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ELEVEN: Bush and Beyond: On Solving and Not Solving Poverty
- The University of North Carolina Press
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chapter eleven bush and beyond On Solving and Not Solving Poverty Government policy in the early 2000s was a good example of how not to cure poverty and unemployment. Events of those years showed that private markets and a government policy favoring the a∆uent failed the people . It does not have to be that way. Other rich nations have social programs that are more generous and that help parents work if they want to. The problem is not that Americans don’t want to work at something useful and or that they don’t want stable social relationships; it is that the economy cannot supply the jobs people need and that government policy does too little to help those who combine family and jobs, those who stay home, and those who want to work and are still poor. Bush’s Jobless Recovery The most important economic event of the George W. Bush presidency was a recession, the first in a decade. The Bush administration did not cause the recession, but it did little to counteract it; the result was few new jobs and more poverty. The recession began in March 2001, six months before the terrorist attacks on the World Trade Center. The background causes included, first, e√orts by Alan Greenspan, who, fearing tight labor markets and rising wages and prices, escalated interest rates to slow economic growth, and, second , the deflation of the 1990s bubble of overbuilding in telecommunications and commercial structures. The downturn was the normal outcome of political and economic decision making that fuels booms and busts. However, the harsh e√ects of the recession were not normal or necessary.∞ The recession meant that total output and jobs declined. Output growth 232 / 1993–present soon resumed, but job growth did not. The peak unemployment rate of 6.3% in June 2003 was not particularly high, but the statistic was misleading. An unusually large number of people gave up the search for work and were not counted as unemployed. Real unemployment was probably 10%. Manufacturing lost 3 million jobs, many of them forever. A larger fraction of new jobs was going to older Americans and to immigrants, which was fine for them but hard on young people and the native-born middle-aged jobless; black workers were especially hard hit by the recession.≤ Total job growth in Bush’s first term was zero, the worst record since Herbert Hoover. Normally a recession slides into rapid job creation, and that is necessary not only to wipe out recession losses but also to add millions of new jobs for an expanding labor force. As the country came out of an earlier recession, 8 million jobs were added in Clinton’s first term. Under Bush, instead of adding the 5 million jobs necessary to keep up with population growth, there was virtually no net job growth.≥ It is not clear why this recovery took so long to begin creating jobs. In part the explanation has to do with the corporate gospel of lean-and-mean employment policy. Big layo√s are now common even in prosperous times. Managers squeeze more out of their existing workforces, and Wall Street likes the e√ect on the bottom line.∂ For the citizenry as a whole, however, this is a vicious circle. Job loss limits income growth, and that limits spending and economic recovery—which in turn limits job growth. Over time employment recovers, but because of a second factor, it limped along this time. As in the early 90s, in 2004 Greenspan was worried about inflation, and he began to raise interest rates in order to chill economic growth. This was long before jobs had returned to their 2000 level. A third exacerbating factor was that the Bush administration did little to stimulate job creation. Policy was warped by Republican-led tax cuts for business and the rich. Rates were cut on dividends and inheritances, neither of which had much to do with job stimulation. Tax cuts rewarded investment in machinery rather than people. Instead of tax cuts for the least needy, governmentshouldhavespentonroads ,parks,andschools;assistedstateswithtroubled budgets;expandedandenrichedpreschoolprograms;improvedunemployment benefits; and enlarged tax cuts and credits for middle- and low-income consumers , for they spend more of their refunds in job-creating ways. But fiscal policy under President Bush and his fellow Republicans favored the very rich. The Congressional Budget O≈ce estimated that one-third of the tax cuts went to the top 1% of income holders; these...