Market Wach - Howard Gold : It’s time to bury supply-side economics : Evidence mounts that tax cuts don’t create jobs - Big Job Creation with Bill Clinton's high taxes, and very poor results with George W. Bush Economic Ideas

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Comparing the boom of the Clinton years ( with high taxes ) creating 20 million jobs to the Depression caused by George W. Bush and his tax cuts. What Mitt Romney wants is a rerun of the George W. Bush economy.

Market Watch
It’s time to bury supply-side economics
By Howard Gold
June 8, 2012


It’s time to bury supply-side economics

Some excerpts :

A 2008 study by the liberal Center for American Progress and Economic Policy Institute showed that private investment, GDP, wages, household income, employment and federal revenue all grew faster — sometimes much faster — during the high-tax Clinton years than they did during the low-tax Reagan and Bush eras.

In August 1993, President Clinton signed a law that boosted the top personal income tax rate dramatically, to 39.6% from 31%.

But rather than die out, the nascent economic recovery picked up speed and never looked back. By the time this giant boom ended, the U.S. economy had added nearly 20 million private-sector jobs in every sector from manufacturing to retail trade to finance to information technology.

Marginalizing marginal tax rates

Of course, higher taxes didn’t cause this boom. That’s the whole point: other economic forces were so powerful that marginal tax rates didn’t matter.

And they didn’t matter a decade later when President Bush signed the second of two tax cuts in May 2003, accelerating the 2001 act’s provisions, reducing the top rate to 35%, and cutting capital gains and dividend tax rates.

But something else was brewing: In July 2003, the Federal Reserve cut the federal funds rate to 1% and kept it there for a year.

By doing so, the Fed pumped hot air into a speculative real estate bubble, with far-flung effects. As Martin N. Baily, Susan Lund and Charles Atkins wrote in a 2010 paper for the McKinsey Global Institute:

“From 2003 through the third quarter of 2008, U.S. households extracted $2.3 trillion of equity from their homes in the form of home-equity loans and cash-out refinancings. Nearly 40% of this — $897 billion, an amount bigger than the 2008 U.S. government stimulus package — went directly to finance home improvement or personal consumption.” (Italics added.)

The two Bush tax cuts caused an estimated $1 trillion loss of federal tax revenues — and each year the revenue shortfall is an additional $100 billion. It’s the gift that keeps on giving.

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