By Steven Conn
It's been 10 years since George W. Bush began cutting taxes, especially for wealthy individuals and large corporations. The bills he signed to do so had names like the "Economic Growth and Tax Relief Reconciliation Act," the "Jobs and Growth Tax Relief Reconciliation Act," and the "American Jobs Creation Act."
As the names suggest, these huge tax cuts were supposed to stimulate the economy and create jobs. The theory was that shifting vast sums of money to big corporations and the wealthiest Americans would enable them to invest in new businesses, expand existing ones, and bring greater prosperity to the rest of us.
So, 10 years later, it's worth asking: Did it work?
Figuring out cause and effect when it comes to economic policy is always tricky. Although many economists pretend otherwise, economics is not a hard science. There are more variables than you can control for, and you don't get to run the experiment twice.
Still, let's look at some numbers. In mid-2003, the Bush administration predicted that by the end of 2004, its tax cuts would create 5.5 million jobs. The administration also acknowledged that even without the tax cuts, the economy would probably add 4.1 million jobs during that period.
The actual result? The economy gained only 2.6 million jobs. In fact, Bush's job creation record in his first term was among the worst since Herbert Hoover's.
And the numbers are even worse than they appear, because many of those jobs were produced by increased military spending related to the wars in Iraq and Afghanistan.
In the middle years of the last decade, the most robust sectors of the economy - housing and real estate - were fueled not by big tax cuts, but by a bonanza of home-equity loans and other forms of easy money. We all know how that turned out.
And at the end of Bush's second term, of course, the economy fell off a cliff. By the time he left Washington, unemployment was soaring toward 10 percent. So much for job creation.
So what happened to all the tax-cut money that was supposed to be invested?
Some of it was invested in hedge funds, derivatives markets, and other places where it made rich investors richer but produced little of any value for the economy. And, by 2003, more American money was being invested overseas than in the United States. In other words, those tax cuts did help create jobs - in China, India, Brazil, and other foreign countries, but not in the United States.
Since we didn't get the jobs we were promised, what did these tax giveaways cost us? It's hard to calculate the lost revenue with precision, but the consensus is that the Bush tax cuts have cost about $2.8 trillion over the past decade. Add that to the costs of the wars in Iraq and Afghanistan, which are approaching $1.5 trillion, and you have enough to more or less clean up our current fiscal mess. In that sense, today's deficit was created by tax cuts that were too big and wars that were fought with credit cards.
It's important to revisit this recent history given the current budget debates around the country. In Washington, congressional Republicans have said everything is on the table in budget negotiations with the White House - except any increase in taxes on the wealthiest. And in states from New Jersey and Pennsylvania to Ohio and Texas, massive revenue shortfalls are being addressed with equally massive cuts to spending on education, health care, and other services. Republican governors have refused even to consider raising taxes on millionaires or large corporations.
And in all these places, we hear the same refrain: Tax cuts create jobs! But clearly, in the last decade, they haven't - unless you're looking for work in China.
Remember that old definition of crazy? It's doing the same thing over and over and expecting different results. Given the evidence at hand, the Republican position on taxes - that if we keep moving money from the middle class to the rich, we'll all benefit - starts to sound pretty crazy to me.
