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American Prospect Online - ViewWeb

The Bush administration has a mantra that we hear whenever some jobs are created: "The tax cuts are working." But are they? Mark Zandi, president of Economy.com and a highly respected economic forecaster, gave us the answer in a new report analyzing the factors in the past three years of growth; the administration's tax cuts, principally for the rich, have had very little to do with it. Increased government spending (particularly on defense) and tax cuts for middle- and lower-income people each contributed more to growth than tax cuts for higher-income people.

The heaviest lifting by far in response to the recession and sluggish recovery has come from lower interest rates. But what the Bush policies failed to fix is only half of this story. Zandi makes the point that better policies could have given us 2.6 percent higher GDP in 2003 and two million more jobs in 2004. Economic performance that vigorous would have, in turn, cut our current fiscal deficit in half. As an engine of growth and jobs, the administration's policies have clearly been second-rate.

The Bush administration can't possibly believe its own rhetoric that any and all jobs created are due to the tax cuts. After all, the administration's own regular forecasts since early 2002 have consistently shown that employment would be growing even without any change in policy. Nor have tax cuts been the only policy response to the recession; as Zandi points out, extraordinarily low interest rates (thank you, Federal Reserve Board) have led to stronger housing and auto sales, high levels of cash-out mortgage refinancing, and more business investment.

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