Research dispels Bush claims that tax cuts create jobs

Despite considerable opposition from lawmakers, including some within his Republican party, President George W. Bush seems determined to push ahead with plans to introduce further cuts in taxes for the rich, continuing to assert that it would create more jobs for the poor. But the findings of a new study suggest that Bush's claim on job creation is based more on political rhetoric than actual facts related to the nation's economic realities. "It's a great sound bite that unfortunately does not hold true in the real world economy," say authors of the report, entitled, "Nothing to Be Thankful For: Tax Cuts and the Deteriorating US Job Market." Changes in tax policy suggest no evidence of their impact on job creation or destruction, according to the 22-page study released Nov. 15 by United for a Fair Economy (UFE), an independent group that tracks the growing economic divide between the nation's haves and have-nots. Since 1950, significant tax increases and decreases have both been followed by job losses and job gains, say the researchers. Based on statistical analysis of changes in tax policies and rates of job growth in the past 60 years, the report points out that tax reduction does, however, disproportionately lead to economic disparity between the rich and poor. "No workers have really benefited from President Bush's tax policy," says Gloribell Mota, a bilingual education specialist at UFE. "But blacks and latinos have suffered disproportionately." The study shows that African American unemployment remains about twice as high as that of white workers. Moreover, it indicates no sign of growth in quality jobs (defined as paying at least $16 per hour and including health benefits and a pension plan) for workers from any racial background, including whites. Last year, one million people fell below the poverty line, a disproportionate number of them children, while the number of billionaires rose to 374, the study says, adding that the number of people living in poverty rose from 11.3 percent in 2000 to 12.7 percent in 2004. The study also shows that the percentage of US workers benefiting from employment-based health insurance was down from 63 percent in 2000 to less than 60 percent in 2004. This despite the fact that US workers are spending more than 1800 hours per year at work while their counterparts in other technologically advanced nations work for 1600 hours a year–a difference of five full work weeks. In June 2003, the Bush administration had claimed that the president's tax cut policy would create more than five million jobs by the end of 2004, but the study shows that only 2.6 million jobs were created–1.6 million less than what would have been expected without any special economic stimulus. "Contrary to what President Bush and his policy makers are saying, tax cuts do not automatically create jobs," said Liz Stanton, director of research at UFE and coauthor of the report. "Their policy is bankrupt," she added. "It is time to recognize that jobs are both created and destroyed during times of tax decreases." Stanton and other researchers say the weakening of job creation during an economic recovery such as the one currently being experienced by the country is "unprecedented since the First World War." On Nov. 15, Republicans tried hard to advance their tax cut plans, but failed to muster enough support in a Senate body to extend tax cuts for capital gains and dividends beyond their planned expiration in 2008. The Senate Finance Committee voted 14-6 to endorse a package that would cut taxes by $80 billion over five years but would omit the administration's priority of preserving reduced tax rates for investment income. Some Republicans who voted for the bill later indicated that they would try to reinstate the extension before the legislation is debated by the full Senate or signed by the president. Meanwhile, critics of the administration's policies are wary that millions in the US would not be able to participate in the national feast of Thanksgiving. "This is because the multiple breadwinners each family needs these days don't have jobs," said Anisha Desai, coauthor of the study. "Of those that do, many are not making enough money to pay for turkey and trimmings for everybody in the family."