Sunday, October 10, 2004

A favorite bit of twaddle from the Kerry camp labels George W. Bush the only president since Herbert Hoover to preside over an economy with fewer jobs at the end of his term than at the beginning.

As John Kerry has said and as mimicked on his Web site, Mr. Bush “will face re-election as the first job-loss president since Herbert Hoover in the Great Depression.”

This clearly implies Mr. Bush is at fault for employment being lower today than when he took office — it’s his doing. If only job creation and reading the economy were that simple.

Despite what politicians say, the business cycle is a complex and sometimes fickle beast prone to go its own way, independent of the machinations of legislators and policymakers. But that is not to say it can’t be influenced, pushed and pulled a little, hurried and slowed when necessary, to the betterment of all.

When times are good, politicians in office can’t resist taking the credit, usually more than their due. The public becomes conditioned to the rhetoric. So when times are bad, it’s all too easy to blame whoever happens to be president at the moment. Sometimes the blame is just and sometimes it isn’t, and it’s often not easy to tell.

Some presidents are luckier than others. President Clinton came into office during an economic expansion that lasted through two terms. The expansion was about spent as he left office. Manufacturing jobs were already in decline, and the seeds of recession had been planted. They sprouted in the spring of 2002, shortly after George W. Bush took office.

A better and fairer way to assess a president’s economic record, whoever he may be, is to look at his economic policies and their timing, not simply the timing of his term in office.

President Bush’s major weapon to promote economic growth has been tax cuts. In June 2001, he signed the Economic Growth and Tax Relief Reconciliation Act into law, followed by further tax cuts in 2002 and 2003. The recession ended in November 2001, and the economy began reviving, aided by the stimulus of the first tax cut. Employment, however, continued weakening, and it wasn’t until September 2003, with the help of two more tax cuts, that the job market finally turned around.

Under the first tax cut, rebate checks were mailed to taxpayers starting in July 2001, in the midst of the recession. By the beginning of 2002, rebates totaling about $36 billion had been distributed. But to give a helping boost to the economy, they needed to be spent.

According to an in-depth study of the 2001 tax rebates by economists David S. Johnson, Jonathan A. Parker and Nicholas S. Souleles, most of the rebates were spent between the summer of 2001 and the spring of 2002. About two-thirds of the rebates were estimated to have been spent during the third and fourth quarters of 2001.

By the end of the first-quarter 2002, the tax cut’s initial impact on the economy had made itself felt, though the 2001 tax cut and the two after continue enhancing long-term growth.

Based on this analysis, a fair place to begin evaluating Mr. Bush’s economic program as it affected the job market would be first-quarter 2002, about a year after he took office.

Payroll employment in the first three months of 2002 averaged 130.4 million. Today payroll jobs are more than a million higher. Payroll jobs exclude the self-employed and farm workers. If these workers are added in, the total number of jobs today is nearly 2 million more than in the first quarter of 2002.

George W. Bush isn’t in the same category as Herbert Hoover.

Alfred Tella is former Georgetown University research professor of economics.

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