On June 7, 2001, George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001, which enacted huge tax cuts for the very wealthy into law.
It's been eleven years, and those tax cuts are scheduled to expire at the end of this year. So it's fair to ask: how have those tax cuts for the rich worked out? Did those "job creators" take that tax money and create jobs?
According to BLS statistics:
In the 136 months since the Bush tax cuts, our nation created 1.325 million jobs.
In the 136 months before the Bush tax cuts, our nation created 23.028 million jobs.
So we created seventeen times more jobs without those tax cuts than with them.
That's not bad luck. That's bad economics. Follow below the arabesque to find out why.
I have never yet met a small businessman who created a job because he got a $400 tax break. The real world doesn't work that way.
I mean, think about it. Why do stores hire around Christmastime? (Hint: it's not because taxes are lower in December.) Businesses hire when demand for their goods and services increases, and they lay off when demand decreases. It's that simple.
Demand is everything when it comes to job creation. There is no second place.
And demand is spending. If I have a dollar and I spend it with you in your business, that's demand for you. Then you take that dollar and spend it with her in her business, that's demand for her. She takes that dollar and spends it with the next guy, and so on.
That virtuous circle of spending and demand continues until somebody decides to save that dollar instead of spending it. At that point the virtuous circle is broken, demand ends, and that dollar is locked up.
So what happens when we tax the middle class? We pay for that tax by reducing our spending. That's bad for the economy, because spending drives demand, and demand creates jobs.
But when we tax the rich, they pay for that tax by reducing their savings. And that's the key. That's why taxing the rich is good for the economy. We take money that would have been locked up in some account somewhere, and we claw that back into the spending half of the economy. That spending creates demand, and demand creates jobs.
This is why Democrats want to tax the rich. It's not class warfare. It's not social engineering. It's good economics that will get this nation moving forward again.
Democrats were skeptical of "supply side" economics from the start (and so were a lot of Republicans: G.H.W. Bush called it "voodoo economics".) We were right: supply side economics is bunk. Demand is everything. We can stimulate demand, and jobs, by taxing the rich at a more appropriate level.
Personal Note
I'm running for the legislature in Minnesota. It's a tough, red district, so I need all the help I can get. If you can contribute, please visit my website at www.keithpickering.com. Thanks!