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Patricia Johnson: Economic Failures 101

Economic Failures 101

By Patricia Johnson defines Accounting as “the systematic recording, reporting, and analysis of financial transactions of a business”, and Economics as “the study of how the forces of supply and demand allocate scarce resources. Subdivided into microeconomics, which examines the behavior of firms, consumers and the role of government; and macroeconomics, which looks at inflation, unemployment, industrial production, and the role of government.”

Is the problem with our economy simply the failure of those in charge to realize economic goals cannot be reached without taking into consideration the impact accounting has on the bottom line?

When National Economic Council Director, Lawrence Lindsey, advised the war in Iraq could cost between $100-200 billion he was fired on December 6, 2002, along with Paul O’Neill, Secretary of the Treasury. The total bill to date for the Iraq war is $151 billion (click here), and Congress has promised another supplemental appropriation after the election. This war is far from being over and Lawrence Lindsey’s estimate of $100 – 200 billion, which was considered excessive -- may, in fact, turn out to be too low.

On July 30, 2004 the Office of Management and Budget released the Mid-Session Review (click here) of the FY 2005 budget which indicated revised estimates for both receipts and outlays.

The revised estimated receipts for 2004 are 1,874.4 trillion, or a decrease of 78.5 billion over 2003 receipts with revised outlays of 2,319.1 bringing the estimated deficit for 2004 to 444.7 billion.

The mid-session review makes note of the fact that the $445 projected deficit for FY 2004 is actually a change of $832 billion from the $387 billion surplus projected by this administration when it took office in 2001. In case anyone is keeping track -- $832 billion is not too far away from a trillion.

On June 7, 2001 and May 28, 2003, respectively, President Bush signed the two tax cut bills – the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.

The intent of both bills was to provide tax relief for the sole purpose of economic growth and job creation. Unfortunately, jobs simply are not being created in this country.

On an annual basis, the U.S. has lost 3.1 million jobs during the first three years of the administration of George W. Bush The number of jobs created in any given month is virtually meaningless unless it is over and above the number of new individuals entering the labor force.

From the period of January 2001 through December 2003 there have been 3,927,000 individuals enter the civilian labor force, while there have only been 845,000 jobs created in this same period, or a loss of 3.1 million jobs on an annual basis for the three year period, as can be determined by the following tables from the Department of Labor, Bureau of Labor Statistics.

Table – Department of Labor, Bureau of Labor Statistics.

Table – Department of Labor, Bureau of Labor Statistics.

A quick glance at the number of unemployed will confirm that 3,082,000 jobs have been lost in the past three-years.

Table – Department of Labor – Bureau of Labor Statistics

Click for big version

The purpose of the two tax cuts was to boost the economy through consumer spending while promoting investment leading to economic growth and job creation.

That didn’t happen.

What did happen is a major decrease in IRS collections over this three year period as follows:

*2002 includes revised totals.
Detail may not add to totals due to rounding.
Source: IRS Data Book, FY 2003, Publication 55b.

Click for big version

When asked about the dismal 32,000 jobs created in July, an August 7, 2004 Washington Post article (click here) quotes N. Gregory Mankiw, Chairman of the White House Council of Economic Advisers, as saying record oil prices, terrorism fears and a lingering lack of business confidence have conspired to foil the administration's job forecast.

This administration used the recession, collapse of the stock market, 911 terrorist attacks and long standing corporate accounting scandals as well as the war on terror, as reasons for wanting the tax cuts and is now using many of the same reasons as excuses why the tax cuts aren’t working.

Time is running out for excuses. Jobs must be created in this country and that is not going to happen with this administration in office.

Are you satisfied with your tax dollars paying for soccer fields in Iraq, while your children are playing in potholes in America?

Are you satisfied with this administration putting your children further in debt with each year that passes with higher and higher deficits?

Or, are you ready for a change?


The ‘real’ costs of the Iraq War – United Press International

OMB Mid-Session Review

Stalled economy turns up pressure – Washington Post

Department of Labor, Bureau of Labor Statistics Charts

IRS Collections,,id=97168,00.html

© 2004 Patricia Johnson

Patricia Johnson is a freelance writer and CEO of Articles and Answers. Visit us online at

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