One of my favorite scenes from Gone with the Wind (a wonderful, but nonetheless overrated movie), is when Clark Gable's Rhett Butler is in a room with a lot of fire eaters who at that moment were celebrating the start of the Civil War. Butler had the cheek to point out that "there isn't a single canon factory in the entire South." One fair faced hot head exclaims "what does that matter to gentlemen!" Butler coolly replies: "it will make a great deal of difference to a great many gentlemen," or something close to that. I'm working from distant memory.
I thought of that shot when I got this one from Democratic activist and Daschle foot soldier Chad Schuldt at CCK. Chad may be happy to hear that we are winning the war in Iraq, but he is certainly not happy to hear that the economic is very strong.
Ken Blanchard, professor of political science at Northern State University in Aberdeen, writes last night about the great shape of the U.S. economy. He points out how the stock market is swell, the great state of business investment, and the like. Unfortunately that kind of stuff doesn't mean jack-shit to average Americans. Unless you buy into voodoo-trickle-down economic crap.
Chad apparently doesn't think that business investment is important, or that an increase in business investment matters to average Americans. I wonder if that view is shared by Tom Dachle in particular, or the Democratic Party in general? One might sometimes think that it is. I reply, casting myself as Rhett, that it makes a great deal of difference to a great many average Americans. Business investment (which, Chad, is what the stock market is about) is the financial oxygen that ignites economic growth. You can't get job growth or wage growth without it.
Nor, I submit, can you hope to fund the Federal Government without it. The Investor's Business Daily has a fine piece on this.
For Democrats opposed to the cuts, no argument has been more potent than that tax cuts somehow "cost" the government money — and thus make deficits worse. [Treasury Secretary John] Snow's chart, shown below, puts the lie to that argument.
In fact, the supply-siders are right: Revenues rise after tax rates are reduced. Federal revenues bottomed at $1.8 trillion just as Bush signed his bill; since then, they've risen 19.4% to $2.15 trillion, an all-time high.
This chart from the same article illustrates the result of Bush's tax cuts.
In short, due to the tax cuts, more money is flowing into the treasury than ever before. This seems counter-intuitive, a fact that Democrats ceaselessly exploit. But it is a simple fact, and it is not hard to explain.
When top personal rates are high, the rich find ways to pay less. That's why our tax code is 55,000 pages thick. When rates are lower and flatter, such behavior disappears.
This also explains why the richest Americans' share of all income taxes paid has soared to 34.27% from 19.05% in 1980 even though their average income-tax rate has fallen by roughly a third — from 34.47% to 24.31% in 2003.
So the rich are shouldering a larger percentage of the tax burden now than before, precisely because their tax rates have fallen. Instead of hiding their money in unproductive dodges (which Congressmen in both parties delight in creating), they bring it out and invest it in taxable enterprises. This gives the Federal Government more money to spend on all those social programs that Democrats hold dear. I also noted the Wall Street Journal's observation that state government budgets, which were in very bad shape not long ago, are in good shape now. That's also something that might matter to average Americans who, after all, live mostly in states. You might think that a Democrat would care about that too. Apparently not.
Chad belongs to the "everything Bush does is by definition stupid and despicable" school of thought. God knows that there are plenty of counterparts on my side of the isle. To which I say a pox on both your houses. And prepare yourself for a shock.
I think that Bill Clinton's Presidency was, economically speaking, a much greater success than is generally recognized by either party. Clinton balanced the budget, saw NAFTA through to ratification (almost exclusively with Republican support), and reformed welfare. All three were dramatic successes.
By contrast, Bush has a much more mixed record. The Federal Government under Bush has spent money in a way that makes a drunken sailor look like a Scottish Presbyterian. That, along with a recession, a war, and a hurricane, is why the budget is in a mess. I suspect that Bush will leave behind him a much less impressive economic policy than Clinton. But however many mistakes Bush made, the tax cuts weren't one of them.
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