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by Stephen Moore
Posted Aug 6, 2004
The biggest threat to the U.S. economy today may be Democratic =
presidential nominee John Kerry.
The centerpiece of Kerry's economic program is to repeal the Bush tax =
cut for those earning more than $200,000. Let us put aside for a moment =
the improbability that John Kerry and his running mate John Edwards =
would only "raise taxes on the rich." That was Bill Clinton's claim in =
1992 and we all got soaked.
But even if Kerry is true to his word, his plan would almost certainly =
short circuit the economic rally that has been well under way for more =
than a year now. The Kerry tax-hike plan would mean a higher capital =
gains tax, a higher dividend tax rate, and a hike in the highest income =
tax rate to 40%.
Not This JFK
Kerry seems to believe the witless notion that if you raise taxes on =
investment, work, savings, and business creation, you magically will get =
more of these things.
Well, President Bush, following in the footsteps of such famous tax =
cutting presidents as Ronald Reagan, John F. Kennedy, and Calvin =
Coolidge, understands that just the opposite is true: tax cuts create =
incentives for economic-growth enhancing activities. When you tax =
something, you get less of it, when you tax something less, you get more =
of it, as the adage goes.
This is not just a theoretical economic equation drawn on a chalkboard =
in a university lecture hall. Bush has the facts on his side. The =
economy has grown at a 5% clip since the dividend and capital-gains tax =
cuts were implemented. That compares with barely 2% growth in Europe. =
The number of jobs has also climbed by almost 1 million in the wake of =
the tax cut.
But here is what is most surprising and impressive of all and what =
exposes the folly of Kerry-nomics. Kerry would repeal the tax cut even =
though it has led to more tax revenues, not less.
The latest federal budget projections show that the Bush tax cuts have =
been far more effective than even the White House originally expected. =
The latest data from OMB show the 2004 budget deficit shrinking from a =
projected $521 billion, 4.5% of GDP, to only $445 billion, 3.8% of GDP. =
This huge improvement is due entirely to a surge in federal tax =
revenues. To get a handle on numbers that big, for an average family of =
four, their share of the 2004 deficit will be more than $1,000 smaller =
than originally projected.
What happened? Individual income tax receipts are up this year for the =
first time since 2000. They were expected to continue to slide as =
recently as February, but stronger than expected economic growth, =
prompted by last year's tax cuts, has caused the surge.
Amazingly, the 2003 tax cut has reversed 3 previous years of declining =
tax receipts.
John Kerry needs to be introduced to a concept known as the Laffer =
Curve. The Laffer Curve, named after the famous economist Arthur Laffer, =
demonstrates that high tax rates can actually so impede economic growth =
that they lead to less revenues for the government. And the converse is =
also true: lowering tax rates can unleash economic potential and make =
revenues soar.
Liberals have always sniffed at this idea because Reagan embraced it, =
but history is on Laffer's side. In the 1980s, federal tax receipts =
doubled even as Reagan was cutting the highest tax rate from 70% down to =
28%. Those tax rate reductions put 15 million more Americans back into =
jobs.quot;and people with jobs stop collecting welfare and start paying =
taxes!
Kerry might have learned this lesson from Bill Clinton. In 1997, the =
Republican Congress passed a capital gains tax cut and Clinton =
(reluctantly) signed it into law. Over the next three years capital =
gains tax collections doubled.
The 2003 Bush tax cuts have also stimulated an expansion that began =
almost the moment the tax cut was enacted. Jon Kyl, the Senator from =
Arizona, wants to make the Bush tax cuts permanent, rather than repeal =
them. He notes that tax receipts this year will be at least $50 billion =
higher than expected. "The capital gains and dividend tax cuts have =
fueled this economic boom," says Mr. Kyl. "It would be foolhardy to =
repeal them."
Kerry, on the other hand, says that the tax cut must be repealed to help =
balance the budget. He intends to cut the budget deficit in half in four =
years. But the Tax Foundation recently issued a report that raises the =
question whether Kerry was taught basic arithmetic in those elite East =
Coast prep schools he attended. According to the Tax Foundation, even =
repealing all the Bush tax cuts for upper income Americans would cut the =
budget deficit only by a scant 10%.
Kerry Agenda Would Hike Deficit
Kerry's overall wobbly economic platform would actually make the budget =
deficit a lot worse. Why? Because his spending plans would add an =
estimated $2 trillion to the national debt over 10 years as revealed in =
a new National Taxpayers Union release. So Kerry is playing with =
monopoly money. For every dime he cuts the budget deficit, he borrows =
another dollar. This is anti-progress on the jobs front and the deficit =
reduction front.
Kerry accuses George Bush of Herbert Hoover economics, but it is Kerry =
who would put our bullish financial expansion at risk. Tax increases are =
to an economic recovery what a 6-4-3 double play ball is to a 9th inning =
rally. The Kerry Democrats say that Bill Clinton's record tax hike =
caused the prosperity of the 1990s. Wrong. The first two Clinton years =
saw a reduction in economic growth. It wasn't until after the election =
of 1994 and a new Republican Congress that the gale force winds of =
growth sailed the nation forward.
John Kerry seems to want to emulate the European model of growth. =
Problem is there is almost no growth in Euro-land. Germany and France =
are battling 9% unemployment rates and economic growth rates that can be =
detected only by a high-powered microscope. Perhaps Kerry is running for =
President of the wrong nation.=20
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<DIV><FONT face=3DArial size=3D2>
<P>by Stephen Moore<BR>Posted Aug 6, 2004</P>The biggest threat to the =
U.S.=20
economy today may be Democratic presidential nominee John =
Kerry.<BR><BR>The=20
centerpiece of Kerry=92s economic program is to repeal the Bush tax cut =
for those=20
earning more than $200,000. Let us put aside for a moment the =
improbability that=20
John Kerry and his running mate John Edwards would only =93raise taxes =
on the=20
rich.=94 That was Bill Clinton=92s claim in 1992 and we all got =
soaked.<BR><BR>But=20
even if Kerry is true to his word, his plan would almost certainly short =
circuit=20
the economic rally that has been well under way for more than a year =
now. The=20
Kerry tax-hike plan would mean a higher capital gains tax, a higher =
dividend tax=20
rate, and a hike in the highest income tax rate to 40%.<BR><BR><FONT=20
class=3Dheadline-topic>Not This JFK</FONT><BR><BR>Kerry seems to believe =
the=20
witless notion that if you raise taxes on investment, work, savings, and =
business creation, you magically will get more of these =
things.<BR><BR>Well,=20
President Bush, following in the footsteps of such famous tax cutting =
presidents=20
as Ronald Reagan, John F. Kennedy, and Calvin Coolidge, understands that =
just=20
the opposite is true: tax cuts create incentives for economic-growth =
enhancing=20
activities. When you tax something, you get less of it, when you tax =
something=20
less, you get more of it, as the adage goes.<BR><BR>This is not just a=20
theoretical economic equation drawn on a chalkboard in a university =
lecture=20
hall. Bush has the facts on his side. The economy has grown at a 5% clip =
since=20
the dividend and capital-gains tax cuts were implemented. That compares =
with=20
barely 2% growth in Europe. The number of jobs has also climbed by =
almost 1=20
million in the wake of the tax cut.<BR><BR>But here is what is most =
surprising=20
and impressive of all and what exposes the folly of Kerry-nomics. Kerry =
would=20
repeal the tax cut even though it has led to more tax revenues, not=20
less.<BR><BR>The latest federal budget projections show that the Bush =
tax cuts=20
have been far more effective than even the White House originally =
expected. The=20
latest data from OMB show the 2004 budget deficit shrinking from a =
projected=20
$521 billion, 4.5% of GDP, to only $445 billion, 3.8% of GDP. This huge=20
improvement is due entirely to a surge in federal tax revenues. To get a =
handle=20
on numbers that big, for an average family of four, their share of the =
2004=20
deficit will be more than $1,000 smaller than originally =
projected.<BR><BR>What=20
happened? Individual income tax receipts are up this year for the first =
time=20
since 2000. They were expected to continue to slide as recently as =
February, but=20
stronger than expected economic growth, prompted by last year=92s tax =
cuts, has=20
caused the surge.<BR><BR>Amazingly, the 2003 tax cut has reversed 3 =
previous=20
years of declining tax receipts.<BR><BR>John Kerry needs to be =
introduced to a=20
concept known as the Laffer Curve. The Laffer Curve, named after the =
famous=20
economist Arthur Laffer, demonstrates that high tax rates can actually =
so impede=20
economic growth that they lead to less revenues for the government. And =
the=20
converse is also true: lowering tax rates can unleash economic potential =
and=20
make revenues soar.<BR><BR>Liberals have always sniffed at this idea =
because=20
Reagan embraced it, but history is on Laffer=92s side. In the 1980s, =
federal tax=20
receipts doubled even as Reagan was cutting the highest tax rate from =
70% down=20
to 28%. Those tax rate reductions put 15 million more Americans back =
into=20
jobs=85quot;and people with jobs stop collecting welfare and start =
paying=20
taxes!<BR><BR>Kerry might have learned this lesson from Bill Clinton. In =
1997,=20
the Republican Congress passed a capital gains tax cut and Clinton =
(reluctantly)=20
signed it into law. Over the next three years capital gains tax =
collections=20
doubled.<BR><BR>The 2003 Bush tax cuts have also stimulated an expansion =
that=20
began almost the moment the tax cut was enacted. Jon Kyl, the Senator =
from=20
Arizona, wants to make the Bush tax cuts permanent, rather than repeal =
them. He=20
notes that tax receipts this year will be at least $50 billion higher =
than=20
expected. =93The capital gains and dividend tax cuts have fueled this =
economic=20
boom,=94 says Mr. Kyl. =93It would be foolhardy to repeal =
them.=94<BR><BR>Kerry, on=20
the other hand, says that the tax cut must be repealed to help balance =
the=20
budget. He intends to cut the budget deficit in half in four years. But =
the Tax=20
Foundation recently issued a report that raises the question whether =
Kerry was=20
taught basic arithmetic in those elite East Coast prep schools he =
attended.=20
According to the Tax Foundation, even repealing all the Bush tax cuts =
for upper=20
income Americans would cut the budget deficit only by a scant =
10%.<BR><BR><FONT=20
class=3Dheadline-topic>Kerry Agenda Would Hike =
Deficit</FONT><BR><BR>Kerry=92s=20
overall wobbly economic platform would actually make the budget deficit =
a lot=20
worse. Why? Because his spending plans would add an estimated $2 =
trillion to the=20
national debt over 10 years as revealed in a new National Taxpayers =
Union=20
release. So Kerry is playing with monopoly money. For every dime he cuts =
the=20
budget deficit, he borrows another dollar. This is anti-progress on the =
jobs=20
front and the deficit reduction front.<BR><BR>Kerry accuses George Bush =
of=20
Herbert Hoover economics, but it is Kerry who would put our bullish =
financial=20
expansion at risk. Tax increases are to an economic recovery what a =
6-4-3 double=20
play ball is to a 9th inning rally. The Kerry Democrats say that Bill =
Clinton=92s=20
record tax hike caused the prosperity of the 1990s. Wrong. The first two =
Clinton=20
years saw a reduction in economic growth. It wasn=92t until after the =
election of=20
1994 and a new Republican Congress that the gale force winds of growth =
sailed=20
the nation forward.<BR><BR>John Kerry seems to want to emulate the =
European=20
model of growth. Problem is there is almost no growth in Euro-land. =
Germany and=20
France are battling 9% unemployment rates and economic growth rates that =
can be=20
detected only by a high-powered microscope. Perhaps Kerry is running for =
President of the wrong nation. <BR =
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