War, jobs and taxes: American lessons for Australia

After returning from the United States and navigating airport security I joked that it was no wonder unemployment was low given the number of Homeland Security staff. Turns out I was right, this graph from the Economic Policy Institute (via Nathan Newman) compares overall job growth under Bush with jobs generated by public expenditure, all the job growth is due to the public sector, despite large regressive tax cuts that were supposed to generate private sector growth. Perhaps we should thank Osama for saving American capitalism! The US experience is directly relevant to Australia where calls for tax reduction are justified on the grounds that there is a budget surplus (as under Clinton before Bush) and it is argued that tax reductions will have dramatic supply-side impacts (workforce participation is the popular one) that makes concerns about budgetary balance irrelevant.