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Critics and supporters of George W. Bush had reason to celebrate Tuesday evening in the aftermath of President Bush's 4th state of the union address. Most GWB supporters felt the president avoided any major errors (the real objective for a 4th speech in a first term of a relatively popular president), and most opponents felt he either overstated his case on some issues that lack consent of popularity (i.e., the Patriot Act, support for the Iraq war), or understated his case on issues people were truly looking for (i.e., job growth, deficit reduction). The political pundits can continue hashing all of those things out. Let's briefly look at the economic angles that were uncovered ...
- First and foremost, for the last time, a president does not create jobs. He does not lower jobs (other than, of course, if he were to make the beautiful move of purposely slashing government payroll). He not only does not do these things, he should not. More accurately, he cannot.
What a president can do to "help" employment is simply implement policies that do not hinder a free market (i.e., lower regulation, lower taxes). This president has done the very, very best one could expect of him as it pertains to the latter. The former seems more pertinent in the hands of state and local politicians, but if one had to speculate, there probably needs to be work done here. Either way, this nanny-state rhetoric about the president needing to stimulate job growth, or even worse, the preposterous criticism about the president "being responsible for tens of thousands of people losing work" is unhelpful, and inaccurate. Typical.
- The president hit the nail on the head regarding the success the tax cuts have had thus far. Though it may very well have been inappropriate for him to have pushed this point, it would have been nice for him to have pointed out how much better things would be if Congress had not slashed his proposed tax cut in half (i.e., when $700 billion of cuts became $350 billion in June of 2003). Either way, the following cuts have been most stimulative to the overall economy, and are likely to continue to be throughout 2004:
- Reduction in overall marginal tax rates
- Reduction in dividend tax at a personal level (still a double tax since the same money has already been taxed at a corporate level)
- Reduction in capital gain tax
- Reduction in the despicable death tax
- Child Tax Credit
If these areas have been as productive as most economic experts describe thus far, and $50 billion of further stimuli from the cuts is expected to hit the economy in the next 90 days, it all the more behooves a second-term Bush to fight for additional tax cuts, and additional tax elimination. The 2001 EGFTRA legislations does allow for a total phaseout of the death tax, followed by a sunset provision in which (assuming no legislative changes are brought about) it is brought back (all the way back to the exemption allowed for prior to the initial legislation). The president rightly instructed Congress Tuesday evening how important it is to make permanent this obscene tax. Throughout his campaign, he needs to make it a point of contention?the ability for Uncle Sam to swallow up 44-50% of a family's fortune upon a person's death is a massively flawed concept if one truly desires economic growth and prosperity (not to mention this rarely discussed concept called ethics).
- The simple reality when one discusses tax cuts is that they are not severe enough, and the very logical argument liberal opponents of the tax cuts make is that they have added to a federal deficit (now approaching $500 billion). The president absolutely has to become prepared to say NO to the ridiculous pork-barrel projects that have entered the budget code since he entered office. He spoke on at least five different occasions Tuesday evening of some project he was prepared to fund (and fund to the tune of billions of dollars). Yet, I do not recall any talk of spending reductions. As much as I wish my own family could operate this way (i.e., I can make less and less if I want, yet spend more and more), it is fiscal nonsense and needs to be controlled. A small degree of deficit spending in times of low inflation and low interest rates has been condoned and understood by most for decades. This is not a small degree of deficit spending. President Bush has an imperative in his second term (which all rational people would agree is a better time to draw the hard line I speak of) to say no to spending projects, and find budget cuts across the board. I do not fault the president for the need to increase spending in matters of genuine national defense and homeland security; however, his tax-cut philosophy ought to be paired with a spending-cut philosophy soon. The sooner the better!
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