Skip to comments.Tax Cutter's Boom
Posted on 11/02/2003 7:46:37 AM PST by TennTuxedo
Tax Cutter's Boom INVESTOR'S BUSINESS DAILY
Economy: The economy's sizzling 7.2% growth pace in the third quarter shows pretty conclusively what some hate to believe: President Bush's tax cuts worked.
You can count on a few things in this world. The swallows will return to Capistrano. Salmon will spawn. Canada's geese will fly south for the winter. And tax cuts will create growth.
Bush inherited a mess when he entered office in 2001 an economy already suffering from shrinking job growth, a collapse in business investment, and one of the worst stock market crashes in history. The economy was already contracting. It was a recession not of Bush's doing.
But Bush did the right thing, the smart thing: He cut taxes.
Not once. Not twice. But three times.
We heard the screams and complaints. A giveaway to the rich, some said. Raise taxes if you want to grow, still others moaned.
In one of the more bizarre twists of logic, some even claimed Bush's tax cuts caused the recession a metaphysical impossibility, since the recession began before taxes were cut.
They were wrong all of them. This growth is no fluke. This is the way tax cuts are supposed to work. And they do so reliably, with a lag of anywhere from one year to three. Yes, tax cuts work.
They did in the 1920s, when Calvin Coolidge cut taxes to shake a slumbering economy awake; they did in the 1960s, after President Kennedy cut rates and lit a fuse under a rocket; and they worked to stunning effect in the early 1980s, when President Reagan jolted the moribund economy back to life with across-the-board cuts.
So the current growth should come as no surprise. Even the stock market, which started rallying last March, was telling us as it usually does about a half-year ahead of time that growth was coming.
Looking at the GDP numbers for the third quarter, it's hard to see any real negatives. Personal consumption roared 6.6%. Business investment, emerging from a three-year slump, surged 11.1%. Foreign trade also added to growth. Inflation stayed low.
Even some of the "bad" news in the report was in fact good. Take the $35.8 billion drop in inventories. With demand now taking off and inventories at near-record lows, it's only a matter of time before businesses boost output and hire more workers to restock.
That's the last remaining point of vulnerability for Bush: jobs. September's 57,000 gain in payrolls was a welcome turnaround, but some 3 million jobs have still been lost during Bush's presidency.
And whether he deserves the blame, he gets it.
Democrats are already weighing in. Vermont's Howard Dean said Bush has "the worst economic record since the great Depression." Massachusetts presidential hopeful John Kerry offered this advice: "Roll back the high-end tax cuts of the Bush administration."
When jobs begin to grow, as they inevitably will, what will the critics be left with? They'll wring their hands over the deficit, and move on to something else as that too begins to shrink as it will.
Those on the American left might do well to listen to Germany's socialist Chancellor Gerhard Schroeder, hardly a friend of Bush, who said Friday: "We know from America . . . (tax cuts) are necessary and what a positive impact that can have."
You see, he wants Germany to have what America has: its own Bush boom
If that's the case then we should cut them even more.
The tax cuts will provide a temporary boom but will inevitably get swallowed up in pork-barrel spending.
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