You know the stuff you’re hearing is bad when ordinary folks like me (who aren’t economists) can read things like the 2004 Economic Report of the President, and daily Administration press briefings, and smell a rat. The blogsphere is just humming this week with discussion of Bush’s “fuzzy numbers,” which is great since the economy is the issue upon which Kerry can win in November.
Scott McClellan (who must have the worst job in the Administration, having to say this stuff every day) keeps saying that the recession existed before Bush took office, even though that’s clearly wrong. It’s not really all that important, of course, because it’s not really clear what we could have done to prevent the recession, but it is interesting that Bush is trying to take credit for ending it. For which, again, there’s no real evidence, since the Administration keeps telling us that the 2001 tax cuts ended the recession. This despite the fact that no evidence has ever been found that tax cuts directly stimulate corporate growth. So naturally, being the curious person I am, I looked at the relevant section of the 2004 ERP, and the argument seems to boil down to: “giving people bigger tax refunds will encourage them to spend more” and “giving businesses a break on depreciation.” Apparently, the tax cuts also “increased incentives for business investment” by lowering tax rates on “personal capital income.” (The latter is apparently code for reducing capital gains and dividend taxes). In other words, straightforward 1980’s “trickle down” or “supply-side” economics. The tax cuts have absolutely no direct effect on corporate growth, and the grand experiment of the 1980’s pretty much demonstrated that supply-side economics didn’t necessarily yield job or economic growth so much as it yielded higher investment income for the top 1%.
Don’t even get me started on Lesson 5 in the ERP: “Strong productivity growth raises standards of living but means that much faster economic growth is needed to raise employment.” After showing two graphs that demonstrate (a) productivity has risen faster as we came out of this recession than the average of prior recessions, and (b) non-farm employment has strongly lagged the average of prior recessions, the lesson says nothing about the effects of outsourcing and job migration overseas. Nothing.
