The U.S. Commerce Department reported last week that the gross domestic product (GDP) grew 7.2 percent in the third quarter of 2003. Business investment grew by 11 percent, the highest rate since the dot.com bubble burst after the first quarter of 2000. Although few economists believe that the U.S. economy can maintain growth at such a level, many analysts and pundits believe we have finally entered a period of long-term economic expansion.
There is only one problem with such prognostications: because new jobs aren’t being created, the growth we’re seeing isn’t sustainable. And if the current doldrums continue, those just entering the job market (such as graduating college students) face a long and disheartening search for employment.
Much of the credit for the surge in growth is being given to the Bush Administration’s supposed economic wizardry. Consumer spending rose by 6.6 percent, and President Bush’s regressive tax scheme — known popularly as “the tax cuts,” despite the fact that most Americans only experienced a miniscule decrease in their income taxes when compared to the wealthiest taxpayers — has been credited with infusing the economy with billions in consumer spending dollars, following the most recent personal-income-tax cut that went effective in July.
It may be true that Bush’s taxation policy helped to fuel the present burst — most experts agree that you can usually stimulate short-term growth with a tax cut — but without job creation, it will simply fizzle out. In the first quarter of 2002, the Commerce Department reported a similarly high rate (5.8 percent), but a few months and 600,000 lost jobs later, growth was back down to 1.3 percent. Lower taxes cannot be substituted for real wages.
America is hemorrhaging jobs, and the financial security of millions is at risk. Fully 3 million Americans have become permanently unemployed since Bush took office in 2001. Last year, another 1.7 million Americans dropped below the poverty line, bringing the total to 34.6 million, or one-eighth of the U.S. population. Thirteen million of them are children. Thirty-one million Americans have been classified “food insecure,” meaning that they literally don’t know where or when they’ll get their next meal.
Wisconsin isn’t immune from the national trend, either; between 2000 and 2002, the state’s unemployment rate rose by 2.1 percent. The manufacturing industry has been severely affected, with 54,000 manufacturing jobs lost between 2001 and 2003 (a 9.5 percent decrease). Most of these jobs were concentrated in the Milwaukee-Racine-Kenosha area, one of the state’s major economic engines.
Yet despite the lost jobs, consumer spending by the majority of Americans continues apace. In the absence of expansion in employment or living wages, the U.S. economy is being sustained by debt-financed consumer spending, which accounts for nearly three-fourths of the GDP. Consumer credit and housing-related debt constitute a greater proportion of disposable income than ever before. Americans aren’t feeling more financially secure; they’re just habituated to boom-cycle spending and are driving themselves into debt to maintain it.
It is not surprising that the economy should experience a short recovery after being aided by higher government spending (particularly in the military), meager tax cuts and one-time-only giveaways in the form of tax rebates. However, this is not a sustainable form of recovery, unless Bush proposes to lock us into a debilitating cycle of constantly increasing debt.
Under Bush, America has had yet to see even two consecutive quarters of growth comparable to that reported for third quarter 2003. The only real growth we’ve seen in Bush’s tenure has been in deficits, unemployment and the rising costs of the president’s overseas projects.
Why is it that Bush and his allies in Congress are willing to siphon billions upon billions of taxpayer dollars into one of the most oil-rich nations in the world, and yet are unwilling to engage in any serious economic “reconstruction” in their own backyard? Why is it that Bush continues to call for tax cuts that are skewed toward America’s wealthiest at a time when the income disparity between rich and poor has never been higher, and the ever-shrinking middle class is set to become an economic minority?
Tax cuts are not a guaranteed method of ensuring continuous growth — remember that Ronald Reagan was forced to roll back some of his own cuts, and the elder Bush had to raise taxes even further when faced with his own economic crisis and Middle Eastern adventure.
Lower taxes means reduced government services, many of which are essential to maintaining the safety net that catches unemployed Americans and helps them to find new jobs. But those jobs don’t even exist yet, and many economists are predicting that growth will drop back to about 4 percent straight through 2004, which may not be sufficient to generate new jobs.
That doesn’t bode well for Americans in general and graduating college students in particular.
As students we have to demand a more intelligent economic policy from our leaders at the state and national levels, because pretty soon, it’ll be our livelihoods on the line as well.
Rob Hunter ([email protected]) is a junior majoring in philosophy and political science.