The Truth Behind the "Tax Cuts = Jobs" Mantra

Monday, February 06, 2006 at 08:36 AM

The President and the White House have turned "tax cuts = jobs" into a soothing mantra for the masses.  In fact, up until a few days ago, the White House's official page on Economy and Budget had a bullet point item headlined "Tax Cuts Have Helped Create More Jobs."  It explained that "As rates decreased, incentives were created for small businesses to invest in new equipment and facilities so that they could expand and create jobs."

Well, for whatever reason, the tax cuts are no longer explicitly mentioned on the current version of that White House page.  It would be nice to think that they took it down because they know it isn't really true, but that seems a pretty optimistic view at this point.

Fact is, the folks at the Economic Policy Institute have analyzed job creation claims and data and concluded that "the projected job growth resulting from increased defense and other government spending exceeds the actual number of jobs projected to be added to the economy through 2006" a fact that "clearly indicates that the tax cuts hardly seem plausible as the engine of the modest job growth in the economy since 2001."

The simple version of that is this: if not for increased government spending, the economy would show a net job loss for the entire period of 2001 through 2006.  Only by the increased government spending will we create any net jobs in that period.  The tax cuts?  Another red herring distraction from folks who use this device so often that cats follow them through the streets of Washington.

As the LA Times pointed out in a Sunday piece by Jonathan Chait:
"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.)"
"Needless to say, it's not the magical incentive effects of tax cuts that created those jobs. It's old-fashioned big government. If you subtract the government-created jobs from the total, you're left with ... a negative 800,000 new jobs, give or take.

"In Bush's defense, it's perfectly fine to use government deficit spending to create jobs when the economy falters. In fact, that's exactly what Keynesian economists recommend. If you do that even when the economy is booming, though, you're simply borrowing from the future. Which is why Keynesians also say that during a boom the government should pull back, or even run surpluses to sock away money for rainy days. Because at some point the economic expansion is going to end."

And please, don't tell me that Bush and Rove and the rest of the dowry boys don't know that the jobs came from government spending--they're dishonest, not stupid.  They knew perfectly well that the tax cut money went mostly to the rich, they knew that the amount of tax relief to small businesses was insufficient to generate jobs in any number, they knew that many of the jobs created by medium and large companies would be created overseas, not here.

So the same crowd that crowed ominously warned about mushroom clouds and WMD in Iraq, the same choir that sang the hymns of Al Qaeda-Saddam mutual plotting, the same manicured hairstyles that forgot to guard the munitiions depots in the country they invaded, the same fervent free-marketeers who shoveled billions to their contracting buddies...has shoveled something else down to us peons in the actual job market.

So here's a new mantra for those disappointed to find out that there is no IRS jobs fairy:
"tax cuts = money for rich folks."

Soothing, isn't it?  Maybe instead of voting for these truth-challenged scoundrels out of conviction, you can get them to pay you for your vote.  At least that way a little bit of the tax cut billions--or is it trillions?--might trickle down to you.