From Yahoo News:
The House voted Thursday to preserve tax cuts for investors through the rest of the decade, safeguarding the centerpiece of the Republican tax agenda in a $56 billion package of tax breaks. The bill, passed 234-197 along mostly party lines, would keep the 15 percent top tax rate for capital gains and dividends in place in 2009 and 2010, two years after their scheduled disappearance at the end of 2008.
Republicans said tax cuts championed by President Bush have revved up a sluggish economy, and Treasury Secretary John Snow praised the bill's passage, saying, "It would encourage investment and innovation — the lifeblood of the American economy." Democrats disagreed and said the tax cuts for investment income, and much of the GOP's economic agenda, exacerbated budget deficits and ignored average workers.
We here at SDP are committed to holding Bush responsible for the consequence of his policies, so I note the following. The Wall Street Journal points out what Bush's tax cuts have achieved so far:
The 2003 tax cut is about as clear a policy success as has come out of Washington in many years:
• 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.
• 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.
This would be remarkable economic growth even in the best of circumstances. We note that the circumstances have not been the best. Katrina shaved away hundreds of thousands of jobs, and energy prices soared. My guess is that Bush's second term will achieve more job creation than France has known over the last ten years.
It is perfectly fair of Democrats to note that the benefits of this economic expansion are not shared equally by all Americans. That is more or less their job. But its only fair for us to point out that their favor solution to the problem is to make the economy of the U.S. more like that of France. That's our job.
Job creation should be the single most important social policy aim. Nothing improves the lives of ordinary people more than a regular paycheck. And job creation follows from investment. So far we are surely on the right track.
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