Four economic policy advisors to the Romney presidential campaign—Glenn Hubbard, Gregory Mankiw, John Taylor, and Kevin Hassett—predicted yesterday that former Massachusetts Gov. Mitt Romney’s economic policy platform would create 200,000 to 300,000 jobs per month, culminating in 12 million new American jobs by the end of a would-be President Romney’s first term. In fact, a reasonable assessment of Gov. Romney’s economic policy platform indicates it would likely cost the U.S. economy at least 360,000 jobs in 2013 alone.
Hubbard and his co-authors would like you to believe their prognostications rather than the years of historical experience that prove their predictions wildly wrong and their favored policies incapable of delivering job growth on the scale of that experienced under the Obama administration. The central premise of Gov. Romney’s economic plan is nearly identical to that put into practice by President George W. Bush—cutting taxes aimed largely at the wealthy and big corporations in order to spur job creation and economic growth. Yet the opposite happened. We experienced a “jobless recovery” and the weakest economic expansion in post-World War II U.S. history under our last president—followed by the Great Recession of 2007–2009.
Back in 2001, as chairman of President Bush’s Council of Economic Advisers, Hubbard predicted that tax cuts slanted disproportionately to Americans in the topmost tier of income and wealth distribution would "quickly deliver a boost to move the economy back toward its long-run growth path," starting with adding 300,000 more jobs and half a percentage point to the 2002 growth rate.
Then in early 2003, as President Bush proposed another round of tax cuts, Hubbard predicted these would add another 1.4 million jobs to the U.S. economy, over and above the 3.1 million jobs the economy would create on its own from natural economic growth in that time. Mankiw—who took over for Hubbard as chairman of the Council of Economic Advisers later in 2003—co-signed a letter with Hassett (then-economist at the American Enterprise Institute) to President Bush “enthusiastically” endorsing more tax cuts because “it is fiscally responsible and it will create more employment [and] economic growth.”
Unfortunately for American workers, these rosy predictions failed to pan out. (see Figure 1) In fact, total employment in the U.S. economy created only 2.4 million new jobs by the end of 2004, or less than half of what Hubbard predicted. By 2007 the economy was running nearly 8 million jobs short of what Hubbard predicted. He and his colleagues were off by a long shot.
Now, they and colleague John Taylor want us to believe 12 million new jobs will result from the same policies. Not only do we have evidence that the Romney-Bush approach to economic policy doesn’t work, but there is enough evidence to conclude that President Obama’s approach works better. Rather than relying largely on cutting taxes for America’s wealthiest individuals and corporations, President Obama focused economic policy on strengthening the middle class and building a competitive economy rooted in job creation. He did this through investments in education and transportation and energy infrastructure that pay economic growth dividends for years to come.
Let’s compare economic performance under these two different approaches to economic policy in greater detail. Both Presidents George W. Bush and Barack Obama inherited economic downturns. At the tail end of the 1990s Internet boom, the U.S. economy slipped into a mild recession for nine months in 2001 shortly after President Bush came to office. Six years later, the U.S. economy fell into deep recession in late 2007 and then suffered a severe financial panic in September 2008, as then-Sen. Obama of Illinois was still campaigning for office. By the time he took the presidential oath of office, the economy was shedding more than 800,000 jobs per month.
If tax cuts and deregulation are such efficacious job-creating policies, we would have seen more flourishing private-sector job growth under President Bush’s policies in the 2000s than under President Obama’s in the years afterward. In fact, the record shows just the opposite conclusion: Private-sector job growth under President Obama far outpaces growth under President Bush. (see Figure 2) This is true whether we measure from the start of each president’s economic expansion (Figure 2a) or from the start of their terms as president (Figure 2b).
From the start of economic expansion in June 2009, the U.S. economy added nearly 3.4 million new private-sector jobs measured from the start of the Obama presidency. During that time the U.S. economy reversed the sharp contraction and added a net new 330,000 jobs by July 2012. By comparison, under economic policies that Hubbard, Mankiw, and Hassett predicted would lead to accelerating job growth, the private sector added just 1 million new jobs in the first 38 months of the Bush economic expansion beginning in November 2001. Or, measuring from the start of President Bush’s first term, the economy lost more than 1 million private-sector jobs under his policies.
President Bush presided over the weakest period of economic expansion in the post-World War II U.S. economy thanks to insights from the same economic policy advisors now touting an economic miracle under Gov. Romney’s plan. Indeed, these advisors set the stage for the economic crisis inherited by the Obama administration and from which Americans are striving to recover today.
To be sure, recent economic performance is not setting any gold medal world records, though we are faring far better than we did under the policies to which Gov. Romney would like to return the U.S. economy. There is no contest between the path offered by President Obama and the repeat of history promised by Gov. Romney.
Adam S. Hersh is an Economist and Sarah Ayres is a Research Associate at the Center for American Progress Action Fund.