• The stock market has risen by about $4 trillion in value, and an estimated 40% of that gain is directly attributable to increases in the after-tax return on equities, thanks to the tax cut. (If the tax cut expires, the market will instantly give back those gains.) Housing values have soared so rapidly that the fear is we now face a bubble. Household net wealth has climbed by $10 trillion.The Bush administration and the GOP in Congress have done a lousy job of getting this message out. Remember how Clinton used to hold a press briefing every time there was a new set of numbers that looked good for the economy? He'd be out there taking credit for it every week. Even with Katrina and the war in Iraq, this economy keeps churning along at an amazing pace. Yes, there are people who are hurting, but overall, it is astounding to have this strong an economy and so much of that strength can be traced back to those tax cuts that were derided as gifts for the rich a few years ago. Since most Americans are economic illiterates, they need some instruction in the connection between those tax cuts and where we are today. Otherwise, the myths that such tax cuts just helped the rich on the backs of the poor will be the only thing that people will hear is the message from the Democrats and the media.
• Business investment--which had sunk into the abyss during the recession, falling by 21% between 2000 and 2002--has roared back to life. Spending is up nearly 25% over the past 30 months.
• Dividend payments to shareholders have doubled in two years, according to data gathered by the American Shareholders Association. The cumulative impact of the tax cut and the higher dividend payments has put $100 billion into the pockets of America's burgeoning investor class.
• The macro-economic signs all point to a solid, sustainable expansion. Employment is up 4.4 million and real GDP growth has averaged 4%--or twice the OECD average--since 2003. Today's unemployment rate of 5% means there are now roughly one million more Americans working than were projected before the tax cut.
• Oh, and yes, there was a $120 billion reduction in the budget deficit in 2005. That's because tax receipts rose by more than in any previous year in U.S. history, even adjusting for inflation. Receipts were up by $55 billion above projections in 2004; $122 billion above projections in 2005; and are already running well ahead of projections so far in fiscal 2006 (which began in October).
• Finally, we wonder if any of the faux debt-hawks in Congress noticed that thanks to the sizzling economy, states and localities are now running hefty budget surpluses, reversing years of red ink and painful service cutbacks. Even New York City--which for years looked like the U.S. version of debt-plagued Argentina--is back in the black.
Friday, December 09, 2005
The Wall Street Journal reminds us of what the 2003 Bush tax cuts have done for the economy.
Posted by Betsy Newmark at 6:28 AM