Steve Forbes Lists (and Lists, and Lists) the Benefits of the 2003 Tax Cuts
The list, in a subscription-only column in the May 22 issue in the magazine, will make wonder why in the world they were only extended two years and not made permanent:
The evidence of the positive impact of these cuts–the capital gains levy was cut 25%; the personal dividend tax was cut 60%; personal tax rates were reduced; and juicy incentives for businesses, especially small ones, to boost capital expenditures were put in place–is overwhelming.
- Real GDP has blossomed, expanding more than $1 trillion, or 11% between the first quarter of 2003 and the end of last year. No other advanced economy has done nearly as well.
- Some 5 million new jobs have been created since the tax cuts, more than in Europe and Japan put together.
- Real personal incomes have mushroomed as well, expanding 5.7% at a real compounded annual growth rate.
- For all the gnashing of teeth over U.S. manufacturing jobs, our industrial production has increased by more than $300 billion, or more than 11%, in the past three years.
- Between the second quarter of 2003 and the end of 2005 a stunning 3.9 million new businesses have been created.
- Equity values have moved up smartly (although they should be up even more given what’s happening to corporate balance sheets and bottom lines). The comprehensive Wilshire Index has increased 65% since early 2003; the S&P 500, 55%; and the Dow Jones industrial average, 42%. What’s intriguing here is that the biggest stock market rises have been with small-cap stocks. Is it a coincidence that these companies have been invested in far more heavily than their much bigger corporate counterparts?
- Aftertax corporate profits have exploded from $727 billion in the first quarter of 2003 to almost $1.1 trillion at the end of 2005, an increase of 46%.
- Dividends have proliferated, rising from an annual rate of $149 billion in early 2003 to more than $200 billion today. In the S&P 500 companies there have been more than 900 increases, and over 40 companies have initiated dividends.
- Business’ capital spending zoomed from an annual rate of $730 billion in the first quarter of 2003 to almost $1 trillion by year-end 2005, an increase of more than 30%. Cash flows have grown even faster than corporate capital expenditures. There have been periods in the past when this has happened but not at the magnitude we’re seeing today. In short, corporate America has plenty of juice to keep this expansion going.
- So does the American consumer. The balance sheets of households in America have never been stronger. Household assets are up more than $15 trillion since the tax cuts versus an increase of only $3 trillion in household liabilities.
- Foreigners have taken note of the powerful American economy. Foreign direct investment in the U.S. last year was $128.6 billion, up 90% since 2003. Private portfolio investment inflows are the largest ever, $686 billion last year, up 107% from 2003.
- The overall assets of the nation have grown 30% in just three years to $160 trillion.
Yet the mainstream media obsesses about Washington’s deficits, giving short shrift to the soaring growth in government receipts both inside the Beltway and out. Last year’s tax take by Washington was up almost 15%. The problem on all levels of government is not inadequate revenue but obscene spending.
Housing bubble? Maybe in some local markets around the country, but the median housing price increase since 2003 is eminently reasonable–new home prices are up 21% in the last three years; existing homes, 23%.
Yeah, other than that, the tax cuts haven’t accomplished much. (/sarcasm)
Markets go up, markets go down. We dropped what, a couple hundred points on the Dow in the last couple of days?
To attribute them to tax cuts for the rich is folly.
Know why housing is booming? Because 4 out of 10 new houses sold recently are for SECOND homes.
There goes that whole “reinvesting it back into the economy” garbage. They’re just living higher on the hog.
Comment by Theo — May 14, 2006 @ 11:09 pm
Well, you did pick Forbes’ weak link, because markets are based largely on expectations of future profits, and that depends on a lot more than tax policy (though the wrong tax policy can stifle the markets. That doesn’t change the fact that even after two bad days, the markets are up a bunch in the past 3 years. That IS a good thing, right?
My brother bought a second home, a new one, and rents out the first. An awful lot of economic activity went into building that new home. I fail to see the “garbage” in that. If you’re concerned about investments in vacation property, well, that could be a business startup (renting it out to others), OR it could be for a family’s own use. In either case someone probably is watching over the property when the family isn’t there and is making money for doing so, which is more economic activity.
I guess you missed the post early Sunday on how business investment (”reinvesting it back in the economy”) has shot up since the tax cuts took effect:
http://www.bizzyblog.com/?p=2108
You also don’t seem to have grasped the last sentence of the second last bullet, which repesents investment (probably should have had its own bullet, because it refers to domestic investment).
If you want to think outside the box, take a gander at this idea, which I’m evaluating:
http://www.bizzyblog.com/?p=1726
Comment by TBlumer — May 15, 2006 @ 12:47 am
Dude, you are a trip.
Suggesting housesitting as an economic boomlet is funnier than Cheney touting eBay businesses a few years back.
You’re an idealogue, as are the WSJ zombies quote — you believe in the absolute sanctity of the (monopolized) markets and tax cuts and thus, pick facts to support your beliefs while ignoring others.
Tax relief for those who really need it (as opposed to the rich) would pour tons of cash into the economy, too - especially since there’s a lot more people in the poor and middle class. Small businesses could flourish. They’d actually buy stuff they need, as opposed to a second and third house or boat or mistress.
The Dow’s no indicator of economic health - it was sky-high during the Clinton years, too.
Realistically, it has nowhere to go but down. You’ll see.
Comment by Theo — May 15, 2006 @ 9:32 am
#3, nice job of misquoting again. I DID NOT suggest house and property maintenance (not sitting) and housewatching as an economic boomlet. I did suggest that it is incremental economic activity. Do you deny that?
If you think I believe in the sanctity of monopolized markets, read my post on concerns about net neutrality:
http://www.bizzyblog.com/?p=1932
I think anyone reading your comments and comparng them to mine knows who the ideologue is.
About 41% of the population (32% of returns filed) pays NO Federal income tax, and millions of those get the Earned Income credit. How do you provide “relief” to someone who is either paying nothing or who is already getting paid by the income tax system?
http://www.taxfoundation.org/publications/show/1410.html
I think you’re wrong about the markets, but only time will tell.
Your stereotypical views of the rich are sickening. I’m sure you would think my brother who works his ass off is rich. He has no mistress, no boat, he rents out his second (former) house, has a wife and three kids, and primarily focuses on his business and the future of his family. I take it very personally that jerks like you stereotype him because he is successful. About 55 cents of every incremental dollar he makes goes to Uncle Sam or Uncle Arnold, and yet HE is the greedy, selfish bastard. Bleep you.
Comment by TBlumer — May 15, 2006 @ 9:49 am
#4 hits the liberal out of the park!!! Yes Sir, now THAT’S what I’M talking ’bout!
Comment by SAM — May 15, 2006 @ 2:11 pm