John McCain and Job Creation

Last Tuesday I watched a mini-debate on PBS between Jared Bernstein (economic policy expert for Obama) and Nancy Pfotenhauer (economic policy adviser to McCain). Bernstein’s argument was economic fairness—a populist argument, in essence. He said Obama wants to restore balance at a time when the combination of windfall profits, huge subsidies and tax breaks to oil companies occurs while ordinary people are being squeezed economically.

Pfotenhauer argued the following: windfall profits tax increases don’t work, they punish domestic suppliers but not foreign suppliers, tax increases represent the policies of Herbert Hoover (!) and Jimmy Carter and (in case we missed it the first time) the 1970s, they cause higher unemployment (“no country has ever taxed its way out of unemployment”), they put us at a competitive disadvantage (she repeated this twice), they’re “a job-killer” (this was repeated three times), and will lead to a recession. She said McCain wants to lower the corporate tax rate, end earmarks (right), reduce pork-barrel spending & freeze non-defense discretionary spending for a year. For more on the implications of such policies, see Matt Iglesias’ 6/12 post on the subject

I found it particularly interesting that Pfotenhauer tried to tie Obama to the 1960s & 70s (Jimmy Carter in particular) but somehow neglected to mention the Clinton era. Had she done the latter, the falsity of her argument would have been immediately apparent. For taxes were higher during the Clinton administration, yet the economy grew much faster than it has under President Katrina. For one measure of the difference, see Ezra Klein's 6/13 post on job creation which includes a Paul Krugman chart that the GOP wishes it could magically disappear. In fact, the Clinton economy outperformed the Bush economy by a number of important measures (See this chart by the PPI and this one in Business Week, for example). Any way you slice it, there's no empirical basis for Pfotenhauer's/McCain's claim that lower taxes produce more jobs and vice versa.