Cantor: No Tax Increases Until Unemployment Falls Below 5 Percent

Wednesday, December 02, 2009 at 1:00 pm

Rep. Eric Cantor (R-Va.) is rolling out his economic speech at the Heritage Foundation today with a lot of fanfare. Earlier this morning, he held a conference call that was fairly vague on details and heavy on explanations of how Democrats were blundering the economic recovery; that got some friendly coverage. Two hours before the speech, he has released excerpts of what he’ll say. Possibly the least surprising element: “Agreeing” not to consider tax increases until unemployment falls below 5 percent. In other words, if unemployment plunged 50 percent below today’s rate of 10.2 percent — something that would clearly mark the end of the recession and an economic revival — it would not be enough to justify any tax increase of any kind.

The basic points after the jump.

1.) “We must tear down self-imposed obstacles to economic growth and wealth creation. Therefore Congress and the Administration should stop the deluge of detrimental rules and regulations.”

2.) “We should agree to block any federal tax increases until unemployment drops below 5 percent. Americans of all political stripes can agree that the government should never raise taxes during periods of high unemployment.”

3.) “We need to restore confidence in America’s economic future.  Record deficits and debts – coupled with runaway spending – have shaken confidence in our economic future. Many believe that the only solutions will be higher taxes or inflating the dollar, which promise lasting pain for small businesses and working families.”

4.) “We should reform the unemployment system to help people out of work find jobs.”

5.) “We need to approve three promising free trade agreements with Colombia, South Korea and Panama that have stalled under the new administration. Recently the President stated that increasing U.S. exports by just 1% would create over 250,000 jobs.”

6. “We must take action to reduce regulatory and tax barriers that inhibit domestic job creation.”

7.) “We must deal swiftly and honestly with the looming commercial real estate collapse.  Congress should move to give bank regulators incentives to deal responsibly with banks and their borrowers.”

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Comment posted December 2, 2009 @ 1:47 pm

Promising free trade agreements is laughable, we need to revise the ones on the books in favor of the American people; all people, not just the wealthy corporate types who would use the agreements to export more high paying industrial jobs. When are both the parties gonna get this? This is exactly why the American people should ge a backbone and vote independent.

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Phoenix Woman
Comment posted December 2, 2009 @ 2:28 pm

Ask Eric Cantor how he expects to pay for continuing the wars in Iraq and Afghanistan — both of which he backs, by the way — without tax increases.

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Comment posted December 2, 2009 @ 4:17 pm

Funny how recessions supposedly prevent raising taxes but have no effect on escalating existing wars, and new wars don't preclude lowering top rates.

Comment posted December 2, 2009 @ 6:49 pm

But wait a minute, I thought that industry doesn't want unemployment to fall too low, because it restricts the supply of available labor.

If there are no new tax hikes unless unemployment drops below 5%, wouldn't that be a win-win for industry? It sounds like a veritable incentive to keep unemployment high.

Comment posted December 3, 2009 @ 8:26 am

Regarding Cantor's advocacy for free trade agreements, our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth – its preeminent industrial power – into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $9.5 trillion. What will happen when those assets are depleted? Today's recession is the answer.

Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.

Clearly, there is something amiss with “free trade.” The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?

At this point, I should introduce myself. I am author of a book titled “Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America.” My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density – rising unemployment and poverty – are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.

One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable – nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world's population.

Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.

If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at or where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It's also available at

Pete Murphy
Author, “Five Short Blasts”

The Breathtaking Narrow-Mindedness of Eric Cantor – The Atlantic Business Channel « mere pixels
Pingback posted December 3, 2009 @ 7:26 pm

[...] the Republican House Whip said he won’t consider raising taxes until our unemployment rate is under 5 percent. Eric, that could be more than a decade from [...]

Comment posted February 9, 2010 @ 2:53 pm

No Taxation Without Public Consent

Join the cause, & be one of the first….…

Comment posted February 9, 2010 @ 7:53 pm

No Taxation Without Public Consent

Join the cause, & be one of the first….…

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