Day by Day

Thursday, August 25, 2005

Water is wet, sunlight is bright, and other newsflashes

Lower taxes, raise revenues.

I can't believe that there are people out there who haven't learned enough macroeconomics to understand how this works. Hell, I haven't had a single course in economics beyond what I was taught in highschool, and I can still grasp the concept that if you let people keep their own money, the economy kicks it up a notch!

Yet few are asking what caused the cash flow. To read the papers, you would think that the fact that the Treasury is now swimming in revenue is like a cool August day at the shore after a number of hot ones: just another pleasant surprise.

But there should be no surprise. For the inflows are the direct result of the Bush administration's commitment to a concept: individuals respond to incentives. Not merely targeted ones -- a break, say, for a specific group of manufacturers -- but overall incentives for enterprise. The administration deduced from this concept that cuts in taxes on capital and work would inspire citizens and businesses to transact more. The Bush team then proceeded to make those cuts amid jeers about incurring deficits.


It's as simple as a history lesson: Every time the tax rates have dropped, the amount of money changing hands in the open market increased. And since many if not all transactions in this country are taxed in one form or another, more transactions means more tax revenue. EVERY TIME the tax rates were slashed, our tax revenues have risen in preceeding years.

Earlier, President Bill Clinton and Robert Rubin, his Treasury secretary, also cut the capital gains tax. The business activity and extra revenues helped create the surprise of that era, a federal budget surplus. Yet earlier, in 1978 and 1981, the US slashed its capital gains rate twice, moving from 35 per cent (or sometimes higher) to 20 per cent. With each cut, the inflows jumped, and "the magnitude of the response clearly shocked some of the staff" recalls Mr. Entin, then at the Treasury. What those involved would recall forever was a wistful feeling -- a new awareness of the likelihood of economic growth forgone in the 1970s, the period of higher rates.


If it weren't for President Bush's tax cuts, the Clinton-era recession (it started in 2000, before Bush was sworn into office) would have lasted for years. As it was, we made it through 2001, and started going like gangbusters in 2002. The proof is in the pudding, and it's been that way with every president who cut taxes, not just Bush Jr.

But the Democrats wail and whine and gnash their teeth, and talk about the rich getting richer, and how the poor are getting shafted, and all that other class warfare which has become part and parcel to the Democrat Party platform. Kim du Toit (from whom I got the link) puts it better than I can:


Of course, had the BushCheneyHalliburtonPuppets done the same as Rubin, we’d be hearing wails of how all this was done to help Bush’s rich conservative buddies, but such wailing was noticeably absent when Rubin, who was an ex-Wall Streeter, made the cuts.

So when it comes to the Evil Party’s caterwauling, we are left with two inescapable options.

Either: the Democrats are stupid because they didn’t remember how well tax cuts had spurred the economy in the past.

Or: the Democrats knew full well that the economy would benefit from tax cuts, but were prepared to sacrifice the well-being of the country in order to score socialistic economic points against “the rich” (and of course, against GWB).

When it comes to the Democrat Party, and one has to choose between evil motives and stupidity, the “evil” option is almost always the correct assumption. Hence their title at this site (when I’m not calling them the Socialist Party or the Gun Control Party).

The reverse is true, of course, for the Republicans, hence their nickname of the “Stupid” Party.


I'll go him one better, and say that the Democrats will sacrafice anything and everything they can in order to gain and control more power of any sort. Socialism is about control. And the Donks are socialists to the bone now, with more and more communists brought into the fold. The few remaining capitalist Democrats are either dying off or getting kicked out of the Democrat Party. And the main goal of socialism and communism is to control everything via the state. Since the Democrats in power are already controlling the state, who do you think will be the recipients of more state power?

Yeah. The Democrats don't care one whit about this country unless they can put it under their thumb.

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