It's not the Economy...Stupid

The Conservative Online ^ | 12/3/2004 | John Risvold

[vmoney]

The Election season is in our rear view mirror and the bustle over America's economy is still at its height. I recently heard one of my liberal friends scoff when I commented that the economy was doing well. "Bush has driven up inflation," she said. "All he does is give tax cuts to the rich, Bush is an idiot!" Yes, usual liberal jargon, resorting to name calling when there is no evidence to back their warrentless claims. I decided I should endeavor to take a closer look at the economy, and see just what is troubling my liberal friend.

When we look to the economy we see historic lows: lower than average unemployment, lower than average interest rates, and the lowest inflation rate since 1960. We also note that, while there is a budget deficit, this deficit is actually has intrinsic value in improving the economy.

With consumer confidence at a two year high, and unemployment at its lowest since the Clinton Era, the economy looks great. The critics still make the claim that Bush has sent is spiraling downward into the worst economy since the Great Depression

Bush's tax policy, while highly criticized, they are not atypical. Following the footsteps of Ronald Reagan and George Bush Sr., Bush cut taxes for all Americans, after Clinton put America through the largest tax hike in history. How do the tax cuts work though, are they really only for the rich? Absolutely not. Here's how it works. The top 1% of tax payers-- the "rich"-- pay over 45% of all collected income tax, so when they receive their tax cuts, they end up paying less per capita then the bottom 10% of tax payers. While the tax cut rate is the same, those who make more will save more. Hardly bias, in fact it's one of the most equal and just programs run by the American Government.

But what about that "dwindling economy" you ask? James J. Cramer puts it all in perspective:

To listen to the critics of President Bush's economic policies, you'd think that the nation's on the brink of economic catastrophe. Not a single Democrat is willing to accept, even for a moment, that the president might be on the right economic track with large deficit spending and lower income and investment taxes. I'm a Democrat, one who helped raise hundreds of thousands of dollars for Democratic candidates nationally in the last two decades. I voted for Al Gore. But I'm also an objective financial commentator. With stocks at two-year highs and interest rates, as represented by the 10-year treasury, hovering near all-time lows, I can't help reach a different conclusion from Mr. Bush's critics: The economic policies pursued by this president have been a stunning empirical success. If you'd told me two years ago, in the wake of 9/11 and the collapse of the stock bubble, that we could have 8% GDP growth, I'd have laughed. If you'd told me we could have 8% GDP growth and long-term rates at 4%, I'd have said that such a combination was impossibly Pollyannaish, a proverbial smooth concoction of oil and water. And if you'd told me that we could have a robust stock market, with a broad array of 52-week highs in dozens of sectors, I'd have told you that you were dreaming. Not after the battering this country's equities had taken. Yet that's exactly what we have right now. Of course, we don't yet have job growth. However, economic recoveries don't traditionally produce job growth until one year after interest rates bottom. That means March of 2004. From my perch, discussing hiring plans with dozens of companies in industries as varied as smoke stackers, financials and tech, we're right on schedule for robust job creation.

A close friend told me earlier this week that he, "voted for Kerry because he hates deficits." To this I responded, "but they honestly don't cause harm to the economy." He looked at me perplexed, and began to argue. How could deficit spending not hurt our country?

The idea of positive deficit spending is simple. The concept of a balanced budget is contested by the ideas of Keynesian Economics. Keynesian economics is an economic model that predicts in times of low demand and high unemployment a deficit will not cost anything. Instead, it claims a deficit would allow more people to work, increasing productivity. A deficit does this because it is invested into the economy by government. Keynesian Economics, in practice, has helped grow our economy for the past year. Government spending on military has increased 5 fold, and the need for equipment has also increased, in turn creating jobs. Another example is clearly if the government spends deficit money on new roads or bridges, the trucking industry will benefit and more jobs will be created.

We have seen the effect of Keynesian economics, as well as the effects of the Presidents economic policies. As Cramer puts it, "So, critics keep baying against the policies. Keep calling for higher taxes or fiscal responsibility. But as someone who's stuck looking at the daily scorecard as represented by the impossible-to-manipulate markets themselves, the judgment's already in: The Bush economic policies have worked beyond what anyone could have hoped for. Or, to put it in parlance my party might understand, this time it's not the economy, stupid.

[vmoney]

for more visit http://www.theconservativeonline.com
Thanks,
John

[lainde]

Thanks for the link and an informative article!

[Brian328i]

Great article, the man states the facts very well.

[RWR8189]

Conservatives citing Keynes to justify the deficit.

Oh the irony...

[ecomcon]

My thought exactly. Since when are conservatives Keynesian?