It’s almost amusing to hear the president’s allies credit tax cuts for job creation; you’d like to think they’d know better by now. But not the editorial page of the Wall Street Journal, which did a fine job summarizing a poor argument.
Yesterday’s report of 193,000 new jobs in January (and a revision of 80,000 more in November and December) was certainly a blunt rebuttal to last week’s announcement of weak fourth-quarter GDP. The economy seems to have begun 2006 with a roar. […]
[T]he American jobs machine rolls on. Will the critics now concede that the 2003 tax cuts were not just “giveaways to the rich?”
Alas, the Journal wasn’t kidding. First, the job report for January shows a job market that is struggling to keep up with population growth, so I’m not sure what the WSJ is bragging about. Second, the 2003 tax cuts are “giveaways to the rich” because they overwhelmingly and disproportionately benefited those at the very top. And third, as Jonathan Chait noted, if conservatives like those on the Journal’s editorial board believe we should praise the 2003 tax cuts for modest job growth, they have a very short memory.
The White House and its allies like to focus on the approximately 4 million jobs that have appeared since the 2003 tax cut. If the year 2003 sounds suspicious, it ought to. Bush first promised that his 2001 tax cuts would create jobs, and then he promised the same thing with a new round in 2002. Instead, the job market kept shrinking. Bush cut taxes again in 2003, and this time jobs came back.
Of course, the job market was bound to bounce back sometime, so if you keep cutting taxes every year, you can just point to your last one and say it did the trick. (Or else all those previous tax cuts failed utterly, in which case we ought to repeal them.)
So anyway, the true measure is that the economy has created about 2 million new jobs since the first Bush tax cuts in 2001. It’s not that impressive of a number. Through the first six years of the Clinton administration, nearly 18 million new jobs were created. Do I think all those jobs happened because of Clinton’s policies? Not even close. But if you’re going to credit Bush’s tax cuts with every new job that’s appeared, Clinton’s policies (including tax hikes) deserve the same credit.
Indeed, if Bush’s allies really want to thank the White House for modest job growth, they should look past the tax cuts — and thank Bush’s increased government spending.
The Economic Policy Institute released a terrific report two weeks ago (thanks to bubba for the tip), highlighting where the new jobs have come from.
Changes in tax law since 2001 reduced federal government revenue by $870 billion through September 2005. Supporters of these tax cuts have touted them as great contributors to growth in jobs and pay. But, in reality, private-sector job growth since 2001 has been disappointing, and a closer look at the new jobs created shows that federal spending — not tax cuts — are responsible for the jobs created in the past five years.
If tax cuts have created jobs at all since 2001, it will have happened in the private sector. Assuming that job growth in 2006 matches the Bush Administration’s projections, the economy will have added about 2.0 million jobs to the private sector from FY2001 through FY2006. But how many of these two million jobs actually can be attributed to tax cuts and how many to increased government spending — particularly increased defense spending — in this period?
The answer is, “not very many.” About 2.8 million new jobs have been created as a result of government spending, mostly through Defense spending, at a time when Bush claims there have been 2 million new jobs created. As Chait noted, “If you subtract the government-created jobs from the total, you’re left with … a negative 800,000 new jobs, give or take.”
Funny, the WSJ editorial board seems to have overlooked this little detail. I’m sure the correction will be forthcoming, any day now.