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.
Thanks to Alex Tabarrok for the pointer. As I pointed out here, those attacking the Administration’s employment forecast seem more distorted by partisanship than do those forecasts.
For Discussion. Galbraith says that employment performance has been dismal. Is it evident what he would propose to do about it?
READER COMMENTS
Eric Krieg
Mar 25 2004 at 9:14am
Outlaw outsourcing, of course.
Oh wait, that wasn’t Galbraith.
dsquared
Mar 25 2004 at 1:03pm
If you’re interested in the answer to the question (rather than just having an off day or making a pointless swipe at JKG), he is in favour of old-fashioned Keynesian public works, financed by borrowing at the state level.
John Thacker
Mar 25 2004 at 4:57pm
Right. So JKG is a honest critic, who says that what we need is more Keynesianism and more deficits. He also correctly notes that the tax cuts so far are mainly middle-class aimed and Keynesian, even applauding them. He makes for an honest contrast from the more partisan types.
Robert Schwartz
Mar 26 2004 at 12:22am
Public Works! PWA. The Bonneville Dam. Woody Guthrie. Puts a nostalgic smile on your kiss.
Just imagine that Great Depression II starts next year. President Kerry has a great idea he will begin a new dam building program. Buoyed by a wave of public support and a PBS documentary about the glories of the New Deal written by Tim Robbins and narrated by David McCullough, the bill passes both houses by overwhelming majorities.
Then the enviromental review starts. And it takes 3 years to complete, but that is not the beginning of construction.
Because every enviromental group and every NIMBY in America files wave after wave of law suits tying the whole process up in courts which works it way up to the Supreme Court for the first time after four more years.
Trials are conducted in the eighth year, the first year of the Hillary Clinton administration, but with appeals and adjustments it takes three more years to settle the cases and publish bid documents.
Of course by that point the depression has been over for a year or two but Hillary feels committed to press on. Unfortunately, the bidding process triggers another wave of litigation by dissapointed bidders, people claiming fraud in the bidding process and of course the condemnation cases with the soon[?] to be flooded landowners.
By the time Libertarian Party sweeps the democrats and republicans out of office and into history on a wave of disgust with this fiasco and ends the project, it has been 16 years, not a single spade of earth has been turned and an incremental 2% of the GDP in each of those years has gone into legal services.
Public Works. Great Idea.
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