Logos57: A Caring Community, edited version published December 31, 2011, original version May 15, 2011, by Paul Evans: This article is dependent on John Boehner says Bush tax cuts created 8 million jobs over 10 years, PolitiFact Truth-O-Meter, May 11, 2011, The Laffer Curve in Real Life, Atlanta Journal Constitution, September 15, 2010, by Jay Bookman, and other sources, especially the Center for Economic and Policy Research.

Also Published on OpEdNews.

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Starting Point: FALSE: John Boehner says Bush tax cuts created 8 million jobs over 10 years

In 1980, Ronald Reagan swept into office on the corpse of Jimmy Carter’s “stagflation” (economic stagnation with increased unemployment + inflation of about 17.5 percent, I remember it well). Republicans were chanting a new mantra called supply side economics, which stated, basically, cut taxes, particularly cut taxes for the rich, and this will result in economic growth. They even had so-called mathematical theory to back them up in a graphical representation known as the Laffer curve.

A cursory look at the literature on the economic successes of recent administrations shows that Boehner’s claim and supply side economics in general are base lies. The only real reason for supply side economics is to raid the nation’s resources (hopefully for the right wingers in terms of cuts to entitlements, or at the least privatization of them), to make the rich richer. The record, as documented below, shows that higher tax rates, particularly higher tax rates on the wealthy, have resulted in 1.) higher GDP economic growth, 2.) lower deficits and 3.) a healthier economic climate with lower unemployment.

In private meetings, the wealthy chortle over their success at hoodwinking the American people into lowering taxes for the wealthy. In an article by Mark Weisbrot called Extending the Tax Cuts: The Ninety-Eight Percent Solution, published in at least 29 newspapers or websites, the snobbery and effrontery of the rich is laid bare:

George W. Bush summed it up at an $800-a-plate dinner back in 2000 with a joke: “This is an impressive crowd – the haves and the have-mores,” he said. “Some people call you the elites; I call you — my base.” What made the joke really funny is that it was true.

Getting back to the PolitiFact article, from which I take one of the main subjects of my own article, that is, John Boehner’s claim about the Bush tax cuts (in other words, one of the main of examples of supply side economics in practice) and these tax cuts’ economic effectiveness, PolitiFact introduces the subject as follows:

During an interview on NBC’s Today show (May 10, 2011), House Speaker John Boehner, R-Ohio, offered some job-creation statistics to cast a favorable light on the tax cuts passed under President George W. Bush in 2001 and 2003.

Host Matt Lauer said to Boehner, “You talk about creating jobs. When the Bush era tax cuts were passed in 2001, unemployment in this country was 4.5 percent. Today it’s at 9 percent, just down from 10 percent. So why are the Bush era tax cuts creating jobs?”

Boehner responded that the tax cuts “created about 8 million jobs over the first 10 years that they were in existence. We’ve lost about 5 million of those jobs during this recession.”

Let me state, before we get into the Bush tax cuts and supply side economics, with a summary of PolitiFact’s arguments and also additional evidence, that PolitiFact’s conclusion was that, essentially, Boehner’s statement is FALSE. PolitiFact examines Boehner’s claim about the Bush tax cuts in the time frame of 2001 to 2009, but an examination of the U.S. economy in a larger time frame is more instructive, as we shall see.

There were two Bush tax cuts, the first passed in June, 2001. PolitiFact points out that this means that Boehner’s contention cannot be true, in that ten years have not passed since the tax cuts (the first package) went into effect. They note, moreover, in the first place that there is no direct evidence that it was these tax cuts which accounted for the job growth during the Bush administration at all. Any rational examination can put job growth during these years as the result of a housing bubble and stock speculative bubble, and not true economic growth with a valid basis — but that is just my opinion, although it is held by many.

Let’s look at PolitiFact’s numbers more closely. There are actually two measures of job growth used by economists. By the most commonly used measure, the “Current Economic Statistics” or CES figures, here is what PolitiFact found was true for the Bush years:

June 2001: 132,047,000 people employed
January 2008: 137,996,000 people employed
Increase during that six-and-a-half-year period: 5,949,000 people

That’s roughly 6 million jobs — significantly below the 8 million Boehner cited.

Now let’s turn to the jobs lost during the recession. We once again calculated the numbers in the way most favorable to Boehner — from the peak of employment (January 2008) to the lowest point (February 2010). Here are the figures:

January 2008: 137,996,000 people employed
February 2010: 129,246,000 people employed
Decrease during the roughly two-year period: 8,750,000 people

That’s almost 9 million jobs lost — almost twice what Boehner had said on Today.

Don’t you love the way politicians throw numbers around without checking the facts? (Many times, of course, they are well aware of the facts and are just baldly lying.) Here please note that the figures indicate that in the time, thus far, since the Bush tax cuts began, that is, from June, 2001 to the time at which PolitiFact’s analysis ends, February 2010, or less than nine years, the economy actually lost about 2.8 million jobs, by the CES statistics. (Boehner’s claim for jobs created by the Bush tax cuts was for ten years.)

As it turned out, Boehner got his figures as provided by that paragon of intelligence, Michael Steele, and from a different set of economic numbers, the “Current Population Survey” or CPS data, and those figures more or less bear him out, to some extent:

June 2001: 136,873,000 people employed
January 2008: 146,407,000 people employed
Increase over about six and a half years: 9,534,000 people

January 2008: 146,407,000 people employed
February 2010: 138,698,000 people employed
Decrease over about two years: 7,709,000 people

So using the CPS figures, Boehner actually underestimated the jobs created after the passage of the Bush tax cuts, rather than overestimating them. And his number of jobs lost in the recession was closer to the CPS number than to the CES number.

Politifact is not stressing the main point here, that Boehner was making his claim of job growth owing to the Bush tax cuts for a span of ten years, and that even by the CPS numbers, only about 1.75 million jobs have been created (thus far). His figures for jobs lost during the recession, while somewhat inaccurate by either measure, are somewhat closer to the mark, but so what? Bush caused the economic and regulatory climate which led to the recession, did he not?

PolitiFact does in fact examine the job creation numbers over a much wider time frame encompassing various recent presidents, citing numbers from Gary Burtless, a labor economist with the Brooking Institution. Burtless looks at the first 81 months of several presidencies, examining only those presidents who served two terms:

Employment under Bush grew by 4.5 percent using CES and 7 percent using CPS, whereas employment grew by double digits under presidents Bill Clinton and Ronald Reagan, and also under the combined eight-year administrations of Richard Nixon and Gerald Ford, who finished Nixon’s term after he resigned, and John F. Kennedy and Lyndon B. Johnson. Only under Eisenhower was job growth more sluggish than it was under George W. Bush, and even then, it was only the case using one of the two BLS statistics. (Burtless did not compare job growth during the administrations of George H.W. Bush or Jimmy Carter because they served only one term each.)

Where does all this leave us? First, under the most common yardstick for measuring employment — the CES data — Boehner’s claim is significantly overstated. Second, while Boehner is closer when using a different statistic, it’s only more accurate if he uses a time period much different than the one he stated in the interview. And third, his suggestion that the tax cuts are primarily responsible for subsequent job growth is contentious at best (and the job growth he points to is modest compared to previous administrations).

So the numbers Boehner offers are accurate only with significant adjustments. Overall, we find his statement too flawed to give it a rating higher than False.

Score one for PolitiFact. It’s good to see centrist news and politics websites which claim to discern the truth of politicians’ statements get it right. Let’s look at a similar, but more devastating analysis by Jay Bookman, The Laffer Curve in Real Life, Atlanta Journal Constitution, September 15, 2010. There is no better way to describe this analysis — and it is devastating to any who would maintain that supply side economics and tax cuts for the rich are good for the economy — than to make an extensive quote from the article:

So how do we gauge the effectiveness of supply-side theory in practice? I propose we look at three specific measures:

• The core claim of supply-siders is that tax cuts spur investment, so we’ll look at growth in private investment;
• Supply-side theory also claims that tax cuts increase government revenue, so we’ll look at whether that actually occurred;
• And since growth in gross domestic product is the ultimate aim of any economic policy, we’ll include that in the analysis as well.

(Note: All data below have been adjusted to account for inflation.)

Private investment:

After the ‘81 Reagan tax cuts, private nonresidential investment over the next seven years grew at an annual rate of 2.8 percent.
After the ‘93 Clinton tax hike, private investment over the next seven years grew annually at 10.2 percent.
After the 2001 Bush tax cut, private investment grew annually at 2.7 percent. (Data source: CAP/EPI study, Sept. 2008,, based on Bureau of Economic Analysis data.)

Federal revenue:

From 1981-1993, federal revenue increased by 20.7 percent over 12 years.
From 1993-2001, federal revenue grew by 46.6 percent over 8 years.
From 2001-2009, federal revenue decreased by 13.9 percent. (Even if you don’t include the deep recession year of 2009 — you might say we’re invoking the mercy rule — revenue increased just 3.3 percent over the eight years of Bush’s presidency.
(Source: OMB Historical Table 1.2)

GDP growth

From 1981-1993, real GDP grew by an annual average of 2.97 percent.
From 1993-2001, real GDP grew by an annual average of 3.56 percent.
From 2001-2009, real GDP grew by an annual average of 1.56 percent.
(Source: U.S. Bureau of Economic Analysis)

In conclusion, in all three categories central to the claim of supply-side proponents, the economy performed significantly better in the wake of tax increases than it did in the wake of major tax cuts.

Also see In Addition to Geithner, Republican Economists Also Argue That Tax Cuts Do Not Pay for Themselves, Center for Economic and Policy Research, August 5, 2010, no author, in which both Timothy Geithner and Douglas Holtz-Eakin, “a prominent Republican economist who was the chief economic advisor to John McCain in his presidential campaign,” dismissed the contentions that tax cuts pay for themselves as “myths.”

Come on people. We are not fools. Looking at Jay Bookman’s analysis, which seems pretty formidable to me, as it would to any logical thinker, and giving credence to Timothy Geithner as well as the PolitiFact analysis, I believe supply side economics, the damned Laffer curve, and the Bush tax cuts should be pretty thoroughly discredited. And the American people think so too! According to a recent look at Americans attitudes on taxes, Americans Believe in Tax Equity, Center for American Progress, April 15, 2011, by James Hairston, we overwhelmingly want progressive tax rates and dislike the Bush tax cuts:

• More than four-fifths of Americans favor a surtax on federal income taxes for people earning more than $1 million a year, according to a recent NBC News/Wall Street Journal poll.
• Almost 7 out of 10 Americans favor eliminating the Bush tax cuts for households earning $250,000 a year or more.
• (Also): The least popular deficit-reduction proposal is turning Medicare into a voucher program where seniors get government coupons for private insurance, as House Republicans have proposed.

Here it is worthwhile to note that Representative Ryan’s budget plan to gut and privatize Medicare, according to the New York Times (CEPR article), “would add $30 trillion to the cost of buying Medicare equivalent plans over Medicare’s 75-year planning horizon.”

This is not the sum transferred from the government to beneficiaries. It is the increase in total costs — waste to the government, income to insurers and health care providers. This $30 trillion figure is approximately 6 times the size of the projected Social Security shortfall. It comes to almost $100,000 for every man, woman, and child in the country.

Well, Boehner and the Republicans have had their way, and by way of budget blackmail, the Bush tax cuts have been extended for two years.

These tax deals have been going on for some time, either with Obama’s complicity or out of political necessity. See the Guardian.co.uk, in an article by Dean Baker of CEPR, about tax cuts for the rich passed at the end of 2010. On this also see Tax Cut Deal: Extends Current Programs, Provides Little Spur to Further Job Growth, CEPR, December 7, 2010, by Eileen Applebaum, an article originally published in The Hill. Again, this was an earlier giveaway that Republicans forced Obama to make to the rich.

Now we have at least two more years of the Bush tax cuts, thanks to Boehner’s and the Republicans’ blackmail, and the political necessity of accepting a deal to get a budget which Obama faced passed. At this point, there are a few things we should know about these tax cuts. They won’t stimulate investment. And there is no evidence they will create much job growth or overall economic growth in the economy. At least if history means anything. All it will do is line the pockets of the Republicans’ real base, and their real masters, the rich and very rich.