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Tax Cut Approach to Job Creation Continues to Fail: Cisco to Layoff 10,000 People

The debt ceiling debate has brought the most extreme themes of each party’s culture to the forefront of the news, with Democrats clinging to Social Security and Medicare and the GOP repeating the chorus of tax cuts that create jobs. This, despite the fact that drastic tax cuts previously put in place have done little to spur job growth. From Nothing To Be Thankful For: Tax Cuts and the Deteriorating Job Market:

• Changes in tax policy have no clear impact on job growth. Tax cuts have sometimes been followed by periods of increased unemployment; at other times, tax cuts have been followed by sharp declines in unemployment. By the same token, tax increases have not always been followed by the doomsday predicted by conservatives. One of the most robust periods of job growth and economic expansion followed the Clinton tax increases of 1993.

• The quality of jobs as measured by income, health insurance and retirement benefits has declined appreciably since the 2001 tax cuts. Between 2000 and 2004, inflation-adjusted family income has declined, and the number of U.S. workers covered by employer-provided retirement benefits and health insurance has contracted. The less than normal number of jobs created have been less than what is
needed to provide a reasonable standard of living

Still, House Speaker John Boehner has refused to consider the fogginess of his reality. “The American people understand that tax hikes destroy jobs,” he said.

The argument is that with as much capital on hand as possible, businesses will invest in the American workforce. But, the tax burden is at its lowest in 50 years, corporations like General Electric, Verizon and Caterpillar are dodging taxes left and right, and companies are still asking concessions of workers and laying people off.

Case in point: Cisco Systems. News has just arrived that the network equipment goliath, which has already cut several hundred jobs this year, will lay off a whopping 10,000 employees:

Bloomberg reported, citing two people familiar with the matter, that the company is planning to shed nearly 14% of its workforce to trim costs.

The report said that the layoffs would take place in a phased manner with about 7,000 jobs cut by the end of August.

The sources added that about 3,000 workers have accepted early-retirement packages offered by Cisco, which includes one year’s pay and medical benefits. They added that the package was offered to 5,800 employees.

Cuts are taking place at the local level of the private sector as well. West Virginia American Water is slashing capital expenditure and canning 30 employees which “could slow the utility’s response times to water main breaks.” Last week, Nokia announced 275 layoffs in New York.

The deadline for a debt ceiling deal is August 2nd.


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