Andrew Klusman

In the 2004 Election, we were told numerous times that the Bush tax cuts were a failure, and that we were experiencing the worst economy since Herbert Hoover’s presidency at the beginning of the Great Depression. This lie was perpetrated numerous times, despite evidence to the contrary: a 4.6% growth in GDP, record lows in unemployment, and growth in government tax revenues.

Well, if you are the type who needs one more indicator that the Bush tax cuts have worked, here’s another. The Dow Jones Industrial Average on October 3 broke its previous record of 11,722.98, which was set at the peak of the dot-com bubble.

The Dow closed at 11,727.34, thus overcoming a major psychological barrier that many may have had in regards to the stock market in the post-dot-com era. The cause for all this growth lies with the Bush tax cuts.

When President Bush took office, he inherited the Clinton economic downturn, which began in early 2000. In addition to this, the attacks on September 11 occurred a mere nine months into his first term, which sent a recessing economy even further into recession.

Around this same time, major corporate scandals broke, most notably the Arthur Andersen accounting scandal which came out as part of the well-known Enron ordeal.

After 9/11, the airline industry also experienced a massive contraction, with major airlines declaring bankruptcy and having to restructure their operations. Furthermore, oil prices have risen to levels not seen in decades, putting pressure on everyone’s wallet.

It’s a wonder then that we have been experiencing 4.6% growth for the past few years. One would imagine that, with all these abnormal and devastating hits to the economy, that it would truly be the worst since Hoover’s time. But, oddly enough, we have not been devastated by these things.

Rather, we have done something very few developed economies have done in recent years. GDP growth in European countries is hovering around 1%, an unhealthy and slow level for developed countries, and Japan has been hovering near 1% also, sometimes dipping into the negatives, meaning they are experiencing a contracting economy.

That’s all fine and dandy, you may say. The Euros have little growth, we have big growth. So, what separates the USA from the European countries?

The short answer is taxes. Our tax rates are drastically lower than those in Europe, and the lowering of those taxes from the end of Clinton’s term to what we have now makes all the difference.

Now, just lowering taxes will not be enough, but it will be a good start. What we in the States can learn is that the lowering of taxes can and does make a difference, and helps boost the economy.

The one thing that is also hard to grapple with is that tax revenues actually increased, which is both a good and bad thing. For example, in Fiscal Year 2002, according to the US Department of Treasury, tax receipts for the Federal Government were about $1.95 trillion. In 2005, however, well after the tax cuts were in effect and had time to have their full effect, tax receipts were $2.15 trillion.

But how could this happen with the tax cuts for the rich? How could taxes go up? Well, part of the answer has to do with the stimulation of the economy, which is what happened with the economy after President Bush had his tax cuts enacted.

Do tax cuts work? Yes. They help stimulate the economy. What must also be included in tax cuts however, is sound fiscal and monetary policy. Spending must be brought back into line, and the Fed must not mess up the economy by toying with the interest rate. However, credit must be given to President Bush for his tax cuts, and we should look forward to the bright future our economy has, especially after we have crossed the threshold that had been looming over our heads since the dot-com era.