OPINION:
There are two fundamental things that need to be done to restore America’s economy to its former health: reduce government spending and thus shrink its debt, and increase federal tax revenues by boosting economic growth, new business formation and job creation.
A lot of attention, understandably, is being focused on the former, which is good, but far less on the latter, which would reduce the deficits much faster than the spending cuts.
President Obama and the Democrats have failed on both counts over the past two years when they have controlled Congress and the White House. Spending has soared to nearly $4 trillion a year under their wasteful, big-government policies, driving the budget deficit to $1.6 trillion and pushing the national debt to more than $14 trillion.
We’re in the midst of a pivotal debate about cutting out-of-control spending - with Republicans calling for deep budget cuts and the Democrats pushing for much more modest reductions.
What has been sorely missing from this debate has been a clear, strong voice for tax incentives to boost faster job-creating economic growth that will raise enough revenues to pound the deficit into submission.
Mr. Obama still thinks raising taxes will bring in more tax revenue, and he continues to blame the George W. Bush administration tax cuts for all of his fiscal and economic woes - which Mr. Obama has made worse on several counts - higher long-term unemployment, budget deficits, government debt and weaker federal revenue.
Last month, in a speech at George Washington University here, he continued to blame Mr. Bush for all the ills that still afflict his presidency - over 9 percent unemployment in nearly half the nation’s states and an anemic economy barely growing at a feeble 1.8 percent in the first three months of this year.
“We increased spending dramatically for two wars and an expensive prescription drug program - but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts,” Mr. Obama said.
When Mr. Obama talks of “paying for the tax cuts,” he means raising taxes, something many Democrats opposed in the midst of a fierce recession.
But it never occurs to him that if he’s looking to raise tax revenue, fueling faster economic growth is the way to do it. And if he’s looking for a role model showing how that worked, he need only look at the much higher federal revenue numbers in the last five years of Mr. Bush’s presidency. Indeed, Mr. Bush still holds the record for the highest federal revenues in U.S. history.
A look at the record shows that soon after Mr. Bush accelerated his tax cuts in 2003, the economy entered a five-year period when the unemployment rate fell to 4.6 percent and federal tax revenues rose by hundreds of billions of dollars - sharply cutting the budget deficit.
Here’s the story:
When Mr. Bush was running for office in 2000, the economy was in the midst of a high-tech, dot-com economic boom (largely because of the Republicans’ capital gains tax cuts that President Clinton signed into law). Then the bubble burst in 2001 and the economy fell into a recession. Mr. Bush pushed through an across-the-board income-tax-rate-cut agenda that would be phased in over several years.
But as the recession worsened, unemployment - then at a low 4.7 percent - rose to 5.8 percent in 2002 and 6 percent in 2003. Federal tax receipts, which had hit a high of $2 trillion in 2000, fell to $1.9 trillion in 2001, $1.8 trillion in 2002 and $1.7 trillion in 2003.
Clearly, the recessionary economy needed a much faster-acting booster shot, and that’s when Mr. Bush and Congress stepped up the tax cuts in 2003. The economy responded.
Contrary to Mr. Obama’s leftist, zero-sum, anti-tax-cut ideology, the government’s tax revenues did not fall as a result of Mr. Bush’s income tax cuts, which affected every tax bracket, including a new, lower 10 percent rate for lower-income people. Revenues rose to $1.88 trillion in 2004, $2.15 trillion in 2005, $2.4 trillion in 2006 and $2.6 trillion in 2007 (a record that stands today).
In other words, tax revenues rose by more than $800 billion in just four years because of cutting tax rates and boosting economic growth that pushed the Dow Jones industrial average index to a record 14,164 points on Oct. 9, 2007.
At the same time, the national unemployment rate plunged as the economy expanded: dropping to 5.5 percent in 2004, 5.1 percent in 2005 and down to 4.6 percent in 2006 and 2007.
As the government’s revenues increased, Mr. Bush’s budget deficit fell sharply, dropping to a tame $161 billion in 2007 - a record Trillion-Dollar Obama can only dream about.
Then the subprime-mortgage-induced recession struck in 2008 and revenues fell to $2.5 trillion, and the jobless rate rose to 5.8 percent.
Nevertheless, the Bush tax cuts helped get our country through some very tough economic times not of Mr. Bush’s making, and even Mr. Obama grudgingly saw the wisdom in renewing them for another two years.
There’s a lesson in all this for Mr. Obama and for our still very fragile economy. But he shows no signs that he has learned it.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
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