Democrats Take Money from Job Creating Tax Credit to Funnel Money Toward Pet Constituencies

The economy lost 131,000 jobs in July. The unemployment rate stayed a steady, if depressing, 9.5%. 6.6 million people have been jobless for more than 27 weeks. Despite it all Tim Geithner penned a column last week entitled “Welcome to the Recovery.” It’s a title in need of a caveat. It should have read, “Welcome to the Jobless Recovery.” Had that been the case it would have been fitting.

Democrats seem to have embraced the idea that the economy will stink well into November. Rather than battle the economic headwind, they’ve hunkered down behind an election strategy of helping core constituencies while leaving the rest of us to weather the storm.

The strategy has crystallized in the $26 billion state aid bill that passed through the Senate last Wednesday. The House of Representatives, which is currently enjoying an August recess, will be brought back into session to vote for the measure. Though many Democrats are at home fighting for their jobs, the Washington Post reports that, “[m]any lawmakers will welcome the interruption, viewing it as a chance to score a fresh legislative victory for teachers and public-service unions, an important Democratic constituency.”

Not a fresh legislative victory for the masses of unemployed. A legislative victory for two important Democratic constituencies.

Set against this backdrop it is unsurprising that the Association of Federal, State, County and Municipal Employees (AFSCME) and other unions are revving up its campaign engine to protect Democratic candidates in the fall. As the president of the AFSCME told Politico recently, “We intend to highlight the clear choice Americans will make in November between Democrats who are working to protect jobs and move the economy forward and Republicans who are willing to wreck the economy for political gain.”

Oh so backwards. Democrats pass a $26 billion bill to help teachers unions and Republicans are the ones “wrecking the economy for political gain”? In reality it’s little more than you scratch my back by paying off teachers unions, and we’ll scratch yours by throwing some campaign resources your way.

Dirty politics to be sure, but here is the real rub: where did Democrats scrounge up $26 billion? After all, they’ve demonstrated their unwavering commitment to following the Paygo rules (that’s a joke). Turns out Democrats found the cash by raiding a fund devoted for a research and development tax credit.

Here’s the scheme. Democrats passed a foreign-tax-credit limit that ended some tax breaks on overseas profits. The provision was projected to raise $11.5 billion over 10 years. In essence the plan was a tax increase on U.S. based multinational companies that are already struggling under the second highest corporate tax structure in the world.

Nevertheless, business leaders threw Democrats a bone. In a letter to Senate leaders, 22 large multinational businesses agreed to support the tax hikes with one caveat – funding the research and development tax credit. Democrats leveraged the support of businesses to tout the legislation, passed the tax increases, then immediately pulled the rug out from under the business leaders. Instead of funding R&D, which some people estimate would create up to 162,000 jobs and increase GDP by $90 billion, Democrats tossed the money to one of their pet constituencies.

Democrats have weighed the options. On one side of the scale is modest job creation. On the other side of the scale is campaign cash. In this broken town winning elections is more important than creating jobs every time. Given that reality I welcome you to the jobless recovery.

by Brandon Greife, Political Director of the College Republican National Committee