'Trickle Down' Policies Not Working

Speaking in New Hampshire yesterday, President Bush continued to claim tax cuts for the rich have helped the middle class, “The tax relief we passed was essential to get the economy going. It's essential to let people have money. It's working. It's working. The economy is growing, people are finding work,” — a proposition hard to swallow for millions of Americans. Even with today’s estimates showing solid 4 percent growth in the fourth quarter of 2003, unemployed and underemployed Americans continue to hold out for the president’s promise of more and better jobs.

• Despite growth, the labor market is still in the tank. In December, the U.S. economy added a measly 1,000 jobs – or 20 jobs in each state. For the past five months, employment increased by an average of only 56,000 jobs, well below the approximately 150,000 jobs needed just to absorb the increase in population. Today’s GDP report also shows weakness in the labor market. In inflation adjusted terms, wage and salary income grew by only 0.3 percent in the fourth quarter, following an increase of a mere 0.2 percent in the third quarter.
• Rising consumer debt continues to feed the economy. Economic growth does come without costs to someone. Americans continue to increase their household debt to maintain consumption and prop up the economy. Credit card debt and consumer loans for things like cars and furniture reached a record high 39 percent of wages and salaries in October and November. Increased delinquencies, defaults, and bankruptcies are likely to follow.
• “Tax cuts, tax cuts, and more tax cuts” is the problem, not the solution. Policymakers must recognize the president’s call for permanent tax cuts for the richest households will only hurt middle class Americans, not help. By continuing to fuel massive, fiscally irresponsible budget deficits long into the future, the president’s tax cuts will create higher interest rates and lower economic growth. This means fewer jobs that pay less coupled with higher costs for housing, consumer goods, and college tuition. Similarly, Congress must recognize the labor market slump is real and expand benefits for the long-term unemployed immediately. The Center on Budget and Policy Priorities estimates 375,000 unemployed Americans are set to exhaust their benefits by the end of January.

Click here to see more analysis by Christian Weller, a senior economist at the Center for American Progress.

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