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The $871,000 Job Subsidy

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“And now, with this bold legislation, we’re sending a clear message to the doubters, the doubters that Washington can respond. We can respond. We can respond in a positive way. We’re building on the strengths of our economy so that everybody who wants to work can find a job in this great country.”

President Bush, upon signing the “Jobs and Growth Tax Relief Reconciliation Act of 2003”

After initially justifying his 2001 tax cuts on the grounds of fairness, President Bush shifted rationales to say that billions of dollars in new tax cuts were necessary—along with the increased phase in of his 2001 tax cuts—to help create jobs. For millions of American workers, the outcome of this “tax-cuts-as-job-creation” approach has been less than optimal as the nation has experienced the weakest employment growth in decades.

No matter how one looks at the data, job creation nationally has been well below historical averages. According to estimates from the Bureau of Labor Statistics released earlier this month, there were 92,000 new jobs created in October 2006. For the entire business cycle, which started in March 2001, job growth averaged an annualized 0.4 percent per month, which is less than one-fifth of the average of previous business cycles. In total, the current administration has presided over a scant six out of 67 months with above-average job growth in this business cycle.

It is not just critics who point out these trends. The president’s own economic team predicted far greater job growth than has occurred over the past few years. In April 2003, the Council of Economic Advisors argued that the president’s “Jobs and Growth Plan” would add 5.5 million new jobs between June 2003 and the end of 2004. The White House estimated that the economy would naturally produce 4.1 million of these jobs while the tax cuts would be directly responsible for 1.4 million jobs—roughly one-quarter of all newly created jobs.

By the end of 2004, there were only 2.6 million more jobs than in June 2003. The president missed his target by more than 50 percent.

In early 2005, the White House predicted a comparatively low job growth rate of 175,000 new jobs per month. By the end of 2005, the economy was still 112,000 jobs shy of meeting this goal.

The administration predicted 176,000 new jobs per month during 2006—again a relatively slow job growth assumption. Yet, to even get over this very low hurdle, job growth in November and December would have to average 322,000 jobs. Since March 2001, there have only been three months—far apart—with job creation of more than 300,000 new jobs.

Despite all of the empirical evidence to the contrary, the Bush administration continues to tell Americans that tax cuts create loads of jobs.

For the sake of argument, let us suspend “reality-based” economics for a moment and evaluate this claim on its own terms. Based on the administration’s estimate that its tax cuts should be credited for creating approximately one-quarter of all new jobs, with the economy producing the rest on its own, we can attribute 1.3 million jobs out of the 5.0 million newly created jobs since the start of the recovery in late 2001 to the White House’s tax cuts. And what did it cost the U.S. treasury to produce these magical gains? According to estimates by the Congressional Joint Committee on Taxation, the tax cuts during the same time period totaled $1.1 trillion.

This means that even under the most optimistic assumptions about the relationship between tax cuts and jobs pushed by the White House, the Bush economic brain trust managed to spend $871,000 on every new job it claims to have created since 2001.

With numbers like these, the administration has invented one of the most expensive—and least effective—job creation programs in U.S. history. It is no wonder conservatives have abandoned the Bush economic ship in droves and progressives remain skeptical of the White House’s employment policies.

To speak with our experts on this topic, please contact:

Print: Katie Peters (economy, education, poverty, Half in Ten Education Fund)
202.741.6285 or kpeters@americanprogress.org

Print: Anne Shoup (foreign policy and national security, energy, LGBT issues, health care, gun-violence prevention)
202.481.7146 or ashoup@americanprogress.org

Print: Crystal Patterson (immigration)
202.478.6350 or cpatterson@americanprogress.org

Print: Madeline Meth (women's issues, Legal Progress, higher education)
202.741.6277 or mmeth@americanprogress.org

Spanish-language and ethnic media: Tanya Arditi
202.741.6258 or tarditi@americanprogress.org

TV: Lindsay Hamilton
202.483.2675 or lhamilton@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org