Economy and Jobs Watch

Two recent economic reports show the depth of economic mismanagement by the Bush administration. First, it was reported last week that the unemployment rate has risen to 6.1 percent in yet another indication of the poor state of the labor market. Second, the Congressional Budget Office (CBO) announced that it expects the current year’s budget deficit will be around $400 billion.

Labor market

The recent Employment Situation report by the Department of Labor shows the continuing weakness of the economy. The unemployment rate rose to 6.1 percent in May from 6 percent in April. In addition, the report demonstrated just how many jobs have been lost during the current administration. According to establishment data (i.e., data from companies and other employers), employment levels peaked in February 2001, and, since then, employment in the private sector has fallen by 3.1 million jobs.

The administration’s first round of tax cuts (enacted in 2001) clearly have not brought about a recovery in jobs. The administration has claimed that the second round of revenue reductions enacted last month will create 1.4 million additional new jobs over the next 18 months. (A publication by The Economic Policy Institute has documented the current labor situation, and offers a method for evaluating this goal.)

In addition, according to the administration’s own analysis, it appears that over the next ten years a large percentage (90 percent) of the 1.4 million additional jobs would have been created anyway.

Even if these claims turn out to be true, spending $350 billion to create 1.4 million additional short-run jobs (that’s $250,000 per job), and many fewer additional jobs over the long run, is a very inefficient way to help the economy.


Last week also brought data to light on just how far we have fallen when it comes to fiscal responsibility. The current administration inherited record budget surpluses and has brought the budget into record deficit territory. The CBO announced that it expects the current year’s budget deficit will be close to $400 billion, about 4 percent of GDP. This record deficit, and the ones expected as a result of current revenue reductions, add to the amount of debt that the government must eventually pay. The current tax-cut binge must eventually be paid for in the future by imposing taxes on this generation or, more likely, the next generation, which would ultimately be greater than would otherwise be necessary.

In addition, while the stated cost of the 2003 revenue reduction is $350 billion, estimates by the Tax Policy Center place the true cost (if temporary provisions are made permanent) at around $1 trillion. If all the temporary provisions are removed from both the 2001 and the 2003 reductions, the cost will be about $2 trillion.


The 2001 and 2003 revenue reductions were not only ineffective, inefficient, and fiscally irresponsible; they were unfair. The reality is that the primary beneficiaries are those at the very top of the income distribution. Those with an income greater than $1 million get a $94,000 break, while those in the middle of the income distribution get only $217.


State by State Impacts of the Bush Tax Plan

Citizens for Tax Justice has released a new analysis of the state-by-state impacts of the latest tax cut bill, signed by President Bush on May 28.

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