June 29, 2004

Bush Tax Cuts Power Economy, but Democrats Want to Raise Taxes

Yesterday Hilary Clinton actually said that Democrats want to raise taxes on behalf of “the common good:”

“Many of you are well enough off that … the tax cuts may have helped you,” Sen. Clinton said. “We’re saying that for America to get back on track, we’re probably going to cut that short and not give it to you. We’re going to take things away from you on behalf of the common good.”

However, the result of the Bush tax cuts has been powerfully effective for the common good.

From the National Review Online:

A year after the Bush tax cuts the U.S. economy stands on the front end of an economic boom. Recent government reports on consumer spending, industrial production, corporate investment, and business sales suggest that overall growth in the second quarter could come in around 6 percent at an annual rate. That would put the trailing four-quarter recovery rate at 5.7 percent the fastest pace since 1984.

That year, if you recall, followed the big Reagan tax cuts. This year follows the big Bush tax cuts. A coincidence? No. The incentive power of lower marginal tax rates on economic growth is one of the most underrated facets of mainstream economic thought.

...The Reagan tax cuts two decades ago were focused primarily on personal income, reducing the top marginal rate from 70 percent to 50 percent, and then 28 percent. The Bush tax cuts of 2003 were aimed principally at investment, lowering the governments take by roughly 50 percent. Almost immediately an economy buffeted by recession, stock market collapse, and corporate scandals all inherited from the prior administration and smacked by a brutal terrorist attack and the necessary launching of two wars suddenly came alive.

What’s more, the people know how well the economy is doing:

Consumer Confidence Reaches a 2-Year High

NEW YORK June 29, 2004 Consumer confidence jumped to its highest level in two years in June, buoyed by an improved job outlook, the New York-based Conference Board reported Tuesday.

The Consumer Confidence Index increased nearly 9 points to 101.9, up from a revised reading of 93.1 in May. The latest reading was much better than the 95 that analysts had expected.

Lynn Franco, director of The Conference Board’s Consumer Research Center, said the strong improvement in current business conditions propelled consumer confidence to the highest level since June 2002, when the indicator was 106.3.

...”Looking ahead, consumers expect the economy to continue to grow at a healthy clip and to continue to generate additional jobs,” Franco said.

So raising taxes is not for the common good. It would have the opposite effect.

Update 6-30-04. Welcome, Carnival of the Vanities readers! This article was honored to be included in the latest Carnival of the Vanities, hosted this week by Quasi in Rem.