Lowering taxes on "job-creators" has not produced jobs. Period. Lowering them further is unlikely to have a different result. To call taxes "job-killing" is Republican doublespeak, as is calling anyone who makes more than a million dollars a "job creator," hedge fund managers taking home multi-billion dollar paychecks included. As it turns out, the Bush tax cuts were job-killers. Looking back at recent history, it would seem that job growth is highest when tax rates are higher and when taxes get cut, jobs disappear. If this was not the case, then the last decade of Bush tax cuts would have produced jobs, not hemorrhaged them. According to the Bureau of Labor Statistics, under President Clinton from January 1993 to January 2001 the nation gained 22.7 million total jobs. During Bush's eight years in office (January 2001 to January 2009) the nation actually gained a net 1.08 million jobs but because there were gains in government jobs (small government be damned!) the private sector actually lost 653,000 jobs during that period. So if tax cuts work against job creation and our nation is in need of job creation, then rescinding the Bush tax cuts for the wealthy is a good start, right? Not according to Republican talking points.
"If you go after the higher income earners, you're going after the job creators." - Rep. John Fleming (R) Louisiana on MSNBC Sept. 19th
Ah, the job creators. As we are still in the grips of an economic/jobs crisis, I wanted to focus on one of the worst months for job losses in recent U.S. history: January 2009. The month before Obama took office, U.S. employers cut almost 600,000 jobs in that month alone, boosting unemployment up to 7.6%. It was the worst month of job losses since December 1974 (four months after Gerald Ford took over after Richard Nixon's resignation) and the end of the biggest three month drop since immediately after WWII when the defense industry was ramping down after war. But if we want to illuminate the complete and total ineffectiveness of Bush's tax cuts on job creation, try this fact about the last year of the Bush presidency:
3.6 million jobs were lost from January 2008 to January 2009, when the unemployment rate was at its highest level since September 1992 (when George Bush senior was still in office). Of those 3.6 million, 2.5 million jobs were lost just since Labor Day 2008.
"The breadth of job losses now surpasses the prior two recessions," said John Silvia, chief economist for Wachovia at the time.
Among the only sectors that posted narrow gains in jobs: education, health services, and the government, three sectors Republicans seem to currently despise.
To see corporate America in a mad dash to jettison jobs like that just before Bush left office brings one thought to mind: after 8 years of Bush tax cuts for the wealthy, weren't you all supposed to be job creators? And if those tax cuts caused you to purge millions of jobs instead, can we honestly say that tax cuts for the wealthy do not help create jobs and in fact do exactly the opposite?
In order to gain some perspective, let's look back to 2001, the first year of the Bush presidency and the year in which 9/11 occurred. The Clinton decade had been a long recovery into prosperity from the first Bush years, as seen in this graph from the U.S. Bureau of Labor Statistics. When Clinton left office in January of 2001, unemployment was 4.2 percent. By June of 2003, it had risen to a peak of 6.4%.
Most people assume that 9/11 caused such turmoil and uncertainty that it cause unemployment to rise, which it did to some extent. But well before 9/11/2001, U.S. companies had announced over a million job cuts, raising unemployment from 4% to 4.5% in the infancy of the Bush presidency. Here is a piece from Sept 5, 2001 after Bush's first eight months in office. Note the 1.12 million in job cuts in the first eight months of 2001 were 83 percent more than in all of 2000, Clinton's last year in office. Here's another CNN piece from two days later (four days before 9/11) on how unemployment and job cuts far exceeded what economists had predicted at the time.
After peaking at 6.4% in June of 2003, unemployment slowly backed down to 5% by June 2005, but employer payrolls kept coming in weaker than forecasted (nine out of the previous 12 months). Here is a telling quote from John Challenger, CEO of outplacement firm Challenger Gray & Christmas, as quoted on CNN July 8, 2005 just after the London bombings:
"With the economy growing at a steady pace and healthy corporate earnings, the lack of much stronger job growth is a mystery," he said in a statement. Challenger said part of the problem is employers' doubts about the strength of the current economic expansion. He said there is "concern that a sudden jolt to the economy could bring down this house of cards," adding, "The terrorist attack in London yesterday serves as a reminder that we are still vulnerable."
Interesting that he refers to our economy as a "house of cards" and chalks up the lack of strong job growth to employers' doubts. Ah, uncertainty. You've become the excuse du jour for companies not hiring or investing! 2006 and 2007 found unemployment back under 5% but by December of 2007, we were back at %5 and rising.
In 2008, national unemployment skyrocketed from 5% in January to 7.3% in December, jumping another half point to 7.8% by the time Obama took office. Unemployment hit the peak of it's upward trajectory in October of 2009, as President Obama put a halt on the Bush surge that had more than doubled to 10.1% from a low of 4.2% that Clinton left him way back in January 2001. By the end of Obama's first year in office, the New York Times reported that the peak in U.S. unemployment had probably passed. They also noted that in the eight months after September 2008 -- the month that Lehman Brothers failed -- the unemployment rate rose 3.2 percentage points, to 9.4 percent. That was the largest gain over such a period since 1975, when the 1973-75 recession was drawing to a close.
For one of the best (as in worst) examples of how the economy unraveled in Bush's second term, let's look at Michigan, a state hit hard in manufacturing and automobile jobs. In 2006, 12 states (and D.C.) had higher than average unemployment, with Michigan, Mississippi, Alaska and S.C. approaching 7%. Michigan crossed that barrier in 2007 right as the subprime mortgage crisis began to unfold.
Michigan tells it themselves in their yearly state government economic outlook report in January 2008, as the housing bubble was bursting:
Manufacturing employment remains hard hit. Between its March 1998 pre-recession peak and November 2007, the U.S. economy shed one out of five manufacturing jobs (3.7 million jobs). While most employment indicators suggest a weaker labor market, some suggest a flattening out.
In the document, Martin Feldstein (former chair of Reagan's Council of Economic Advisors) provides a telling description of the current credit crunch:
The current credit crunch reflects not only a lack of liquidity, but also a lack of confidence in the creditworthiness of counterparties and in the accuracy of asset prices. This problem is now being compounded by the banks' loss of capital as they recognize past losses, and by their need to use large amounts of the remaining capital to support existing off-balance-sheet credits that have to be shifted to their balance sheets. (Wall Street Journal, December 5, 2007)
Here are a few more facts from Michigan's 2008/2009 report/forecast, followed by the much darker January 2009 report for comparison. It's worth noting that Michigan's employment peak was during Clinton's last year in office:
Consumer Sentiment Near Lowest Level in Over a Decade
From Michigan's employment peak in June 2000 to November 2007, Michigan has lost nearly 450,000 jobs (-9.5 percent). Since June 2000, Michigan manufacturing employment has fallen by 297,000 jobs. Michigan has lost nearly three out of every ten manufacturing jobs it had at the State's employment peak.
In 2008, real GDP growth is forecast to slow from 2.1 percent to 1.7 percent. Growth is then expected to accelerate to 2.4 percent in 2009. High consumer debt levels, high energy prices, the credit crunch and a weak housing market are expected to depress growth.
U.S. wage and salary employment is forecast to rise -- though more slowly -- in 2008 and 2009. Employment will rise by 0.5 percent in 2008 and 0.6 percent in 2009. The U.S. unemployment rate rises to 5.3 percent and 5.6 percent in 2008 and 2009, respectively.
Michigan employment is forecast to fall 2.0 percent in 2008 and 1.1 percent in 2009. Private non-manufacturing employment is projected to decline by 35,900 jobs in calendar year 2008 and by 12,100 in 2009. Manufacturing employment is forecast to fall by 5.9 percent in 2008 and by 5.1 percent in 2009. Struggles at the domestic Big 3 automakers and concomitant restructurings will depress manufacturing employment along with continued rationalization among vehicle suppliers. Total Michigan employment is forecast to decline by approximately 19,100 jobs per quarter during 2008. Declines are then forecast to slow throughout 2009 with net employment changes averaging -5,700 jobs. Only in 2009Q4 does Michigan employment rise and then only slightly. Michigan's unemployment rate is expected to rise from 7.2 percent to 8.3 percent in 2008 and to 8.9 percent in 2009.
So in January 2008, Michigan was predicting an 8.9 percent unemployment rate in 2009. By the time January of 2009 rolls around, the state had upped their prediction two whole percentage points, expecting 10.9 percent unemployment in 2009 and 11 percent in 2010. Michigan unemployment actually rose a whopping 41.3 percent -- 205,000 jobs -- from December 2008 to December 2009.
Let's move forward one year for some facts and figures from Michigan's 2009/2010 Economic Outlook, released during Bush's last month in office (January 2009). At this point, Michigan had suffered eight consecutive years of declining wage and salary employment and their highest unemployment rate since Bush the Elder was in office:
After averaging 8.4 percent in 2008, the Michigan unemployment rate is forecast to rise to 10.9 percent in 2009 and 11.0 percent in 2010. In FY 2009, Michigan wages and salaries income is expected to fall 2.5 percent before decreasing an additional 1.0 percent in FY 2010.
Michigan wage and salary employment is on pace to decline for the eighth consecutive year in 2008. From Michigan's employment peak in June 2000 to November 2008, Michigan has lost 576,200 jobs (-12.3 percent). Since June 2000, Michigan manufacturing employment has fallen by 343,500 jobs, more than one out of every three manufacturing jobs the sector had at the State's employment peak (-37.8 percent). In May 2008, Michigan's unemployment rate rose sharply, rising from 6.9 percent to 8.5 percent. Since May, the State's unemployment rate has risen still more with November's rate at 9.6 percent -- Michigan's highest unemployment rate since March 1992. In November 2008, Michigan had the highest state unemployment rate in the nation
After growing 1.2 percent in 2008, real GDP is forecast to decline 1.6 percent in 2009 and then rise only 1.3 percent in 2010. High consumer debt levels, the credit crunch and a weak housing market are expected to shrink the economy in 2009 and to substantially restrain growth in 2010. The projected 2009 decline would be the economy's worst annual performance since the 1982 drop (a 1.9 percent decline). After declining slightly in 2008Q3, the U.S. economy is estimated to have contracted severely (-4.9 percent annual rate) in 2008Q4. Like most other forecasters' predictions, the baseline forecast expects that the current recession's sharpest real GDP decline is in 2008Q4. In large part, the risks to these expectations represent the three major factors that precipitated the recession: the housing market, the roiled financial markets and the accompanying credit crunch and oil prices.
Total Michigan employment is forecast to decline substantially each quarter of 2009, falling an average of 39,100 jobs per quarter. State employment continues to decline in each quarter of 2010, but those declines are smaller averaging 9,400 jobs across the year. 2010 would mark the tenth straight year of Michigan employment declines; 2010 State wage and salary employment would be Michigan's lowest calendar year employment in 18 years. Michigan's unemployment rate is expected to rise from 8.4 percent to 10.9 percent in 2009 before rising in 2010 to 11.0 percent -- a 26-year high.
The main point of this piece bears repeating: the Bush tax cuts for the wealthy did not create jobs and have in fact accompanied massive layoffs and debt. To think that they will somehow begin to work creating jobs after a decade of failure is insanity. And for the record, in a January 2009 CNN poll done just before Obama took office, the number one priority of Americans polled were JOBS. And it's about damn time for some real action. Though Obama is presiding, it is up to Congress to pass bills and laws that he can sign. Until Congress gets real about fiscal policies that actually create or destroy jobs, our nations' millions of unemployed are left hanging in the balance. President Obama's American Jobs Act is a good start but it is Congress that has to do the heavy lifting of passing it with bipartisan support coming into an election year. As much as I'd love to have hope in that happening, I fear the "job creators" in Congress are not up for the task.
For a lighter look at job creators and uncertainty check out Bill Maher's latest.