The Labor Department reported last week that the U.S. economy created a net of 108,000 jobs in December, and you would have thought that the nation had entered an economic millennium.
President Bush went to Chicago to trumpet the phenomenal news to corporate bigwigs, who undoubtedly loved the message. One or two of them may have even believed it.
“By cutting taxes on income, we helped create jobs,” Bush boasted.
To keep that incredible job-creating engine roaring, he said, “Congress must make the tax cuts permanent.” News reports did not record it, but we can presume that the executives applauded lustily.
Vice President Cheney went to a Kansas motorcycle factory to proclaim the success. Treasury Secretary John Snow and other team members fanned across the country to proclaim a victory for American workers and to call for Congress to make the tax cuts for corporations and the rich permanent. It was one swell day.
Trouble was, it was all a hoax. Since Congress passed the first of Bush’s four tax cuts in May 2001, the United States has posted the worst record of job creation for a comparable time period since the Great Depression. The Labor Department’s own records prove it. (One example: Eighty-eight of Bill Clinton’s 96 months in office produced more than last month’s 108,000 new jobs.)
The bizarre jobs road show last week was another example of how the administration turns public perception of defeat into victory, of mediocrity into excellence, of mendacity into truth.
If the administration and Republican congressional leaders had said in the spring of 2001 and before enactment of the subsequent tax cuts that cutting taxes would pump up corporate profits and leave billions of dollars more in the pockets of executives and shareholders, today they could legitimately be saying “We told you so!” And Bush could honestly tell the Chicago executives that if they wanted far more of the same brand of prosperity, they should pressure the Congress to make the temporary tax cuts permanent.
But that is not what Bush said in 2001, 2002, 2003 and 2004, when Congress enacted tax cuts that primarily benefited corporations, investors and others with very large incomes. You could not have sold many Americans on the idea that rich people needed to be richer, that corporate profits, which had reached records in the 1990s, needed to be even higher or even that tax cuts would drive the Dow higher. (Monday, the Dow returned to where it was when Bush signed the first tax cut.) Even a Congress bought by special-interest bucks would have found it hard to pass a bill based on such an aristocratic premise.
So here is what they said each time: Cutting taxes will leave hundreds of billions more dollars in the pockets of people who will use the extra capital to create new production lines and many millions more jobs. Furthermore, they said, rather than the reduced taxes slashing government revenues and returning the nation to deficit spending, the creation of all this new employment would pump even more money into the treasury. Even Ronald Reagan came to see the folly of that theory, known as the Laffer Curve, but lots of people still see some logic in it. President Bush at least didn’t try to make that case last week. Everyone in the room from the CEOs to the table bussers would have got a laugh out of it.
Anyone can browse the Bureau of Labor Statistics web site and look at the jobs record. Since passage of the first big tax cut in May 2001 the economy has created a net of 2,281,000 new jobs. That is nearly 2.3 million new jobs in almost five years, most of that attributable to a huge growth in government employment and the rest to interest rates artificially driven down to gin up the economy.
In each of six of Clinton’s eight years, the economy exceeded 2.3 million new jobs.
Meantime, adjusted for the cost of living, average salaries and hourly wages of Americans in the post-tax-cut era fell.
As for the argument that the economic stimulus of big supply-side tax cuts offset the revenue loss for the government, which the Bush administration still touts at strategic times, the nonpartisan Congressional Budget Office (run by an ex-Bushie, by the way) put the kibosh on that in December. The first scholarly analysis of that theory concluded that the economic growth from a 10 percent income tax cut would offset perhaps no more than 1 percent of the loss over the first five years. If Americans employed their savings with an eye toward the long term they could make up only as much as 22 percent of the treasury loss.
Big news? The national debt soared past $8.1 trillion in December and it will approach $10 trillion when Bush leaves office. If he gets his permanent tax cuts, that is when the really big numbers start.