Economics has never been the Bush family’s thing. The first President Bush was so bored by financial briefings that he sometimes dozed off during them. The second hasn’t been caught napping yet, but it’s fair to say that the economy isn’t his favorite topic. George W. Bush is well aware, however, of the fate that befell his father after he waged a successful war in the Gulf—“It’s the economy, stupid”—so he briefly turned his attention away from foreign policy to defend his controversial tax-cut plan, which is fighting for survival in the Senate.
“With a robust package of at least five hundred and fifty billion dollars in across-the-board tax relief, we will help create more than a million new jobs by the end of 2004,” he declared in his weekly radio address. “Some members of Congress support tax relief but say my proposal is too big. Since they already agree that tax relief creates jobs, it doesn’t make sense to provide less tax relief and, therefore, create fewer jobs. I believe we should enact more tax relief so that we can create more jobs, and more Americans can find work and provide for their families.”
There is a pressing need for more jobs—another forty-eight thousand vaporized last month—but the link between tax policy and payrolls is a lot murkier than the President made it out to be. If tax cuts automatically created jobs, businesses would be scouring the streets for workers right now, and nobody’s twenty-five-year-old children would still have to live at home. Two years ago, after all, President Bush persuaded Congress to pass the biggest tax cuts in a generation. But since then a million and a half jobs have disappeared. By contrast, between 1993 and 2000, President Clinton raised taxes to reduce the budget deficit, and the economy created more than twenty million jobs. Of course, this doesn’t mean that higher taxes create jobs, either. The number of people working is determined by the over-all state of the economy, to which fiscal policy is just one contributor. Other things being equal, tax cuts can help the economy by putting more cash in consumers’ pockets, but they are an expensive and unreliable way to raise employment, especially when they are aimed at people who tend to save their windfalls rather than spend them.
More than half the President’s tax cuts would come in the form of abolishing the taxation of corporate dividends. The primary recipients would be rich people and senior citizens, since they own most of the dividend-yielding stocks. For example, Sanford Weill, the chairman of Citigroup, would get a tax cut of about six million dollars. Based on 2001 figures, Vice-President Dick Cheney would save about a hundred thousand dollars. The dividend plan might persuade yacht builders and assisted-living communities to hire some extra help, but it won’t do much for the rest of the nearly nine million unemployed.
from the issuecartoon banke-mail thisIn view of this problem, the White House has put forward a more subtle rationale for the dividend-tax cut: It will cause the stock market to rise, which will make consumers and businesses feel more confident. This, in turn, will boost spending, which will generate more hiring. But if any of these links fail to materialize, so will the new jobs.
Even taking the President at his word, each new job would cost the government five hundred and fifty thousand dollars in lost revenues, which is about seventeen times the salary of the average American worker. It would be far cheaper for the federal government to give private firms subsidies to hire more people, or to give money to the states, which are facing their worst financial crisis since the Second World War, and which at this moment are being forced to fire teachers, troopers, and health workers. Parks, museums, and libraries are closing; cultural programs are being cut. College-tuition fees are rising, and scholarships are vanishing. Hundreds of thousands of people stand to lose their state-provided health-care coverage. (Meanwhile, taxpayers will be laying out billions of dollars to reconstruct Iraq.)
None of this factors in the Bush tax plan’s impact over the long term. A few years back, the big debate in Washington was what to do with the surplus, which was projected to be five trillion dollars over the coming decade. Now, after the stock-market crash, a prolonged economic downturn, and the 2001 tax cuts, the deficit for this year alone could reach five hundred billion dollars, a figure that even Ronald Reagan and David Stockman failed to match during the last disastrous experiment in “supply-side” economics. And phasing in the tax cuts, which the White House is considering to alleviate the concerns of Republican moderates, will do nothing to reduce their long-term cost. The Center on Budget and Policy Priorities calculates that a dividend-tax cut would deprive the federal government of some seven hundred and fifty billion dollars between 2014 and 2023, just when the baby boomers will be lining up for Medicare and Social Security.
What’s more, the President’s tax cuts may in the end destroy more jobs than they create. As tax revenues fall and the deficit increases, interest rates will rise, and the higher cost of borrowing will impede business investment and hiring. The reborn supply-side economists who devised the President’s plan would dispute this, except that many of them were fired or encouraged to quit in the Administration’s recent purge of its financial team. N. Gregory Mankiw, the Harvard professor who was recently nominated as chairman of the Council of Economic Advisers, is more realistic. In his popular textbook “Principles of Economics,” he explains that when a government runs a budget deficit it “pulls resources away from investment in new capital and, thereby, depresses the living standards of future generations.” Alan Greenspan, whom the President plans to reappoint for a fifth term as Federal Reserve chairman, said essentially the same thing last week. Kenneth Rogoff, the I.M.F.’s chief economist, went even further. He recently told journalists, “Suppose for a minute that we were talking about a developing country that had gaping current account deficits year after year . . . a budget ink spinning from black into red . . . open-ended security costs, and a real exchange rate that had been inflated by capital inflows. With all that, I think it’s fair to say we would be pretty concerned.” When I.M.F. types start talking about the United States as if it were a banana republic on a bad day, it’s probably time to change course.
“With a robust package of at least five hundred and fifty billion dollars in across-the-board tax relief, we will help create more than a million new jobs by the end of 2004,” he declared in his weekly radio address. “Some members of Congress support tax relief but say my proposal is too big. Since they already agree that tax relief creates jobs, it doesn’t make sense to provide less tax relief and, therefore, create fewer jobs. I believe we should enact more tax relief so that we can create more jobs, and more Americans can find work and provide for their families.”
There is a pressing need for more jobs—another forty-eight thousand vaporized last month—but the link between tax policy and payrolls is a lot murkier than the President made it out to be. If tax cuts automatically created jobs, businesses would be scouring the streets for workers right now, and nobody’s twenty-five-year-old children would still have to live at home. Two years ago, after all, President Bush persuaded Congress to pass the biggest tax cuts in a generation. But since then a million and a half jobs have disappeared. By contrast, between 1993 and 2000, President Clinton raised taxes to reduce the budget deficit, and the economy created more than twenty million jobs. Of course, this doesn’t mean that higher taxes create jobs, either. The number of people working is determined by the over-all state of the economy, to which fiscal policy is just one contributor. Other things being equal, tax cuts can help the economy by putting more cash in consumers’ pockets, but they are an expensive and unreliable way to raise employment, especially when they are aimed at people who tend to save their windfalls rather than spend them.
More than half the President’s tax cuts would come in the form of abolishing the taxation of corporate dividends. The primary recipients would be rich people and senior citizens, since they own most of the dividend-yielding stocks. For example, Sanford Weill, the chairman of Citigroup, would get a tax cut of about six million dollars. Based on 2001 figures, Vice-President Dick Cheney would save about a hundred thousand dollars. The dividend plan might persuade yacht builders and assisted-living communities to hire some extra help, but it won’t do much for the rest of the nearly nine million unemployed.
from the issuecartoon banke-mail thisIn view of this problem, the White House has put forward a more subtle rationale for the dividend-tax cut: It will cause the stock market to rise, which will make consumers and businesses feel more confident. This, in turn, will boost spending, which will generate more hiring. But if any of these links fail to materialize, so will the new jobs.
Even taking the President at his word, each new job would cost the government five hundred and fifty thousand dollars in lost revenues, which is about seventeen times the salary of the average American worker. It would be far cheaper for the federal government to give private firms subsidies to hire more people, or to give money to the states, which are facing their worst financial crisis since the Second World War, and which at this moment are being forced to fire teachers, troopers, and health workers. Parks, museums, and libraries are closing; cultural programs are being cut. College-tuition fees are rising, and scholarships are vanishing. Hundreds of thousands of people stand to lose their state-provided health-care coverage. (Meanwhile, taxpayers will be laying out billions of dollars to reconstruct Iraq.)
None of this factors in the Bush tax plan’s impact over the long term. A few years back, the big debate in Washington was what to do with the surplus, which was projected to be five trillion dollars over the coming decade. Now, after the stock-market crash, a prolonged economic downturn, and the 2001 tax cuts, the deficit for this year alone could reach five hundred billion dollars, a figure that even Ronald Reagan and David Stockman failed to match during the last disastrous experiment in “supply-side” economics. And phasing in the tax cuts, which the White House is considering to alleviate the concerns of Republican moderates, will do nothing to reduce their long-term cost. The Center on Budget and Policy Priorities calculates that a dividend-tax cut would deprive the federal government of some seven hundred and fifty billion dollars between 2014 and 2023, just when the baby boomers will be lining up for Medicare and Social Security.
What’s more, the President’s tax cuts may in the end destroy more jobs than they create. As tax revenues fall and the deficit increases, interest rates will rise, and the higher cost of borrowing will impede business investment and hiring. The reborn supply-side economists who devised the President’s plan would dispute this, except that many of them were fired or encouraged to quit in the Administration’s recent purge of its financial team. N. Gregory Mankiw, the Harvard professor who was recently nominated as chairman of the Council of Economic Advisers, is more realistic. In his popular textbook “Principles of Economics,” he explains that when a government runs a budget deficit it “pulls resources away from investment in new capital and, thereby, depresses the living standards of future generations.” Alan Greenspan, whom the President plans to reappoint for a fifth term as Federal Reserve chairman, said essentially the same thing last week. Kenneth Rogoff, the I.M.F.’s chief economist, went even further. He recently told journalists, “Suppose for a minute that we were talking about a developing country that had gaping current account deficits year after year . . . a budget ink spinning from black into red . . . open-ended security costs, and a real exchange rate that had been inflated by capital inflows. With all that, I think it’s fair to say we would be pretty concerned.” When I.M.F. types start talking about the United States as if it were a banana republic on a bad day, it’s probably time to change course.
Oh and Bush Jr inherited the myth of the Clinton Recession right? ah whatever im not gonna answer you back. Not about you its to tough to get involved in all of this with the Tournament going on. I will say this tho. Im sick of where my tax dollars are going and i don't care who is in charge. Dem or republicans. I call a spade a spade.
