Employment Forecasting, continued
By Arnold Kling
A while back, Paul Krugman published a graph that appeared to show that the employment forecasts of the Bush Administration were implausible. Drawing the same graph, but using an earlier start date, James K. Galbraith refutes that analysis. As Galbraith points out, what the Bush economists are guilty of is forecasting a normal recovery in employment.
Galbraith also disputes the view that the tax cuts that have taken effect to date were overly skewed to the rich.
Bush did cut taxes on the rich — relentlessly, recklessly, wrongly. But most of those tax cuts have yet to be phased in. They are part of the revenue losses still to come in the decades ahead. They aren’t the big thing behind deficits we’re seeing now. Therefore, reconfiguring the tax cuts already in place to benefit only the middle class and poor would have helped some — but not that much.
Moreover, in 2001 and 2003, taxes were cut for the middle class. Those cuts were the sweetener for the enormous future giveaways to the rich. They happened first through cash rebates and then through an expanded child credit. Taken entirely alone, these cuts weren’t bad policy. Without them — and without the short-term deficits they caused — the recession and job losses would have been much worse. And in 2003 the middle-class tax cuts did deliver a burst of spending, leading to an 8 percent economic growth rate in the third quarter.
For Discussion. Galbraith says that employment performance has been dismal. Is it evident what he would propose to do about it?