Americans should pause a moment from filing their tax returns this week and reflect on how much the 2003 tax cuts have reduced their taxes and sparked economic growth. The benefits of the Bush tax cuts are apparent in their tax returns, and millions of Americans owe their current jobs in part to the pro-growth tax policy changes of 2003.
The economic benefits of the tax cuts continue to flow. Today, the Department of Labor reported that the economy created 211,000 jobs in March, with 187,000 of those in the private sector. The unemployment rate fell to 4.7 percent, down from 6.3 percent in June 2003 when President Bush signed the 2003 tax cut legislation. Since then, the U.S. economy has added over 5 million new jobs. This is no coincidence; the 2003 tax cuts reduced the cost of business expansion, fueling economic growth and job creation.
March job growth exceeded the consensus forecast of 190,000 new jobs. Employment gains occurred throughout the economy, with the education, health, retail, construction, and leisure sectors all posting strong numbers. The largest increase in employment came from professional and business services, which added 52,000 new jobs. These employment numbers bring the net number of new jobs created over the past year to 2.1 million.
This job growth reduced the unemployment rate to 4.7 percent, a 4-and-a-half-year low. With the unemployment rate falling, those who are out of work are able to find jobs more quickly. The median length of time it took unemployed workers to get jobs dropped from 8.9 weeks to 8.5 weeks. The median duration of unemployment also declined over the last month, from 17.6 weeks to 16.9 weeks-two weeks less than one year ago.
The growing economy is also creating jobs for the long-term unemployed. The number of long-term unemployed workers-those who have been unemployed for more than 26 weeks-fell by 68,000 in March. That is a 5 percent decrease from February and a 21 percent drop from one year ago. As well, the proportion of unemployed workers suffering long-term unemployment fell to 18.4 percent in March, down from 19.0 percent in February. At the same time, more Americans are feeling upbeat about the economy and entering the workforce. The number of discouraged workers-those who have stopped looking for jobs because they do not believe they can find work-has dropped six percent over the last year.
Keep the Economy Strong
Congress should make permanent the 2003 tax cuts to maintain the strong economy-wide growth evidenced by today's employment numbers. Lower tax rates on capital gains and dividends reduced the cost of capital and spurred business investment during the last three years. Reducing the tax code's bias against income that is saved and invested has helped to fuel the current economic expansion. Business investment has grown in every quarter since the 2003 tax cuts. But these lower rates are set to expire in 2008. If that is allowed to happen, business expansion and new business startups could slow, leading to slower job growth.
When Congress returns from its April recess, one of its top priorities should be extending these tax cuts. Economic growth is strong today, and Congress should do nothing to threaten that. Extending these two provisions will ensure that future employment reports continue to bring good news.
Rea S. Hederman, Jr., is Senior Policy Analyst, and James Sherk is Policy Analyst, in the Center for Data Analysis at The Heritage Foundation.