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Final grade on the Bush tax cuts: Failure to produce jobs

The Bush Administration called the tax cut package, which took effect in July 2003, its "Jobs and Growth Plan." The president's economics staff, the Council of Economic Advisers (CEA, see background documents), projected that the plan would result in the creation of 5.5 million jobs by the end of 2004—in other words, 306,000 new jobs in each of the 18 months from June 2003 to December 2004. Even without the passage of Bush's tax cut plan, the CEA projected that the economy would generate 228,000 jobs a month.

With the newly released payroll employment data for December 2004 it is now possible to assess whether the administration's tax cut strategy produced the employment growth that was projected (see table and figure below). The final verdict is grim.  Job growth over the last 18 months has fallen short by 1,703,000—more than one-third less than the number of jobs the administration said would be created without the tax cuts. Given that the economy failed to produce the number of jobs expected with no policy change, it seems hard to argue that the tax cuts were a successful strategy in adding any jobs—the promised 1.4 million additional jobs never materialized. The announced revisions (up 236,000 in March 2004) to the payroll employment series (see Data Note below) do not materially change this assessment.

Grading the Bush Administration's tax cuts
 
Projected by administration
Actual
Shortfall
Job growth with no policy change
4,110,000
2,407,000
1,703,000
Tax cut impact
1,400,000
0
1,400,000
Total job growth
5,510,000
2,407,000
3,103,000

Actual and projected job growth, June 2003-December 2004

This job growth comparison can also be presented on a monthly basis over the June 2003 to December 2004 period, as is done in the figure below. The December job growth of 157,000 jobs falls short of the monthly 306,000 target by 149,000. As seen in the chart below, job creation failed to meet the administration's projections in 15 of the past 18 months.

Difference between actual and projected monthly job growth

Data Note: Forthcoming employment revisions
The Bureau of Labor Statistics commissioner announced that, based on preliminary analysis of first quarter unemployment insurance tax reports, payroll employment for March 2004 will be revised upward approximately 236,000. That is smaller than the average revision. It does not materially change the picture for job growth between March 2003 and March 2004. When the official revisions occur in February, the revision to November 2004 may be higher or lower than 236,000.


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