Another Bush Lie: Tax Cuts for Jobs

by JACK RASMUS (Copyright 2004)

Tax Cuts vs. Jobs: The Last Three Years

During the first three years of the Bush administration, more than 3 million jobs in the U.S. have disappeared, been destroyed, dismantled, vanished. Not since the early years of the Great Depression of the 1930s has America experienced three consecutive years of net job destruction! Nor has any President since Herbert Hoover faced the prospect of leaving office with the economy having fewer jobs than when he entered.

The Bush recession began in March 2001 and was declared officially over in November 2001, six months later. Two major tax cuts, plus a series of additional corporate tax breaks, were enacted between mid-2001 and 2003 — tax cuts worth $2.1 Trillion — 80% of which went directly to benefit those with incomes over $147,000 a year!

American workers were promised at the time that these tax cuts were the answer to economic recovery and creating new jobs once again. It was Ronald Reagan's old 'trickle down economics' argument, brought out of the closet, dusted off, prepared for public consumption — but larger than ever before! Even a 'trickle' of that, a worker might argue, could produce significant improvements in jobs or wages. And that's not counting some share of the tax cut as well. But let's look at these two 'taxes and jobs' and how workers fared under George Bush the past three years.

To begin with, 84% of all taxpayers have incomes below $75,000. That's the American working class, the largest part of which earn between $40,000 and $50,000, and many more less than that. According to the Urban Institute, the tax cut in 2003 for workers in the $40-$50,000 median range amounted only to $380, and for those in the 50-$75,000 range, only $553.

In both cases, that's less than 1% of their annual income. In fact, with Bush's tax cuts half of all income tax payers had their taxes cut by less than $100. On the other hand, those with annual incomes more than $1 million received an average tax cut of $105,636 from Bush. That's more than 10% of their annual income. So much for benefits to workers from the tax cut. Let's look at jobs.

Sleight of Hand: The Jobless Recovery

In early 2001, the President's Council of Economic Advisors (CEA) announced that if the first round of Bush's $2.1 trillion tax cuts for the rich were passed quickly, it would result in the creation of 800,000 additional jobs by the end of 2002 due to the tax cut alone.

And, once again, in February 2003 the President's CEA assured that the adoption of a second round of Bush tax cuts would create 1.4 million additional jobs — 510,000 in 2003 and another 891,000 for 2004 — all solely attributable to the tax cuts!

All total, that amounts to a Bush promise of 2.2 million jobs created between 2001 and 2004 as a direct consequence of passage of the $2.1 Trillion tax cuts for the rich!

But three large dollops of handouts for the rich have not stemmed the destruction of jobs. Bush's primary plan for job creationÑtax cutsÑhas proved a dismal failure.

On the other hand, facts have never deterred George the II. True to his 'stay the course' mentality, even when faced with the loss of 3 million jobs, he today continues to propose further tax cuts for the rich. More than seventy years ago it was Herbert Hoover insisting on cutting wages, on behalf of his wealthy backers, as the solution for creating jobs during the Great Depression. Today is it George Bush II insisting on cutting taxes for his wealthy contributors as the single solution for creating jobs in America. For Bush, tax cuts are the only solution to the jobless crisis.

After promising last August 2003 to ask for no additional cuts, Bush has once again gone back to the trough in early 2004 and has requested in his latest budget yet another big cut for his wealthy friends — this time a $1.8 Trillion permanent cut in taxes for the wealthy over the next 10 years.

The long held consensus among economists is that the US economy needs to add a minimum of 150,000 to 200,000 new jobs each month just to absorb new workers entering the work force and keep total joblessness from rising. During the non-recession years of 1993-1999 the average monthly gain in jobs was 250,000. And economists agree that by spring 2004, at this stage of a recovery from the 2001 Bush recession, monthly job creation should be at least at that level.

The Last Six Months: An Aborted Jobs Recovery

During 2003 the US economy needed to produce 150,000 jobs a month, or 1.8 million jobs for the period, just to stay even. Instead, it actually lost 360,000. That's in addition to the 1.8 million new workers entering the economy. For a total shortfall of more than 180,000 jobs a month.

The following Table illustrates the negative net jobs creation record of 2003 and, in particular, the brief aborted jobs recovery that occurred in the fall of that year.

TABLE 1: Net Job Destruction 2003

(in 000)		1/03	2/03	2/03	4/03	5/03	6/03
Jobs Lost		-115	-159	-110	-20	-128	-14
New Workers Entering		150	150	150	150	150	150
Net Job Loss		-265	-309	-260	-180	-278	-164
(in 000)		7/03	8/03	9/03	10/03	11/03	12/03
Jobs Lost		-45	-25	+67	+88	+88	+8
New Workers Entering		150	150	150	150	150	150
Net Job Loss		-195	-175	-83	-62	-67	-142

The grand predictions and assurances from Bush and his spokespersons about jobs have been no more accurate in the last 6 months than they were in 2003 or during the last three years. Since Bush's trumpeting last October of the 8.2% surge in economic growth that occurred during July-September 2003, jobs have been created at a rate of around only 61,000 a month on average. That's still about 90,000 a month short of the 150,000 minimum jobs needed every month just to absorb new workers entering the labor force. Even the brief surge in jobs that accompanied the 8.2% growth rate never came close, in the best months of job creation last October-November, to reaching the 150,000 minimum per month needed for net job creation. And after that brief period last fall it has been down hill once again in terms of job growth in the economy.

If the government committed just 20% ($440 billion) of the $2.1 trillion tax cuts direct to job creation, it would produce a total of nearly 9 million new jobs, each paying $50,000 a year. The 8.2 million officially unemployed would be eliminated.

The wealthy in America with incomes over $147,000 a year have been receiving their 80% share of the $2.1 Trillion tax cut pie. But the American worker is yet to see the promised jobs.

Impact on Wages and Profits

From 2001 through 2003 a total of 58.6 million workers in the US were laid off at some point and about 55 million rehired or were newly hired somewhere. Jobs that were created in the last three years were often not of the same quality as those that disappeared. In addition to lower pay and benefits, they were often temporary, involuntary part-time or contract-basis jobs. Various studies show those laid off during this period, and then rehired, went to new jobs that typically paid 30-35% less in wages and benefits. A similar study by the Economic Policy Institute in Washington D.C. estimated new hires were earning an average of $14.65 an hour, whereas lost jobs were paying $16.92. The differential is even greater when medical and other fringe benefits costs are added.

And companies are clearly pocketing the difference. According to recent government data, corporate profits were up by 30% in the July-September 2003 period compared to the same period in 2002—the largest year over year growth in profits in 19 years and reaching an annual rate of more than $1 trillion dollars for the first time in history! Forecasts are for another 15% gain in profits in 2004. That's a 45% pay raise in just 2 years.

A lion's share of the above profits surge accrued to those companies in the US aggressively engaging in moving US jobs offshore. For example, TV business news commentator, Lou Dobbs, recently compiled a list of 216 companies moving jobs overseas, called the 'Dobbs Rogue Fund'. Others have calculated that "these 216 companies registered a remarkable 72% return ( i.e. profit gain) over the last 12 months."

True Job Loss and Unemployment

Officially, the number of unemployed during the current Bush recession and jobless recovery that has followed has remained at any given time chronically at around 8 to 9 million. This does not count the so-called 'discouraged workers' leaving the workforce in hundreds of thousands every month, those 5 million employed involuntarily part-time, those involuntarily forced into retirement or those who have no jobs but claim when interviewed to be employed as 'consultants earning an occasional dollar here or there 'under the table'.

This alternative, more accurate measure of the unemployed is sometimes call the 'labor underutilization rate'. This rate adds at minimum about another 2.8 million of those considered 'discouraged'. When the discouraged workers, those who want work but drop out of the work force, are added to the official number of those out of work, the unemployment rate in the US is generally around 10%, instead of the current official 5-6%.

And even this 10% of officially unemployed and discouraged doesn't count those involuntarily employed part time, or forced into retirement, or 'consultants' not really working full time by any measurement. The figure for these latter groups would add another 3 million equivalent full time unemployed at minimum, and another 3-4% to the official unemployment rate.

All total, that brings the number of those out of work today to more than 15 million! And the true unemployment rate to around 13%-14% in the US as of early 2004.

Historical Parallels

George W. Bush may be the familial offspring of George H.W. Bush, but he is more so the economic policy descendant of Ronald Reagan. In fact, Bush II is Ronald Reagan times three. Three times the tax cuts. And now a' Jobless Recovery' yet a third time.

The phenomenon of a jobless recovery first arose during the Reagan recession of 1982-83, rose again under George H.W. Bush in 1991-93 and now under George W. Bush once more, this time far worse and longer than under Reagan or Bush I.

The following Table describes this phenomenon of ever-worsening jobless recoveries under Reagan, Bush I, and Bush II, measured as jobs created as percent of the workforce 35 months after the start of recession.

George W.'s $2.1 trillion tax cut for the rich is also a direct inheritor of Reagan's similarly targeted tax cuts of $758 billion for the wealthy enacted in the early 1980s.

At that time the $758 billion was a record give away. Just as George W., Reagan's term was also marked by a more than doubling of defense spending, similarly Reagan's record defense spending and tax cuts resulted in the then-record budget deficits of the 1980s that were used as a hammer by Republicans at the time to attack and cut social spending programs.

Even the element of corporate scandals under George W. Bush was first experienced under Reagan. Today it is almost forgotten how Reagan tax-and-deregulate policies encouraged and facilitated the massive Savings & Loan industry scandal that eventually cost the American taxpayers a trillion dollars to clean up.

In a February 19, 2004 speech on the economy Bush arrogantly declared, "We've been through a lot. But we acted here in Washington. I led." Yes, like the Pied piper of Hamlin led, playing the same tax tune on his jobs flute all the way—right over the cliff!

—Jack Rasmus, National Writers Union, UAW 1981, AFL-CIO.

This article is an excerpt from Jack Rasmus's forthcoming book, THE WAR AT HOME: The Corporate Offensive in America From Reagan to Bush, which is available for pre-ordering along with offerings of other plays, music and videos.

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