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BUSH TAX CUTS CAUSED THE RECESSION?

The Democratic Party, including President Obama, seem to think that the Bush administration tax cuts of 2001 and 2003 caused the recession of 2008.  The recent Matt Lauer interview of George W. Bush shows how some in the media have bought into this line of thinking.  Matt Lauer’s question about maintaining the Bush tax rates…”We’ve been living under that system for 7 years now and we’ve seen incredibly slow growth in jobs.” 

It is bad enough that the Democrats are trying to gain political advantage by ignoring facts.  It is, however, unacceptable that people in the media would propagate this falsehood when the facts are easily available. 

The Bush Tax cuts had the same effect on the economy that the Reagan, Kennedy, and Harding/Coolidge tax cuts had.  They created sustained economic growth and jobs.  The facts are as follows…

          Year                              GDP Growth Rate                                Unemployment Rate

          2003                                        2.5%                                                    6.0%

          2004                                        3.9%                                                    5.5%

          2005                                        3.2%                                                    5.1%

          2006                                        2.8%                                                    4.6%

          2007                                        2.0%                                                    4.6%

These statistics are readily available at government websites, and could take as long as 10 minutes to research (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000, and http://www.bea.gov/national/).  To admit to these statistics would deny the ability to argue the effectiveness of tax cuts to economic growth, and job creation. 

The economic downturn that we currently find ourselves in, was caused by the housing crisis.  Reasonable people can argue about what caused the housing crisis, and how it could have been prevented.  It is not reasonable to argue that the tax cuts of 2001 & 2003 helped the economy tremendously for 5 years, then apparently caused a crash 6 years later.

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One comment on “BUSH TAX CUTS CAUSED THE RECESSION?

  • You are leaving out the biggest factor in the growth during those post Bush tax cut years…

    The credit bubble, people weren’t actually making money organically, it was all debt fueled, something like over 40% of all job creation during those years was real estate related, agents, banks, retailers, mortgage brokers, contractors, architects, money extracted from their homes and spent, easy credit cards, etc.

    I’m not complaining, heck I’d like to see another bubble so that I can get some more myself as we all did during those years. It was a great party while it lasted and frankly I don’t care about the losses to the banks, we all know they’ve been well taken care of in the aftermath.

    In short, the banks used SEC permitted leverage to PRINT (call it whatever you want, that’s what it was) upwards of $40 to every actual $1 they had. then they hired PHD level mathematicians to take that $40, sink it into all sorts of derivatives, bets structured on other bets, etc. so that the $40 could now be leveraged to amounts we still don’t truly know but at least $100, probably much more.

    then they took this non existent money using the banking rules of the US and loaned it to anyone with a pulse, enriching everyone in the pipeline, then they sold this to investors all over the world and expected the American citizen to pay back this monopoly money with real money that they actually had to earn… fat chance of that, especially when real wages have been stagnant for 30ish years while necessary things such as homes, cars, eduction have inflated several hundred points. But… TV’s and other toys got cheaper so we all felt like inflation wasn’t as bad as it was. what happened was that it was hidden because luxuries became cheap while stuff we needed crept up.

    Basically folks can argue about free enterprise vs. government Keynesian by no matter who injected the stimulus, there can be no doubt that most economic and employment data over the last decade or so has no reflection on political ideology or policies because the banking system, or Wall Street or whatever they are (certainly not real banks as anyone defines a bank) has flooded our economy with what was effectively the largest stimulus in the history of recorded economics.

    And lets be clear about one more thing, government, while being either negligent or simply ill equipt to know what was going on, didn’t force one bank to make one loan that didn’t meet the banks own internal underwriting standards.

    The truth is that government’s role was one of being too lax or hiding behind socially desirable statistics, anotherwords they were screwed by the banks too, the home ownership rate looked positive so all is well they assumed.

    But the real motivator behind all this, a crass culture in the business community that saw nothing wrong with every individual player doing whatever it wanted for profits while ignoring the systematic consequences of the cumulative activity. Every person in the game made a lot of money, including the guy who bought a house he probably shouldn’t have. But the real question is why these private companies gave hundreds of thousands, if not millions, of people moeny they couldn’t pay back? Because it was all monoploy money yet the banks made real profits on the exchange.

    If a few cells in your body got a little greedy with their use of resources it would be a minor health problem, if the entire central nervous system decided to only act in it’s short term interests you’d be dead in a week of massive cancers and other bodily failures. Same thing.

    That’s not capitalism, it’s corporate corruption & insanity. Capitalism where there is transparency and integrity I support, not this stuff.

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