to move their money offshore.

If you give an extra dollar to wealthy people, they will turn it over to their money managers, who look around for high yields and who will increasingly invest those dollars overseas, perhaps increasing the net worth of the wealthy investors but competing with and destroying American jobs. Had that same dollar been given in tax relief to middle class families, it would have been much more likely to stay in America.

So, in the real world, Republican policies trickle down, but they trickle down to jobs in China, and that is why the Bush tax cuts have generated zero jobs in the 8 years after having been enacted.

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