Tax Cut Chicanery (3)

The No-Jobs-During-the-Bush-Years Myth

The tax rates implemented by the Bush tax cuts of 2003 are still in effect but are set to expire January 1 if Congress does not act. President Obama and the Democrats want to raise tax rates on those who earn more than $200,000.

Half the over-$200,000 taxpayers targeted for an increase are small business employers.  Yet the Democrats and their media supporters keep telling us the Bush tax cuts didn’t help create any jobs. Therefore they claim, increasing small business tax rates now will not diminish future job creation.

Democrats’ note that there were only a few more jobs at the end of Bush’s eight years than at the beginning in 2001.  Therefore, their argument goes, the tax rates that were enacted in 2003 and are still in effect today never helped create any jobs.

It’s true that the total number of private sector jobs was about the same at both ends of the Bush Administration.  But that simplistic comparison doesn’t account for all that happened over those eight years, and hides the fact that there was a four year period of very strong job creation.  Here are the historical details the Democrats hope we’ll all forget:

• Due to the post dot-com recession job losses began the month Bush was sworn in.  The 9-11 terrorist attacks directly caused the loss of an additional million jobs.
• In 2001 Congress enacted a schedule of tiny incremental reductions in tax rates to be phased in over four years. This proved ineffective and job losses continued through 2002 and into 2003.
• In May, 2003 Congress abandoned the incremental schedule and enacted new, substantially lower tax rates for all brackets.  These “Bush tax rates” are still in effect today.
  
• Job growth began four months later in September, and continued over 51 months for a total of 7.3 million private sector jobs.
  
• In 2008 the mortgage crisis brought on another, severe recession and 4.4 million jobs were lost in Bush’s final year.

Obviously, 2008 was an economic nightmare.  But there is no connection between the tax cuts of 2003 and the mortgage malfeasance that caused the economic crisis, the recession and the massive job losses of 2008 and 2009.  Nor is there any evidence that raising tax rates now will either help create more jobs or prevent another financial crisis.

As the chart above indicates, the stimulus has failed.  Job losses continued for almost a year after the stimulus was enacted on President Obama’s promise that it would “immediately jumpstart job creation.”

• After the 2003 tax cuts it took 27 months to replace the jobs that were lost in 2001 and 2002 due to the dot-com recession and the 9-11 attacks.
• If current job growth continues at the 2010 rate it will take 65 more months to replace all the jobs lost in 2008 and 2009.

After the Bush tax cuts Employers created jobs for a total of 51 months, bringing private sector employment to an all time high of 115,574,000 in December, 2007.  Unfortunately, millions of those jobs were lost due to the mortgage crisis and the brutal recession that followed in 2008 and 2009.

The Obama agenda of massive new intervention in the private economy plus continuous threats of tax increases has spooked large and small businesses, causing them to be reluctant to risk any new job creating investments.

It will take even longer if small business employers are hit with a tax increase.