The Economic Policy Institute's "economic snapshot" for this week, "Sluggish private job growth indicates failure of tax cuts", looks at whether the Bush tax cuts have led to lots of new jobs being created. Remember, those tax cuts were supposed to pull us out of recession (well, first they were gonna be returning part of the surplus the government had too much of, and then they were going to prevent us from going into recession, and then they were gonna pull us out of recession).
When job "recovery" first started in 2004, there were many months in which we had job "growth" that was actually based entirely on new public sector jobs. Obviously, tax cuts don't create new public sector jobs. But more recently, in 2005, we started consistently getting more pivate sector jobs each month. Could the tax cuts have led to that?
Now, I remember when those tax cuts were first proposed, a lot of people looked at how much money the government was giving up, how many jobs they projected would be created, and came to the correct conclusion that the government could create a lot more jobs simply by using that money to hire people. But of course, conservatives don't like that sort of economy, based on government spending. It's all about free enterprise and the private sector.
Except... that's what they did. In addition to giving up gobs of money through tax cuts (mostly money held by wealthy people), the Republicans increased both defense spending and non-defense discretionary spending by huge amounts. Clearly, when the government spends a lot of money, it generates jobs. If they're buying a bunch of new tanks and personnel carriers, for example, well, GM or Ford is gonna get a lot of business, and hire people to make those vehicles. And so on. So EPI got estimates from the government about how many new jobs were likely created by this spending since 2001, and compared it to overall job growth:
- New jobs resulting from increased defense spending: 1.495 million
New jobs resulting from new non-defense discretionary spending: 1.325 million
... new jobs since 2001 as a result of government spending: 2.82 million
Total new jobs created in the private sector since 2001: 2.01 million
I don't find anything inherently wrong with that. Business goes through cycles, and there are years when the government has to step in and spend to make up the difference, until the next up cycle. But tax cuts? Because of the tax cuts, the government has had to depend very heavily on borrowing - possible in large part because China has been buying up gobs of US debt.
Or, economist Max Sawicky puts it,
- "The upshot is that the triumph of Republican-conservatarian economic policy consists of an expansion of government jobs financed by loans from the Communist Peoples Republic of China."