President George Walker Hoover?

Commentary about business and finance.
April 30 2003 5:43 PM

George Walker Hoover?

President Bush is on track to match Herbert Hoover's record of job destruction.

Now that the war with Iraq is over, President Bush is focusing on passing his proposed tax cut—optimistically dubbed the "Jobs and Growth Plan," rather than the more accurate "Deficits and Deficits Plan."

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The Treasury Department is putting out word that accelerating the planned reduction of marginal tax rates, cutting taxes on dividends, and otherwise tinkering with the tax code will create more than 1 million jobs by the end of 2004. The Council of Economic Advisers is more sanguine, estimating the Bush plan will create 1.4 million new jobs by the end of 2004.

But 1.4 million jobs in 18 months isn't many jobs, and it isn't much growth. By historical standards, when it comes to job creation, Bush is shaping up to be more like Herbert Hoover than Ronald Reagan. He stands to preside over the first presidency since Hoover's in which the American economy lost jobs.

The Bureau of Labor Statistics' time series on non-farm payrolls, dating back to 1919, testifies to the amazing long-term performance of the U.S. economy. (To see years before 1993, you need to adjust the dates in the "Change Output Options" field.) Even in times that were considered bad—the oil shock of 1973, or the stagflation of the Carter years, or the early 1990s recession (which candidate Bill Clinton somewhat disingenuously labeled the worst economy in 50 years)—payrolls continued, by and large, to rise.

There was only one downturn in payrolls that spanned a president's four-year term. Between 1929 and 1933, the notorious single term in Hooverville, the number of Americans with payroll jobs fell 24 percent, from 31.32 million to 23.69 million. (Shockingly, not until 1940 would the U.S. economy employ as many people as it did at its 1929 peak.)

The seasonally adjusted figures for the past decade should jar the tax-cut supporters who insist marginal tax rate reductions create jobs. Orthodox economic theory holds that raising taxes kills jobs and cutting taxes creates them. But in the 16 months after the passage of the 1993 Clinton budget plan, which raised marginal income tax rates on the highest earners, payrolls rose from 110.96 million to 115.92 million. In other words, the biggest tax increase in American history "created" nearly 5 million jobs in less than a year and a half. In the 22 months since President Bush signed his tax cuts in June 2001, the number of payroll jobs has fallen from 132.11 million to 130.41 million in March 2003. In other words, the biggest tax cut in American history has so far "cost" us 1.7 million jobs and counting. (Bush supporters, with more passion than evidence, insist that job losses would have been worse had the tax cuts not been passed.)

The good news for Bush is that with a base of 130 million jobs, adding 1.4 million in an 18-month period isn't out of the ordinary. In fact, 1.4 million jobs would still be below average: Over the past 84 years, the economy typically adds nearly 2 million jobs every 18 months.

The bad news for Bush is that even if the economy does add 2 million jobs by October 2004, he will still have presided over the only job-losing presidency since Hoover. And as Karl Rove surely knows, that name is never good company for a president seeking re-election. Since 1900, the only incumbent Republican presidents to lose second-term bids have been named Hoover and Bush.

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