Bush tax cuts cost $329,220 for each job created
Guest post by Publius
The Bush tax cuts cost $329,220 for each job it created. That, according to the math recently employed by The Weekly Standard in its analysis of the cost per job from Obama’s stimulus package.
The Weekly Standard argued that because the overall cost of the
stimulus to date is $666 billion, and the number of jobs created since
the stimulus was passed (according to the low estimate by the Council of
Economic Advisors) is 2.4 million jobs, the cost per job from the
stimulus equals $278,000 per job. The Weekly Standard went on to note
that we could have simply written a check for $100,000 to everyone whose
employment was allegedly made possible by the stimulus and come out
$427 billion ahead.
Sounds pretty bad, right?
Well, using the exact same formula, the Bush tax cuts passed in 2001 were estimated by the Joint Committee on Taxation
to cost about $864.2 billion from 2001-2008 (the first year of the Bush
tax cuts through the last year of his presidency). During that period,
according to The Wall Street Journal,
2,625,000 jobs were created. That comes out to a total cost of
$329,220 per job under the Bush tax cuts. And that’s if we assume that
every single job which was created during Bush’s presidency was
attributable to the Bush tax cuts (pretty unlikely) AND if we exclude
the costs of the 2003 tax cut (estimated to cost another $350 billion
over 10 years). We could have written a check for $100,000 to each
person who “allegedly” had their job created by the Bush tax cuts and
saved $600 billion, but they wouldn’t have received it because the check
was instead delivered to really wealthy people.
My point isn’t that the Obama stimulus was good because the Bush tax
cuts were bad. Instead, my point is that the math employed by The
Weekly Standard is absurd. This example highlights the absurdity.
It’s wrong to suggest that the sole purpose of the stimulus was to
“buy jobs.” If that was the sole purpose, then yes- the cost would
arguably have been $278,000 per job. As White House spokesperson Liz
Oxhorn noted the other day, however:
[The Weekly Standard] study is based on partial information and false analysis. The Recovery Act was more than a measure to create and save jobs; it was also an investment in American infrastructure, education and industries that are critical to America’s long-term success and an investment in the economic future of America’s working families. Thanks to the Recovery Act, 110 million working families received a tax cut through the Making Work Pay tax credit, over 110,000 small businesses received critical access to capital through $27 billion in small business loans and more than 75,000 projects were started nationwide to improve our infrastructure, jump-start emerging industries and spur local economic development.
The concept of the stimulus was grounded in Keynesian economic
theory- government countercyclical spending is critical to countermand
the effects of a recession. Increased government spending increases
GDP, frees up capital and, consequently, creates jobs. Jobs are part of
the benefits of stimulus. They aren’t the direct purchase.
By most metrics, the stimulus was a success. According to the CBO,
the stimulus increased GDP by 3.1%. It added as many as 3.6 million
jobs to boot. It gave us new factories, roads, bridges, and other infrastructure which we benefit from each day. Boiling all of this down to a cost per job is just silly.
The Weekly Standard would also be wise to note that about $288
billion of the projected $747 billion stimulus came in the form of tax
cuts (about 38.5% of total spending), despite the fact that according to
many prominent economists (such as Mark Zandi), tax cuts are far less
stimulative than other types of spending, such as food stamps,
unemployment benefits and infrastructure spending (all of which
Republicans opposed).
If The Weekly Standard wants to argue the stimulus could have been
more effective, it won’t find many on the left who disagree. If it
wants good ideas on how to make it more effective, step one is to stop
believing tax cuts are the best solution to all economic ills.
Labels: Bush tax cuts, CBO, economic stimulus, jobs, The Weekly Standard
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