Jobs and snow jobs: Part II

Our current unemployment rate — 5.4 percent — is one of the lowest in the world and one of the lowest in U.S. history. Why then the hysteria about jobs? Because this is an election year and Sen. John Kerry is desperate for some issue that will rescue his faltering campaign.

According to the Kerry campaign, President Bush has “lost” over a million jobs since taking office. This of course assumes jobs are presidents’ to win or lose.

Both in political rhetoric and media hype, presidents are credited or blamed for all sorts of economic developments they have had little or nothing to do with. Back in the 1980s, it was “the Reagan deficit” and in the 1990s “the Clinton surplus.”

In both those administrations, as in all other U.S. administrations, all spending bills originated in the House of Representatives. Both Ronald Reagan and Bill Clinton faced a House of Representatives controlled by the opposite party. Neither president could create a deficit or a surplus.

Even further back, President Herbert Hoover was blamed for the Great Depression of the 1930s and President Franklin D. Roosevelt was credited with getting us out of it. Virtually no recognized economist believes that today.

Some of Hoover’s policies may have made matters worse and Roosevelt carried those policies even further, making things much worse. But there is little positive any president can do, except recognize how little he can do — and therefore not get in the way of the market’s natural tendency to rebound.

President George W. Bush came into office inheriting an economic downturn that began at the end of the Clinton administration. Then the September 11, 2001, terrorist attacks and the reactions to them disrupted the economy.

Have we forgotten the drastic reduction in travel after that September 11, which plunged the airline industry into huge losses and dealt a blow to hotels and vacation resorts across the country? Jobs decline when the economy declines.

President Bush’s tax cuts have been blamed for our economic woes by those who believe in high taxes. But the economy’s decline began before taxes were cut, and we now have a strong recovery without the tax rates being raised.

Few things have been more grossly distorted than tax cuts. Liberals in politics and the media seem to think what happens to the money matters. In reality, what matters is how the cut in tax rates affects people’s behavior.

Time and again, lower tax rates have increased tax revenues. That is because lower tax rates make it profitable to take money out of tax shelters like municipal bonds and put it into something more productive, now that taxes no longer take such a big bite.

When more money is invested in more productive economic activities, there is more output — and more jobs are created while increasing output. That is the whole point.

People who hate to see tax cuts have an entirely different scenario. They see “tax cuts for the rich” approved because of some theory the money received by the rich eventually will “trickle down” to the poor.

No economist in the entire history of economics has ever had any such “trickle-down” theory. It is a complete straw man.

If you want to argue about the effects of any given cut in tax rates, fine. But those who dream up a “trickle-down theory” obviously do not want to confront the real arguments for tax cuts or the actual effects of these cuts.

Story Continues →