EPI economist Josh Bivens has been busy looking at a different aspect of the jobs crisis. The June 6 New York Times article, “As Stimulus Funding Ends, Experts Weigh Law's Impact on 'Green Economy,’” highlights the impact that less stimulus funding will have on jobs: "As soon as the money stops, one imagines jobs stop being supported. My guess is we've passed the peak effect of the Recovery Act on jobs." (PDF)
In the policy memo “Tenth anniversary of the Bush-era tax cuts,” Slate Magazine wrote: “So, to recap: The Bush tax cuts were followed by low GDP growth, negative median wage growth, and little job growth. Even before the Great Recession, growth in the Bush business cycle was the weakest since World War II. And the cuts cost about $2.6 trillion between 2001 and 2010, according to the Economic Policy Institute—adding to a debt future generations of taxpayers will pay for, plus interest.”
In 2010, tax filers in the bottom 20% of the income distribution (tax filers making less than $20,000) received only a 1% share of the tax cuts, and 75% of these low-income families saw no reduction at all.
The Bush economic expansion had the worst wage and and total compensation growth of any postwar economic expansion. Inflation-adjusted median weekly earnings fell by 2.3% during the economic expansion from 2001Q4 to 2007Q4.
Total employment increased just 0.9% annually—just barely keeping pace with population growth. The 2002-2007 expansion was the only postwar expansion in which the employment-to-population ratio did not rise.
Federal tax revenue fell from 20.6% of GDP in 2000 to 18.5% of GDP in 2007.
From 2001-10, the cuts added $2.6 trillion to the public debt.
Nearly 50% of the total debt accrued during this period.
Some proponents, including Senate Minority Leader Mitch McConnell (R-Ky.), have suggested that the Bush tax cuts paid for themselves by inducing economic growth. However, economic performance during this period was poor, income tax revenue immediately fell in response, and in real per capita terms tax revenue has never recovered. Supplyside theories have not held up to empirical scrutiny.
Bush administration economists widely acknowledged that the tax cuts lowered revenue. Alan Viard, a senior economist with the Council of Economic Advisers under Bush, said in 2006 that “Federal revenue is lower today than it would have been without the tax cuts. There’s really no dispute among economists about that.” Making the changes permanent would cost about $4.6 trillion over the 2012-21 period.
The extension of the Bush tax cuts in the December 2010 tax deal is projected to decrease revenue by $423 billion over 2012-21, pushing the total cost above $5.0 trillion over the next decade. This represents about half of the total projected deficits over this period.
Just allowing the Bush tax cuts to expire would put public debt on a sustainable trajectory over the next decade. If continued, they will crowd out budget priorities such as economic security programs and investments in education, infrastructure, research, and health.
Over the last decade we have spent more than $400 billion on increased interest to finance the debt created by the Bush tax cuts.
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