Prosperity for all!
I never thought I would write this, but I’m hoping the Democratic Party gains control of the House of Representatives, especially in light of Speaker of the House hopeful Nancy Pelosi’s statement that if the Democrats take control, they will “jump-start the economy.” Like many Americans with finite resources, I’m concerned about my economic well-being, and have learned never to take the vicissitudes of the marketplace for granted. Ms. Pelosi has gone on record stating she wants to make George Bush a “lame-duck” president. Her first priority would be to repeal the 2003 tax cuts – in particular, those that favor individual investing. So I thought we might examine the prospects of prosperity that lay in front of us:Economic expansion: Since the Bush tax cuts went into effect, the American economy has grown at a rate of 3.5 percent. That’s 6 percent better than the 3.3 percent growth rate of 1990s and 12 percent better than the 3.1 percent growth rate of the 1980. Nevertheless, the economy must need a “jump start,” or Ms. Pelosi wouldn’t have told us it does. I suspect it’ll only be a matter of time before the economy begins expanding at a rate of 4 percent or even 5 percent after the prospective new speaker administers her jump start.Unemployment: Growth is just one aspect of an economy, and many people are concerned about unemployment. To put this into perspective, it might be wise to view this aspect of the economy through an historical lens. America’s unemployment rate has averaged 6 percent since John F. Kennedy held our nation’s highest office. However, that figure is skewed because during the peace-dividend and dot-com era of the ’90s it was 5.8 percent. Today, partially due to the 6.2 million new jobs that have been created since the 2003 tax cuts, the unemployment rate hovers around 4.5 percent.So just imagine what a much-needed economic “jump start” will do to an already low unemployment rate. Could a 2 percent or even a 1 percent unemployment rate be far off? And depending upon the strength of Ms. Pelosi’s “jump start,” by the time the 2008 presidential election rolls around, we could experience the lowest unemployment rate in the history of Western civilization. Of course, if that occurs,Ms. Pelosi might have to initiate a government program or two to attract workers from abroad. Perhaps she could induce some of the millions of unemployed in the broader Middle East to come here and work, just as they do in France, Belgium and The Netherlands. GDP ratios: One of the most accurate measurements of a society’s economic health is comparing a government’s revenues and deficits to its gross domestic product. Again using JFK’s first year in office as a baseline, when the GDP was $545 billion , the federal government’s revenue as a percentage of GDP during the past 45 years has averaged 18.2 percent. Contrast that with fiscal year 2006 when our government’s share of a $13.1 trillion GDP was about the same at 18.4 percent. However, perhaps with a good “jump start,” Ms. Pelosi can increase the government’s share of America’s gross domestic product to 20 percent or 25 percent.The deficit: For fiscal year 2006, the budget deficit was 1.9 percent of the GDP, which is 14 percent below the 2.2 percent of the ’90s, and 37 percent below the 3.0 percent of the ’80s. However, I’m certain this number will be further reduced with a “jump start” regardless of whether Social Security and other entitlement programs are overhauled. And although Ms. Pelosi hasn’t offered anything concrete regarding these entitlement programs, I’m sure she’s just waiting until after the economy has been “jump started” to do so.The stock market: Since Sept. 11, 2001, the U.S. economy has performed better than any other major economy in the industrial world – a phenomenon reflected by both new investment and the Dow, which continues to set record highs. But then no one really knows how much more investment we can attract or how high the stock market will go with increased tax rates.Government revenues: Since the tax cuts of 2003, the U.S. government has experienced a quarter of a trillion dollar increase in tax revenues. However, I must admit that I’m a bit confused as to how federal revenues increased while the president was cutting tax rates.I thought tax cuts meant less revenue for the government, but somehow the federal government is collecting more revenue even though every segment of society is paying less in taxes as a percentage of income. Perhaps the new speaker will explain this in a future press conference. Consumer buying power: According to the latest government statistics, the United States has experienced an overall increase in real wages of 4 percent, which when combined with the concomitant decrease in tax rates, means the average American is experiencing a significant increase in buying power. I salivate at the thought of how much our buying power will be enhanced after the new speaker eliminates the tax cuts. I just hope the retailers in the valley have enough merchandise on their shelves when that occurs.On a personal level, though, I hope this imminent economic boom will encourage the Daily’s editor, Don Rogers, to increase my weekly stipend to at least the level of Tuesday’s commentary writer, Richard Carnes. After all, if the economy is going get even better, we should distribute the wealth equally, right? Butch Mazzuca, a local Realtor and ski instructor, writes a weekly column for the Daily. He can be reached at firstname.lastname@example.org
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