Opinion pieces and speeches by EPI staff and associates.
[ ORIGINALLY APPEARED IN THE FORT LAUDERDALE SUN-SENTINEL ON OCTOBER 26, 2004. ]
Workers, budget got bum deal from ‘Stimulus’
By William Spriggs
The latest theme of the Bush-Cheney campaign is that John Kerry can run, but he cannot hide from his record. But the Bush administration is also running – from its own economic record.
To explain away a lackluster economy, President Bush has blamed the Sept. 11 terrorist attacks, corporate scandals and the dot-com stock market bubble collapse. He has declared that the country was in recession when he took office, and so his fiscal policy choices were meant to stimulate the economy.
Yet, the record shows a different picture.
If the president’s efforts were supposed to spur job growth, they haven’t worked. Over the last four years, Bush has become the first president in 72 years to have fewer Americans on our nation’s payrolls than when he took office.
In January 2001, we had 132.4 million jobs; the number now is only 131.6 million.
In July 2003, Bush’s Council of Economic Advisers projected job growth for the next year of 3.7 million, but that’s roughly the same as the 3.4 million jobs that the economy has typically gained at this point in an economic recovery anyway. Despite that forecast, there’s only been a growth of 1.7 million jobs. Even though that’s way below projections, the president touts this weak performance with puzzling glee.
If workers have received a bum deal from the administration’s so-called stimulus, the federal budget has fared worse. In January 2001, the non-partisan Congressional Budget Office, reporting to the Republican-led House and Senate, projected rising federal budget surpluses from 2001 to 2004. This year’s surplus was to have been $397 billion, and over the last four years was to have accumulated $1.35 trillion.
In October, after tax breaks that mostly benefited those with high incomes, the CBO projected a budget deficit of $415 billion this year. So, over the last four years, the federal budget has accumulated a net deficit of $820 billion, a net loss of almost $2.1 trillion compared to the prior surplus projections.
The Bush tax cuts have worsened the outlook.
In August 2001, with the president’s first tax cut in place, the CBO warned that by 2004 the entire projected surplus from income tax revenue would be lost and any further cuts in taxes, or increases in expenditure – not offset by tax increases or spending cuts – would have to come out of the Social Security surplus.
So, the tax cuts pushed by Bush since then have all occurred knowing that ignoring “pay as you go” budgeting would continue to increase the deficit.
Moreover, the cuts in individual income tax rates were projected to be $40 billion in 2001, but by 2006, the projected cost spiked to $93 billion because of cuts aimed at the wealthy. Bush scoffs that John Kerry would raise taxes on everyone to balance the budget. But Kerry’s plan to let tax cuts for the highest-income individuals expire is at least a realistic first step, as opposed to a policy that pretends deep tax cuts will create jobs.
This president’s advisers pooh-pooh the deficit because it amounts to around 3.6 percent of gross domestic product, a figure they argue is manageable. That is, we can afford to pay the deficit down. What the advisers do not say is that revenues, by that same measure, are about 16.2 percent of GDP, a record low for the last 42 years, while spending is just below its long-run average.
In other words, we are choosing to not pay the deficit down.
To eliminate the budget deficit through spending cuts would require the total elimination of every domestic department of government. So, the president has not explained how he will maintain his tax cuts and balance the budget.
The president has created a record of reckless tax cuts that have exploded the federal deficit, but have failed to create net job growth over four years. The administration can keep running from its own record, but it cannot hide the consequences of its policy choices.
William Spriggs is a research associate at the Economic Policy Institute.
[POSTED TO VIEWPOINTS ON OCTOBER 27, 2004. ]