The Wake

When investment and consumer spending is not strong, the only way to create the essential growth needed for a healthy economy is through tax cuts. Reagan and Kennedy implemented this strategy and the effect was prosperity for all. With President Bush’s tax cuts, America will again be reaffirmed that trickle-down economics works. When people get to keep more of their own money, they spend it. This increases sales and profits for businesses. With increased sales and profits, businesses expand, create jobs, and create wealth for investors. This cycle ends with the people who become better off because their investments grow and a better opportunity for job choice exists. But the Democratic presidential hopefuls try to deceive the American public by blatantly using class warfare or scare tactics to discredit Bush’s economic policy.

How many times have we heard, “tax cuts for the rich,” and the “rich get richer and poor get poorer” statements? When referring to the Bush tax cuts, Howard Dean wrote: “…America’s wealthiest individuals – those in the top 2 percent of income brackets – receive the bulk of the tax cuts, America’s middle class is left behind.” The Bush tax cuts were not just tax cuts for the rich, they were an across the board cut which lowered all rates. But, a 4.6 percent tax reduction to someone who makes 3 million dollars a year equates to a lot more nominal dollars than someone who gets a 5 percent tax reduction making $12,000 a year. So the fact that the people in the upper bracket get more nominal dollars back justifies the “benefits the rich” statement in their minds, but it is extremely deceiving. The rich pay more in taxes initially, and when a tax cut is enacted, they get more back; how is that unfair?

John Edwards quote, “He thinks if you just help people at the top somehow the whole country will do better,” applies to this ideology. Using the Reagan economic expansion of 1983–1989 as a model, we can see what will eventually happen with the upper class getting more nominal dollars back. Reagan enacted a similar tax cut as Bush, which was phased-in from late-1981 to 1983. Once effects of the tax cut took hold, median family income, median household income and average household income increased every year from 1982–89. Average Gross Domestic Product (GDP) grew at an above average rate from 1983–89 and every class increased its wealth.

But, tax cuts do not mean instant economic recovery, and Democratic presidential hopefuls have tried to use that to their advantage while they can. The Reagan tax cuts enacted in 1981 took two years to have an influence of economic indicators. With the Bush tax cuts starting in 2001, right now is about the time when economic indicators should be showing signs of improvement – and they are. The third quarter growth rate of 8.2 percent was the highest since the start of the ‘80s expansion. And in the months of August, September and October, 286,000 jobs were created.

By keeping more of their own money, because of the tax cuts, people were able to buy more, which is why consumer spending was able to increase 6.4 percent in the third quarter to fuel the phenomenal growth rate.

The Democrats know full well about the delayed correlation tax cuts and economic growth have with each other, and this is why they tried to win the economic issue before undisputable signs of recovery occurred. But their window of opportunity has officially closed. The Reagan tax cuts helped to create 20 million jobs and the Bush tax cuts, if made permanent, will create vast amounts of jobs as well.

But what about the deficit? Wesley Clark, when referring to Bush said, “We have a guy who has deepened the deficit…” in an attempt to pass blame onto Bush. When America is coming out of a recession (inherited from Clinton’s economic policy of the late 1990s), subject to terrorist attacks and involvement in a war, economic growth will hinder. Revenues will decrease, investors will lose confidence and deficits will have to be run. If congress does not allot money for discretionary spending in times of need, the blame shouldn’t rest with the executive branch. The economy would never have been stimulated had the tax cuts not occurred.

And, the Bush tax cuts will surely create an increase in revenue as also did the Reagan tax cuts; the amount of money the government collected in income taxes was 43.6 percent larger in 1989 than that in 1983. The way to grow out of deficit spending is to stimulate the economy so GDP increases and tax revenues increase. An increase in revenue along with controlled spending would help pay off temporarily increased deficits.

Congress did not prioritize its spending to accommodate the increased defense spending under Reagan; Reagan was blamed for the deficit. Reagan’s increase in defense was strategically planned to break the backs of the Soviet Union economically – and it did. Debt was inevitably passed on to future generations, but, and most importantly, the threat of the Soviet Union was not passed on. Stern’s foreign policy and deterrent policies, like the Strategic Defense Initiative, ended the Cold War. This same premise is true of the Bush Administration policies. Deficits contributed to by anti-terrorist, Iraqi and Afghan spending will ensure future generations safety and security here in America. I would suspect future generations of Americans would be willing to accept debt caused by these essential expenditures in exchange for their continued freedom and security of this great nation. I know I do.