More Federal Stimulus Is Certainly Not the Solution

Small businesses have less access tocapital & ability to grow, even maintain workforce

By Rep. Ken Paxton

Texas Insider Report: AUSTIN, Texas – Two weeks ago President Obama signed into law the Education Jobs & Medicaid Assistance Act (H.R. 1586), a $26 billion aid package for states.  TARP carried a $700 billion price tag, and President Obama quickly passed a $1 trillion economic stimulus package shortly after becoming president. Yet, our economy continues to suffer.  

After the passage of these and several other economic stimulus bills, including the failed Cash for Clunkers program, I, along with many others, are concerned that this latest measure will not stimulate the economy, but rather add to our continuously growing national debt. 

Rather than throwing even more money at the problem, the federal government could better achieve its goal of stimulating our economy by lowering the tax burden on individuals, families and businesses and eliminating the heavy regulations on businesses operating in our country.

According to a recent paper by economists Alan S. Blinder of Princeton University and Mark Zandi of Moody’s Analytics, the federal government’s actions since the passage of Troubled Assets Relief Program (TARP) will cost taxpayers over $1.6 trillion. 

The nation’s unemployment rate has hovered near 10 percent for many months.  Detroit, the home of General Motors and Chrysler, companies that received billions of dollars from the passage of TARP, currently has one of the highest unemployment rates (14%) in the country. 

Government is the least productive institution in any economy, and throwing taxpayer money at our nation’s economic problem is demonstratively not the solution.  Rather than picking winners and losers by targeting particular businesses and industry sectors with stimulus dollars, the federal government (as well as state governments) should focus on allowing all consumers, investors and employers to keep more of their money in order to stimulate the economy.

In particular, a better use of federal dollars would be to extend the Bush tax cuts. 

Currently, the taxpayers pay anywhere from 10 percent to 35 percent in federal income taxes (this excludes the nearly 50% of Americans who do not pay any federal taxes).  If the federal government allows the tax cuts to expire, then the federal income tax rates will return to their levels in 2000, which ranged from 15 percent to 39.6 percent. 

Additionally, President Bush raised the standard deduction in 2001 for married couples filing jointly. 

If Congress does not extend the Bush tax cuts, a married couple earning $80,000 a year may pay approximately $2,200 a year more in income taxes, and a married couple earning $160,000 a year could pay approximately $5,500 extra.  Couples with children may pay even more, as the per-child tax credit is scheduled to revert back to $500 from $1,000.

Investors will also be affected.  

Under President Bush, long-term capital gains and qualified dividends were reduced to 15 percent, and some lower income filers, such as retired seniors, actually owed zero percent. 

If President Bush’s tax cuts expire, the capital gains rate will return to a maximum of 20 percent, and qualified dividends would resume being taxed at the rate of the filer, which, as mentioned above, could be as high as 39.6 percent. The effects of the increased taxes will affect consumers, which also affect businesses (employers). 

Furthermore, businesses, particularly small businesses, will have reduced access to capital, which will undoubtedly have an effect on their ability to grow or even maintain their workforce.

With the passage of H.R. 1586, the federal government is once again taking taxpayer dollars and doling them out to specific entities with failing economic policies; this time to certain states.  Texas has a constitutional requirement that prohibits us from operating with a deficit, a constitutional prohibition against a state income tax, and a business-friendly climate, all of which have contributed to our State’s success.  While Texans are certainly feeling the effects of the recession, our unemployment rates are still well below the national average and existing businesses are staying in Texas and other companies are re-locating here providing new opportunities for workers in our State.  The federal government should look to Texas for examples on policies that stimulate our nation’s economy, rather than dig deeper into the pockets of taxpayers by allowing President Bush’s tax cuts to expire to fund failing institutions.

Representative Ken Paxton was elected to the Texas House of Representatives in 2002 and is currently in his 4th term representing District 70.  Paxton received his BA & MBA from Baylor University, and also earned a law degree from the University of Virginia. He and his wife Angela live in McKinney, TX and have 4 children.


  1. I wished to thanks for this excellent study!! I surely taking pleasure in each minor little bit of it I’ve you bookmarked to examine out new things you post…

  2. Texas does not have a substantially lower unemployment rate. DFW has 8.5% unemployment, yet the panhandle does have a low unemployment rate it is due to the population and nature of the work performed there which would not show up on the unemployment rolls anyway.

    Get it right and do what is right for the long term on unemployed. Stop fudging the numbers which prevents the many of us who have been unemployed over 92 weeks from anyhelp at all aside from food stamps and homeless shelters which are full to the brim.

    I am a college grad with 33 years of sucessful business experience making $90k a year. Saved money lived frugally and now having nothing despite diligent efforts to find a job, ANY job. Tell my 3 chldren what they are supposed to do.

    Get the numbers right or provide more jobs. And no, I cannot consistantly lift 70lbs throughout the day or run a forklift.

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