$550,000,000,000

OK, let's say the $550 billion tax cut creates the 1 million jobs the Bush Admin optimistically claims it will. That's $550,000 per job and, in my view, a shoddy stimulus. Couldn't we do this better so that if we do have to have a tax cut, we end up with 11 million new jobs at, say, $50,000 per job? But we all know this is not about economic stimulus or jobs. _____________________________

Sizing Up The Spark From the Tax Plan
NYTimes

FISCAL policy, to borrow a metaphor, is a game of two halves.

In the first half, President Bush and his cabinet have been trying hard to sell his tax-relief package. The first half will end when some version of his plan, originally envisioned to cost the government $726 billion, makes it to his desk for signing.

Then the second half begins, and that half is all about accountability. The White House has made some strong claims about the power of tax relief to create jobs and stimulate the economy. It's everyone else's job to see whether the predictions come true.

There's just enough information to go on. In February, the Council of Economic Advisers released estimates of the original plan's impact, based on a computer model of the economy. The council predicted that the economy by itself would add 4.1 million jobs from July to the end of next year. With the president's plan, the council estimated, another 1.4 million jobs might be added to payrolls, for a total of 5.5 million.

Since then, the political odds have shifted to favor a smaller plan. President Bush has been pushing for tax cuts worth at least $550 billion. On Friday, the House passed a package of that size, but no one knows what the final plan will include. Nevertheless, the president has said that a plan worth $550 billion will create more than a million jobs.

Reviewing the numbers, it appears that his claim rests on a simple assumption. To scale down $726 billion to $550 billion, you subtract about a quarter of the total. Do the same with the figure of 1.4 million jobs, and you're left with almost 1.1 million — roughly the president's figure. Thus, if everything goes according to the White House's latest plan, the economy might add about 5.2 million jobs by the end of next year.

Say the White House's package makes it through Congress. Then fast-forward to election time — November 2004. How will we be able to tell if the plan has fulfilled its promises?

There's no easy way to tell whether a specific job was created as a result of fiscal policy or the underlying trend in the economy. But it won't be too difficult to get some idea of whether this package worked.

The first step is to consider the underlying economic trend. The Council of Economic Advisers assumed that without the White House plan, the economy would grow 2.9 percent in 2003 and 3.6 percent in 2004. With the plan, the council estimated that the economy would expand 3.6 percent this year and 4.8 percent next year.

At election time, say only 4 million jobs — not the 5.2 million suggested by the White House estimates — have been created. If the economy had expanded by about 3 percent, the council's own estimates would suggest that the fiscal package had virtually no effect. The onus would fall on the White House to prove otherwise.

Alternatively, say payrolls have grown by 7 million jobs by November 2004. If the economy had also grown faster than expected, even with the fiscal package, the White House might have a harder time asserting that its policies were responsible for millions of new jobs. More likely, it would contend that its initial forecasts were too conservative.

But what if only 2 million or so new jobs appear? If economic growth had continued to lag behind normal rates — experts place it at 1 to 2 percent now — the White House might be able to take a lot of credit. On its own, the economy might not have created any jobs. In fact, several economists have suggested that the fiscal package would be most potent in a slack economy. (If the economy grew by closer to 4 or 5 percent, without creating many jobs, then the council's assumptions about the links between jobs and growth would come into question.)


OF course, many factors besides fiscal policy could lead to changes in employment in the next year and a half.

In February, the council predicted that 131.41 million Americans would be on nonfarm payrolls by the end of the first quarter. Expectations about fiscal policy probably changed little during that period. But as of early April, according to the Labor Department, only 130.35 million people had jobs.

So, employment is starting from a lower base than the council forecast. And Congress looks likely to pare back the White House's fiscal package. Still, the council's estimates offer enough guidelines to make a reasonable assessment of the link between new policy and new jobs.

That assessment would become a lot more reasonable if the council updated its estimates. Claire Buchan, a White House spokeswoman, said the council was unlikely to offer new figures.

But if President Bush truly believes in his policies, perhaps he won't mind giving the American public a useful yardstick for grading their effectiveness.

 

USA Today said recently that 52% favored the cuts, but as with everything, it probably goes to how the question was asked. You get different numbers in the story below...
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GOP Eyes Tax Cuts as Annual Events


By Dana Milbank and Dan Balz
Washington Post Staff Writers
Sunday, May 11, 2003; Page A06


With the House's passage of a $550 billion tax cut plan, Congress is moving toward the third tax reduction in as many years for President Bush -- the same number passed in an entire generation before he came to office.

Yet the impressive trio of reductions is but a small step toward the administration's goal: nonstop tax cuts.

White House officials have told allies they will attempt a new tax cut every year Bush remains in office, and there is already talk of another round. The ultimate target -- overhauling the tax code and sharply reducing the size of the government -- may never be achieved. But the incremental steps in that direction help to keep the Republican Party unified and the president in an unending debate with Democrats over the tax burden on Americans.

Coupled with the war on terrorism, which also is likely to continue indefinitely, the constant pursuit of tax reductions has the potential to give U.S. politics a new rhythm. With Bush perpetually fighting for lower taxes and constantly battling terrorists -- he describes Iraq and Afghanistan as "battles" in the larger war -- there is little room for government to discuss new spending programs that Democrats want.

Paul Weyrich, a conservative with ties to Bush, said he was told at a White House meeting that "we intend to try to offer a new tax cut every year" -- a view top Bush aides have expressed to a number of business lobbyists. Grover Norquist, an anti-tax advocate who works closely with Bush aides, predicts: "You'll have a tax cut each year. I state it that way in all of the (White House) meetings, and I never get an argument."

But will the strategy continue to succeed?

Bush's determination to push multiple rounds of tax cuts -- this year's cuts of as much as $550 billion and 2001's $1.35 trillion cut sandwiched smaller investment tax breaks in 2002 -- comes in the face of evidence that Americans are at best only lukewarm in their support. The latest Washington Post-ABC News Poll found that, given the choice between tax cuts and spending on domestic priorities, the public favored spending by 67 percent to 29 percent. Asked to rank issues in order of importance, tax cuts ranked 10th.

Beyond the issue's appeal to Republican partisans, even Republican strategists question the political value and potency of the tax cut issue. "As a political tool, I don't think they do much outside of the base," said one strategist close to the administration. "The political importance of tax cuts is indirect. If they actually stimulate the economy, which is questionable, then they'll be helpful."

Said another strategist close to the president's team: "If we pass a tax cut and the economy doesn't improve and it gets worse, it's obviously problematic."

Still, Bush's tax cut strategy, by gradually reducing the supply of federal funds, has the potential to keep the GOP unified and Democrats on the defensive without frightening a cautious public. "A tax cut bill a year keeps the Democrats away," said Kenneth Duberstein, who was chief of staff to Ronald Reagan. "Americans like their changes in bite-size pieces and not in huge chunks."

Jonathan Baron, a Republican strategist tied to the party's conservative wing, said Democrats have shown no ability to turn Bush's support for tax cuts into a political liability. "Let's think of an election where a candidate's support for tax reductions was a political liability," he challenged.

Democrats acknowledged that there is no strong constituency opposed to tax cuts. In other words, Bush has found, for now, a relatively cost-free way to appeal to his base without inciting a revolt among independent voters or Democrats who might be attracted to him for other reasons.

"I think Bush has always used tax cuts to define Democrats as the party of government," said Bruce Reed, former president Bill Clinton's chief domestic policy adviser. "It doesn't do the economy any good, but it does Democrats some harm, " said Reed, who is now at the Democratic Leadership Council.

Democrats said the public could be stirred to oppose tax cuts if they could see the consequences of reducing the revenue available to the government for education or health care. In the states, where sharply declining revenue has forced substantial budget cuts, the public has become highly aware of the trade-offs, but in Washington, where there is no requirement to balance the budget, the pain is rarely felt as directly.

Mark Mellman, a Democratic pollster, said his party has not been effective in making an argument against Bush's tax cuts, a fact that was underscored by its losses in last year's midterm elections. "The argument we've been making is that it's bad for the economy, and people don't believe that."

Another Democratic pollster, Geoffrey Garin, agreed that deficits are "abstract" and produce little intensity among voters. Garin, however, said Bush's devotion to tax cuts could have political consequences. "The real downside for Bush is that his version of tax cuts continue to identify him as somebody who looks out for the interests of the wealthy as opposed to the middle-class or working-class Americans."

Even on the right, some social conservatives complain that the yearly tax cuts are distracting Bush from other important goals, such as judicial nominations. A potential warning comes from Weyrich, who, though a supporter of the tax cut, complains that the president's constant stumping for it is weakening his ability to draw the nation's attention to Democrats' unwillingness to confirm conservative judges. "You can't do more than one thing at one time," he said. "To push for a tax cut instead of these judges in my opinion is a mistake."

Business groups, meanwhile, doubt that tax cut momentum can be sustained. And even fierce advocates say cutting taxes will not work if government continues its inability to restrain spending and deficits continue to balloon.

Dan Danner, top lobbyist for the small-business group NFIB, said he is pleased by the administration's "continuing long-term interest and support not just for tax cuts but for tax reform." Yet he wonders how far it will go. "There always needs to be both the will to take it up on the Hill and a realistic opportunity for success," he said. Assuming a tax cut in each of the next five years is "not very realistic."

Similarly, Bruce Josten, a top official with the U.S. Chamber of Commerce, said business unity behind this year's tax cut is more an indication of the anemic economy than an endorsement of a year-by-year approach to tax cuts. Still, he sees evidence that the strategy is the best alternative. "I don't think politically this town is ready to get rid of the whole system and start over," he said. "It does work better this way, because we've gotten some things done. Dick Armey's approach -- get rid of the whole thing and replace it at once -- went nowhere."

That the yearly tax cuts are being pursued at all reflects important changes in Republican politics. With exceptions such as Sens. George V. Voinovich (Ohio) and Olympia J. Snowe (Maine), deficit hawks are almost entirely gone from the party. Of the 229 Republicans in the House, 216 have pledged not to raise taxes; forty-three of 51 GOP senators have done the same. Also, corporate lobbyists who once argued for stability in the tax code now favor a march toward simplification.

White House communications director Dan Bartlett said Bush's goal remains a streamlined tax code and a reduced tax burden. "Steps in 2001 and beyond have been in the right direction, and the president believes by reducing the tax burden more we can improve our economy," he said, adding that Bush also seeks a "fairer and simpler tax code."

Officially, there is no promise of a tax cut each year, and Bartlett said "a judgment will be made based on what the economy needs." Still, he endorsed the incremental approach. "The president also knows there are dramatic plans to achieve it overnight with a flat tax, and he's not looking at anything like that," he said.

Overall, the GOP is uncommonly unified by the tax cut strategy. While often divided on issues such as abortion and trade, Republicans have few divisions on tax cuts. Even religious conservatives are enthusiastic about tax cuts because, as conservative activist Gary Bauer put it, "people see high taxes as being a growing burden on the typical American family. To the extent social conservatives are trying to get kids into Christian schools, they want more of their money to spend."

In the past, the various industries and taxpayer groups squabbled over which tax cuts were the priority. But Norquist said Bush has avoided such fights by promising future tax cuts. The White House "made it clear that there was going to be a tax cut each year and that if you weren't in this year's tax cut, you would be in subsequent years' tax cuts," he said.

The result has been a near-unanimous coalition of business groups in support of Bush's tax cuts. Dirk Van Dongen, president of the National Association of Wholesaler-Distributors and a key White House ally, said that while he would like to see more major reforms, "there is something to be said in the legislative process for taking digestible bites and you work the hell out of that and come back and take another bite."

 

Some more info...
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Presidental Term and Jobs created per month:

Truman 1: 60,000
Truman 2: 113,000
Eisenhower 1: 58,000
Eisenhower 2: 15,000
Kennedy: 122,000
Johnson: 206,000
Nixon 1: 129,000
Nixon/Ford: 105,000
Carter: 218,000
Reagan 1: 109,000
Reagan 2: 224,000
G. Bush: 52,000
Clinton 1: 242,000
Clinton 2: 235,000
G.W. Bush: 69,000 jobs LOST per month

- Since Bush signed the biggest tax cut in American history in June of 2001, more then 1.7 million jobs have been lost in the economy.

- Bush is about to become the first president since Herbert Hoover to preside over a 4-year economy that lost jobs.

Average Monthly Job Creation Since Truman:

Democrat Presidents: 171,000 jobs created per month
Republican Presidents: 78,000 jobs created per month