To solve our economic woes, the Republicans propose to energize our nation’s “job creators.”

House Speaker Boehner makes the argument cogently when he says, in an allusion to Ayn Rand’s “Atlas Shrugged,” that “America’s job creators are essentially on strike.”

To alleviate unemployment and revive growth, he and other Republicans recommend a lessening of regulations on business and a lowering of taxes, especially on the wealthy. Excessive regulations and taxes, apparently, are the prime discouragement to hiring, investment and innovation.

Rand’s larger- than- life world of capitalist superheroes and simpering socialists is a myth. To make good decisions, we need to look beyond the political rhetoric: What is “job creation?” Who does it? What policies promote it?

That is, as Ayn Rand would have it, “Who is John Galt?” Let us use economics to give some answers.

A few facts

To separate fact from fiction, we start with the data. Job creationists often assert that low marginal tax rates on high incomes are a key to employment and growth. They also assert that such policies benefit everyone, not just the wealthy. But the crude historical facts do not support these assertions.

In particular, in a recent authoritative study, the Congressional Budget Office shows that over the last 30 years in the U.S., government tax and transfer policies have become less progressive and, at the same time, even before the effects of taxes and transfers are taken into account, income has become more concentrated in the hands of the rich.

It is not obvious that the lessened proportional burden on the rich is trickling down to lower income groups.

In addition, marginal tax rates on the highest incomes are not correlated in any systematic way with U.S. growth and unemployment. Over the last 40 years, the highest marginal rate was about 70 percent in 1971-81; 50 percent in 1982-86; about 30 percent in 1988-92; about 39 percent in 1993- 2003; and 35 percent since.

Annual economic growth was lowest during the two periods of low tax rates (i.e., in 1988- 92 and the present) and highest during the years of 50 percent rates.

Average unemployment rates during the years of the lowest and highest marginal rates are similar ( average rates of 6.14 percent and 6.31 percent during 1988-92 and the present, respectively; and an average unemployment rate of 6.4 percent in the 1970s).

The years of more moderate tax rates yielded the extremes of significantly higher (in 1982-86) and significantly lower (1993-2002) unemployment rates.

We are not surprised that these crude correlations reveal no pattern. The several forces behind the changing distribution of income in the U.S. and our economy’s rate of growth and employment are complex.

Any attempt to explain these developments by one factor — the progressivity of the tax and transfer system or marginal tax rates on high incomes — is doomed to oversimplification. These factors might matter, but other forces and policies evidently matter more.

Job creationists who make grand claims for the impact of tax reforms on economic growth should be challenged to produce the evidence for their claims.

Business cycles or growth?

When economists look at the evolution of income and prices, they see two forces happening simultaneously.

One of these forces is longrun economic growth, which is the economy’s average annual increase in per capital income in a hypothetical state of well-functioning markets and full employment of resources.

The other force is short-run business cycle activity, temporary periods when markets let us down and leave us with busts of excessive unemployment (in excess of around 6 percent unemployment in the U.S.) or booms of excessive inflation.

The actual changes in income and prices are a blend of both forces. Although it may take some time to emerge from a boom or bust ( as now), the economy inevitably returns to its longrun growth path.

These two features, growth and business cycles, have different sources and are affected by different policies. Keeping them straight is essential to understanding “ job creation.”

In particular, excessive unemployment is inherently a cyclical problem. Almost all economists agree that busts are caused by inadequate spending on domestic production, and the way to get people back to work is to induce more spending.

Thus, if “ job creation” means a lessening of unemployment, the litmus test for the Republican remedy is how changes in marginal tax rates on high incomes will impact spending.

In contrast, in the long run the number of jobs, or the unemployment rate, is not an issue. What matters is the quality of those jobs; that is, the level of the wages paid and the quality of workers’ lives.

Thus, if by “job creation” we mean enhancing the quality of our jobs in the long run, we must ask how the Republican prescription will impact the growth rate of our standard of living.

Unemployment

To get people back to work, we need to increase spending on the goods and services produced at home.

For this purpose, it doesn’t matter who does the spending, or which domestic products we buy. On that, economists agree.

Analysts disagree on the effectiveness of different policies to increase spending. For example, do we get more stimulus out of spending by our federal government on infrastructure and grants to the states, or transfer payments to the poor and unemployed, or tax incentives for businesses to invest, or tax reductions on the wealthy?

Most analysts would say that, among these options, tax reductions for the wealthy are the least powerful stimulus. The reason is that high income households tend to save ( rather than spend) a higher fraction of their aftertax earnings than do other households.

In addition, studies show that people save most of their tax reductions if they believe the tax reduction is temporary. In today’s fiscal environment, where an eventual tax increase on the wealthy appears to be an inevitable compromise to address the deficit, a lowering of taxes on the wealthy would not be seen as sustainable.

Put the other way around, of all of the ways we might tackle our budget deficit, an increase in taxes on the rich would likely “kill” the fewest jobs.

In this regard, the claims of the job creationists are probably wrong.

Long-term standard of living

Economic growth in the long run springs from two sources.

The first is called capital formation: To grow, we must add each year to our productive capacity.

The second is called technological change: To grow, we must develop new products and new ways to produce.

Capital formation depends on our willingness as a nation to save, and innovation arises from research and entrepreneurship. Taxes at the margin reduce the after-tax return to savings, invention, and risktaking.

As a consequence of lessened savings and innovation, high marginal tax rates lower the growth rate.

Discouragement of capital formation and technological progress is a valid concern of the job creationists. Most economists share this concern and, as a result, support some variant of the tax reforms recommended by the several deficit-reduction committees.

These plans would combine an expansion of the tax base (by eliminating deductions) with lower (and more equal) marginal tax rates. The combination can maintain the progressivity of the tax code, collect more total revenue and lessen some of the disincentives to save and innovate created by taxes. The net impact should be enhanced growth.

Where most economists disagree with the job creationists is the leverage of these actions. Tax rates in the U.S. are low by historical and international standards; hence, conceivable changes in marginal rates are small.

In addition, most studies show that savers, investors and innovators do not respond powerfully to the favorable incentives created by lessened tax rates.

For example, job creationists sometimes claim that lower tax rates will increase economic growth so strongly that, in the long run, the government will collect more in total tax revenue. Most authoritative studies find such claims to be a fantasy. Taxes matter for growth, but they are not obviously the prime movers.

How do we, then, “create jobs” in the long run?

Economists have no magic bullets, but many would point to other considerations that matter at least as much as taxes for our standard of living in the future.

First, over the next few years, we must reduce the federal government budget deficit to a manageable level.

To cover deficits, our government necessarily borrows funds that otherwise would have financed capital formation. Consequently, continued large deficits are the greatest threat to economic growth.

Deficit reduction of the necessary magnitude will require the political compromise of increased tax collections combined with expenditure reductions.

Second, some types of capital formation must be made directly by the government. Our nation’s productive capacity depends not only on the investments undertaken by private businesses but also on the health and education of our work force and our national infrastructure for transportation and energy.

The latter kinds of projects provide benefits to many people at once and hence would be under-used in the absence of government. Government expenditures on such projects, provided they offer a competitive rate of return, enhance economic growth and should not be the target of deficit reductions.

Third, our standard of living depends on factors in addition to the market wage. For example, the quality of the environment and the safety of products and the workplace matter for our welfare. That is why businesses are regulated and polluters are taxed.

Whether such regulations are on net good or bad is a subtle question of whether their benefits outweigh their costs. But the job creationists’ claim that regulations “kill jobs” misses the point that quality of life is the goal of economic policies and many regulations promote that goal.

No easy answers

The job creationists (and many of their opponents) offer simplistic, sound-bite solutions to an almost intractable problem: There are few ways to stimulate the economy in the short run without adding to our deficit and, hence, lowering growth in the long run.

Some deny the dilemma with assertions that lower tax rates will increase growth so powerfully that tax collections increase, or that reductions in government spending will enhance business confidence so strongly that overall spending in the economy will increase.

But, for most serious economists, such assertions are groundless. Myths like these distract us from facing the hard choices of balancing cyclical unemployment and long-run growth.

If politicians acknowledge the absence of simple solutions, they might focus on the few areas where policies avoid the dilemma or achieve common ground. One such area is government spending on infrastructure, education and health: Careful spending here will stimulate the economy in the short run and yield investment needed for long run growth.

Another area of common ground is to increase tax revenue in a fashion that promotes economic efficiency. As discussed above, several proposals for tax reform would enhance revenue in conjunction with a reduction in marginal tax rates; and policies such as cap and trade would both raise revenue and save the environment for our children.

In these areas, at least, our leaders should be making progress.

MICHAEL JONES lives in Brunswick.