Reality Check: Jobs, George & John

CBSNews.com's Jarrett Murphy separates the facts from the spin on the nation's employment picture.

Opening his reelection campaign last week, President Bush said, "The economy is getting better."

Simply put, events (i.e., the greatest economic catastrophe in U.S. history) did not reward Hoover's optimism. Neither did voters.

Mr. Bush's fate may hinge on whether the numbers back up his more cautious optimism. But it also will depend on who, if anyone, voters blame or credit for the economy's performance.

The Numbers
Friday's report that the economy created a mere 21,000 jobs last month was bad news for the president.

Even the recent good news has been modest. The unemployment rate has dropped, but partly because fewer people are in the labor force. Few businesses tell surveys they are planning layoffs, but not many more foresee hiring. The Federal Reserve finds employment is growing, but slowly.

More troubling for the president are numbers spanning his entire time in office. They're what Democrats harp on — and sometimes exaggerate — on the campaign trail, often saying that around 3 million jobs have disappeared under Mr. Bush.

In fact, during Mr. Bush's first three years in office, the economy lost about 2.3 million jobs, according to one survey by the Bureau of Labor Statistics. By comparison, the economy gained about 8.5 million jobs in President Clinton's first three years in office.

The numbers look even worse on closer inspection. Of the 8.3 million people who were unemployed this January, 1.9 million had been out of work at least 27 weeks, almost triple the number when Mr. Bush entered office.

If you add up the officially unemployed, part-timers, folks who left the labor force and those who stopped looking for work, some 15 million people who say they want full-time jobs lack them. That figure is up 38 percent since Mr. Bush became president.

The president and his aides do not boast that he has defeated unemployment. Instead, White House spokesman Scott McClellan has said Mr. Bush "is not satisfied … because there are people still out there looking for work."

Mr. Bush has said he is encouraged by recent job creation, but his advisers backed away from a projection in a recent White House report that 2.6 million jobs would be created this year. At February's pace of 21,000 jobs a month, it would take more than ten years to create 2.6 million jobs.

"There's more to do," Mr. Bush said last week.

The Plans
The president's philosophy, which he laid out last week, is that "the role of government is not to manage the economy, the role of government is to create an environment in which entrepreneurs are willing to create risk and create new jobs."

That's a standard "supply-side" argument: Make it easier for business people to make money and they will invest, create jobs and generate growth.

The president's economic plan reflects that outlook. It calls for streamlining federal regulations, reducing health care and energy costs, promoting exports via free trade deals and discouraging "damaging junk lawsuits." The heart of the plan is extending tax cuts or credits that were passed in 2001 and 2003, but are due to be phased out in coming years. Some of those taxes, like the estate tax, mainly effect rich people.

Kerry, the president's likely Democratic opponent, embraces a somewhat more "demand-side" approach, in which workers spend more money so businesses will hire folks to make more products for people to buy.

Kerry wants to extend the Bush tax cuts for middle-class families and create new tax credits for health care and college tuition. He says he would offer a tax break to manufacturers who create American jobs and to industries that upgrade, and enforce trade laws to protect U.S. workers. Kerry also proposes a short-term, $50 billion fund to offset state government budget cuts.

What Works?
Economists have long been divided over whether demand-side or supply-side policies — if either — work. Some feel only monetary policy, which the Federal Reserve conducts by changing the interest rate, is really effective. Others think both fiscal policy and monetary policy are useless, and that the economy basically fixes itself.

That means there's disagreement over whether, when the jobs numbers come in between now and November, Mr. Bush will deserve credit, blame or neither.

All sides agree, however, that whether tax cuts for investors, government spending, lower interests rates or the economy's own internal power is responsible for generating jobs, the changes take time.

And timing might be the key.

Eventually, inevitably, the economy will generate new jobs. If voters conclude that federal policy does affect job creation, whether or not Mr. Bush joins the unemployed could depend on just when those new jobs decide to punch in.

By Jarrett Murphy