Tax Increases and the Two Johns

[andyfox]

"If the Democratic policies had been pursued over the last two or three years, the kind of tax increases that both Kerry and Edwards have talked about, we would not have had the kind of job growth that we've had," Cheney said.

What kind of tax increases have Kerry and Edwards talked about?

[ThaSaltCracka]

we would not have had the kind of job growth that we've had
what is Cheney talking about?
Job Growth? How about a decrease in job losses, but an increase in job growth?
The Bush Admin loves to trumpet how much the job market is turning around, however the fact that unemployment is stabalizing does not mean that it is. The reason unemployment has "stabalized" is because many unemployed workers have now become discouraged workers, thus they are not counted as part the work force.

[adios]

Let me see here, the highest marginal tax bracket now is 35% if memory serves. Not sure what Edwards has proposed but Kerry has stated that he wants to increase it to 40%.

[adios]

The unemployment rate in June time frame of 2003 was 6.4%. The last report from the Department of Labor had unemployment at 5.6%. The Department of Labor jobs report for February is coming out on Friday before the markets open (well most of em). Accoding to the Department of Labor in the preceding 12 months 1.4 million jobs have been created in the economy. The household survey show far more. What will be interesting is seeing how the unemployment rate is effected as workers exhaust their unemployment benefits. Congress is in no mood to extend them any more. Sure you're right that PART of the reason for the drop in unemployment is that some people quit looking for work and they shouldn't be counted. Is 1.4 million jobs enough? Hell no it isn't but that doesn't mean Cheney was wrong either.

[ThaSaltCracka]

thank you for pointing out my error. Question though. How many jobs were lost in the preceeding 12 months? I only ask because if 1.4 million jobs were created, does that mean we are finally in the plus column for jobs created against jobs lost?

[adios]

"I only ask because if 1.4 million jobs were created, does that mean we are finally in the plus column for jobs created against jobs lost? "

For the Bush term in office no. For the past 6 months yes although the net number of jobs over the past 6 months is on the positive side it's not enough, not even close. There are 2 employment surveys conducted by the Labor Department, the payroll survey and the household survey. Most people refer to the payroll survey when they talk about jobs, unemployment, etc. Here's the skinny according to adios, take it FWIW. The American work force is going to continue to go through some rough times no matter who's elected. Many manufacturing jobs have been lost and they're not coming back. People need to be re-trained and re-educated. Unfortunately for some that have lost their manufacturing jobs their standard of living will decline because they're probably not re-trainable and re-educatable for the opportunities that are available and will continue to become available. I hope I'm wrong but I don't think I am. US style capitalism can be very cruel. Here's an article about the jobless recovery that you may find interesting. I'm not going to say that Bush isn't vulnerable due to the employment situation because he is.

Jobless Recovery

Jobless Recovery
By Aaron Steelman


Resources
Web Links


--------------------------------------------------------------------------------
As recessions go, the most recent downturn was relatively mild. According to the National Bureau of Economic Research, it lasted just eight months — from March to November 2001 — and during that time real gross domestic product (GDP) declined only modestly before picking up again. Indeed, there are signs that the economy is gaining steam: Preliminary data show that real GDP grew 8.2 percent in the third quarter of 2003. But there remains a dark cloud in this otherwise hopeful picture: the labor market. Employment growth has been unusually weak following the recession, leading some to dub this a “jobless recovery.”

According to the payroll survey conducted by the Bureau of Labor Statistics (BLS), the U.S. economy has lost 2.8 million jobs since the recession began. Roughly 2.4 million of those losses have been in the manufacturing sector. The BLS conducts another employment survey, the household survey, which shows less severe losses. By that measure, 1.3 million jobs were lost during the recession, but more than 600,000 jobs have been added since.

Why the difference? The payroll survey asks companies how many employees they have, while the household survey asks people whether they have jobs. As a result, the household survey captures many single-person proprietorships that are left out of the payroll survey. And in a slow economy this can be particularly important. For instance, people who lose their jobs often find it desirable to work as consultants or independent contractors until more permanent positions become available.

Also, some observers have suggested that the household survey is more effective at accounting for newly created jobs at start-up companies. “In our dynamic economy, old firms die and new ones are born. The [BLS] learns about the deaths quickly, but it takes longer to learn about the births,” argues Allan Meltzer, an economist at Carnegie Mellon University. This, no doubt, was true for past recoveries. But recent revisions to the payroll survey have likely improved its coverage of new businesses.

Overall, economists tend to prefer the payroll survey to the household survey. Its primary advantage lies in its larger sample size. The data in the payroll survey come from about 400,000 businesses, covering roughly a third of total nonfarm employment. In contrast, the household survey is based on data collected from about 60,000 households.

“Whatever the verdict regarding the relative reliability of the two surveys, their differences should not obscure the fact that the U.S. labor market has been weak,” stated Ben Bernanke, a member of the Federal Reserve Board of Governors, in a November 2003 speech.

One factor contributing to recent labor-market weakness is common to almost all recoveries. Businesses are typically hesitant to hire new workers until they are sure the downturn is over because they don’t want to be burdened with excess labor costs should the recovery prove fleeting. It’s not unusual, for instance, to see a few quarters of GDP growth before some employers decide to increase their work force.

But this alone cannot account for the type of employment weakness we have seen recently. Consider a few other possibilities.

First, some have argued that increased benefits costs — especially health insurance costs — are deterring employers from taking on new workers. For instance, benefits costs rose more than 11 percent from September 2001 to September 2003, while wages and salaries grew at just 6 percent.

Second, political uncertainty may be playing a role. The terrorist attacks of Sept. 11, 2001, and the war in Iraq have made some employers hesitant to expand their operations.

Third, structural changes in the economy could be important. In particular, many of the manufacturing jobs that were lost during the recession may be gone for good. Employers saw the recession “not as an event to be weathered but as an opportunity — or even a mandate — to reorganize production permanently, close less efficient facilities, and cull staff,” write economists Erica Groshen and Simon Potter of the Federal Reserve Bank of New York.

Fourth, productivity growth continues to be strong at around 4.5 percent per year, compared to a historical average of roughly 2.5 percent. In many ways, this is a huge boon to the economy. Over time, productivity growth boosts real incomes and leads to more efficient industries. But it also can mean that employers need less labor in the short run.

While there is no single explanation for the jobless recovery, increased productivity is quantitatively “probably the most important” factor, Bernanke concludes

One way to to gauge how the employment picture really is, is to look at federal tax revenues and my understanding is that they have increased from the lows of the recession but are still below the peak level of 2000.

[AceHigh]

You are asking the wrong question. You should be asking what kind of job growth have we had? The answer is we've lost jobs, in record numbers. So it's unlikely that the tax increases have helped job growth.

Got to wonder why Cheney phrased his sentence like that. The economy has shown high rates of growth the last two quarters. If he just would have substituted the word economy for job, he could argue that without the tax cuts the economy would not be growing.

[ThaSaltCracka]

I really think this jobless recovery will be especially damaging to Bush. People wont care if the economy is getting better if they don;t have a job.

[andyfox]

Q: Which of the tax cuts enacted in 2001 would you change, if any?

A: I will roll back the Bush tax cuts for the wealthiest Americans. However, I don't believe that we should be raising taxes on the middle class. Specifically, I want to protect the increases in the child tax credit, the reduced marriage penalty, and the new 10 percent tax bracket that helps people save $350 on their first level of income.

Source: Associated Press policy Q&A, "Taxes" Jan 25, 2004

Kerry wants to touch the Bush tax policy for only people making over $200,000 a year.

[adios]

What I believe Kerry would say if asked these questions if he was being truthful:

Q. Why do you want to raise the highest marginal tax rate?

A. To reduce the budget deficit.

Q. The NTU and the Washing Post have stated that your proposals will increase the budget defecit from between $165 billion to $265 billion given your plan on taxes. In light of this, doesn't reducing the budget deficit involve raising taxes more, cutting spending or a combination of both?

A. Yes

Q. Which choice would you make?

A. A combination of both.

Q. So if you have your way raising taxes won't stop with just raising the highest marginal tax rate?

A. No.

Q. So where would you make spending cuts if you have your way?

A. Defense, Intelligence, and Homeland security.

Q. The amount of the current budget deficit is estimated to be $520 billion but as a percentage of GDP it's not even close to a historical high in fact on that basis the budget deficit it's less than the deficits ran in the Reagan years. Do you agree that viewing the deficit as a percentage of GDP is the proper way to view it?

A. Yes

Q. What are the biggest structural problems with the deficit?

A. Medicare/medicaid and Social Security.

Q. Social Security is running at a surplus now is it not?

A. Yes bet we know that the demographics of the baby boomers will erase this surplus and add a great deal more to federal outlays.

Q. You don't support privatization of Social Security, correct?

A. Correct.

Q. So you would further increase taxes to fund the budget shortfall caused by Social Security?

A. Yes.

Q. Would your plan for health care coverage increase the budget deficit contribution of Medicare/Medicaid?

A. Yes.

Q. So you would raise taxes to cover this budget shortfall as well?

A. Yes.

Q. Federal tax revenues are down since the peak in 2000. We have the Bush tax cuts as one reason. Isn't the biggest contributer by far due to the slowdown in the economy?

A. Yes.

Q. So economic growth will actually help the narrow the budget deficit?

A. Yes.

Q. Doesn't excessive taxation put a damper on economic growth?

A. Yes.