No Ominous Sign (A Defense of the Bush Tax Cut Policy)

The George Washington University Hatchet ^ | January 29, 2004 | Gary J. Livacari

[GaryL]

Published: Thursday, January 29, 2004 Apparently GW Hatchet contributor Paul Kendrick missed his talking points from the Democratic National Committee, for he is one of the few remaining liberals who still has enough political nerve to take issue with the state of the American economy. Economic growth, soaring investor and consumer confidence and home ownership rates, and more than 500,000 jobs recovered in the third quarter alone - most of which were the direct result of the Bush tax cuts - are not convincing enough evidence to silence his reflexive repulsion to Bush's economic policies. In his recent column, "Responsibility over expediency," (Jan. 19, p. 5) Kendrick implicitly recycles such tired Democratic myths regarding conservative economics as "tax cuts for the rich" and "tax cuts create massive deficits." Such slogans are not even remotely rooted in any kind of sound economic theory. In fact, these are nothing more then shallow, political clichés - the attack tools of a Democratic Party that cares more about TV sound bites and securing political power than real economic progress.

Still, as Kendrick correctly states, it is important to remember that if tax cuts are not accompanied by fiscal discipline, deficits can result. A perfect example is the Reagan tax cuts, which created unprecedented prosperity, economic growth and an exponential increase in government revenues (from $312 billion in 1981 to $346 billion in 1985). But deficits also occurred - the results of a 25 percent increase in spending by the majority congressional Democrats, who refused to accept Reagan's balanced budget plans. But the deficits were not caused by the tax cuts, as Democrat revisionists would have us believe. Reagan's cuts actually increased revenues. Again, I agree with Kendrick that fiscal responsibility is a crucial component of a sound economic policy and that President Bush's fiscal record is disappointing. However, Kendrick overlooks a more important, subtler point: tax cuts are not fiscally irresponsible; rather, bloated, uncontrollable government spending is.

Furthermore, I strongly disagree with the idea that Bill Clinton was some champion of fiscal responsibility. "Slick Willy" never saw a domestic spending program he didn't like. He begrudgingly accepted a Republican-sponsored balanced budget initiative, and only under the most extreme political pressures after twice vetoing it. Under the direction of his wife, he attempted to take over one-fourth of the American economy with a universal health care plan. This is probably the only "courageous" thing Clinton ever did in regard to fiscal policy, considering his own party even rejected this attempt at socialized medicine.

Despite budget deficits, which are still well within post-World War II norms, Bush's tax cuts have worked remarkably well. Kendrick claims that under President Clinton we witnessed "the largest period of economic expansion ever recorded." But under President Bush's direction we have reached a growth rate of 8.2 percent, the highest since the Reagan administration. Most economists concur that, as Bush's top economic adviser stated, "statistical analysis suggests that employment lags behind growth in real (gross domestic product) by about three to six months ... The rapid real GDP growth we experienced in the third quarter should be a sign of employment gains looking ahead." Is this Kendrick's "ominous sign"? No, it's more like a definitive, positive economic indicator that will bring about sustained growth and job accumulation. Unlike Clinton's economic legacy, which, by its own admission, handed off a recession to the incoming Bush administration, this future prosperity will "reveal what will be the true legacy of the Bush tax cut."

"An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget - just as it will never produce enough jobs or profits." According to Kendrick, these should be the words of another right wing extremist who only cares about helping the rich at the expense of the poor. In reality, they are the words of John F. Kennedy. I ask you Mr. Kendrick, was President Kennedy also some greedy, "drunken sailor," right-wing radical? You can have partisans like Robert Rubin and Paul O'Neill. The American people will take the word of President Kennedy and accept an economic policy that worked before and is working again.

-The writer, a freshman majoring in political science, is a Hatchet columnist.

[lelio]

home ownership rates

When you pump money into something, in this case by lowering the interest rate to all time lows, why does it come as a surprise that spending will go up?