Tax cuts are beneficial

In his "State of the Economy" speech, President Bush expressed justifiable pride in his economic accomplishments. Economist Larry Kudlow keeps calling it "the greatest story never told." And indeed it is, says Investor's Business Daily (IBD).

"Across our nation," Bush said, "small businesses and entrepreneurs are creating millions of new jobs. Retail sales are up, consumer spending is strong, exports of goods and services have jumped by nearly 35 per cent. The Dow (industrial average) has set records 26 times in the past four months. Productivity is strong, and that's translating into higher wages."

Since President Bush's tax cuts took effect in mid-2003:

Real gross domestic product (GDP) is up to $1.33 trillion, or 12.6 per cent.

Existing businesses have hired 5.9 million workers (not counting the millions of jobs entrepreneurs have created).

Corporate profits have soared 91 per cent to $1.6 trillion.

Tax receipts have leapt $503 billion, or roughly 1.1 percentage points of GDP, refuting the notion the tax cuts "caused" deficits.

And thanks to rebounding stock prices and huge gains in home values, Americans' total wealth has soared 39 per cent to $54 trillion – the biggest expansion ever.

After such a stellar performance, a breather – what economists call a "midcycle correction" – would be in order. Yet the economy continues to power ahead, says IBD.

In 2006's final period, GDP growth was 3.5 per cent, and it has averaged 3 per cent since the tax cuts. Real wages rose 1.7 per cent in 2006, much faster than the 0.3 per cent average of the Clinton years. In just the last 12 months, unemployment plunged from 5.0 per cent to 4.5 per cent, near post-war lows.

Source: Editorial, Bush's Real Record, Investor's Business Daily, January 31, 2007.

For text: http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=255139775271860

For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

FMF Policy Bulletin/ 06 February 2007