Anyone But Bush NOTD – 3/31/2004
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By KellyMc - Last updated: Wednesday, March 31, 2004 - Save & Share - Leave a Comment

Today’s reason: jobless recovery.

Despite claims otherwise suggesting that joblessness isn’t an issue, too many Americans who had well-paying silled jobs are working in unskilled positions to pay their bills. Call centers and manufacturers for U.S. companies are increasing their skilled headcounts but few (if any at all) of those jobs are on U.S. soil. Yet, Bush would have us believe the economy is doing great. “Why is the economy recovering but jobs are stil an issue?”:

bq. What exactly did the Bush tax acts do to create this problem? They granted an enormous tax cut to big business in the form of “bonus depreciation.” Under bonus depreciation, the more corporations spend on equipment, the less tax they have to pay on the same economic income. And that’s exactly what they’ve been doing. Business spending on equipment has skyrocketed, corporate tax collections have plummeted and no one’s being hired.

bq. Unfortunately, economists’ ignorance of basic tax law is not limited to the bonus depreciation rules. Recently, the chairman of Bush’s Council of Economic Advisers, Gregory Mankiw, opined that the movement of American jobs to other countries was a good thing. Indeed, back in Econ 101 we learn that free trade and the law of comparative advantage support Mankiw’s views.

bq. But here again, our chief economist appears to be ignorant of basic U.S. tax law. When a U.S. corporation manufactures in the United States, its income is subject to U.S. tax at a nominal rate of 35 percent. If the same corporation moves those jobs to some other country, it can normally structure the deal to reduce its U.S. taxes to zero. That’s right, zero.

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