If former President Clinton had overseen this economy, he’d have held daily Rose Garden news conferences to mark the occasion. In fact, former President Reagan did just that in the booming 1980s -- he gave speech after speech touting the success of his supply-side tax cuts. Yet President Bush seldom goes into the current economic story, and when he does it’s just a mention.
Why the silence? Even the media can’t keep mum about this economy: “Consumer confidence is up as gas prices drop.” “New home sales hit record levels in October.” Business capital spending is strong across the board. Core retail sales are surging.
The recovery narrative is not new, but hardly a day passes without the arrival of more positive economic data.
Real GDP has grown at 3 percent or better for ten straight quarters, averaging 4.1 percent at an annual rate for the best performance since the middle 1980s. Wall Street expects the good times to continue, with a consensus of economists predicting 4 percent growth for this year’s fourth quarter.
Business profits have increased at a double-digit pace for nine straight quarters, only the third time this has happened in 55 years. At 8 percent of GDP, after-tax earnings are at a record high. Ditto for household net worth and total U.S. employment. In fact, average monthly job creation over the past two years is running at 179,000, more than five times the GM layoff total.
The source of this good fortune is clear: American businesses, the backbone of our economy, have responded to tax incentives that sharply reduced the cost of capital. Capital spending expanded at 13 percent last year, the best performance in two decades. This year’s tally should be even larger, meaning more jobs and higher incomes.
Actually, the business story is larger than life. With record profits and cash flows, businesses are now paying out record dividends and share-buyback capital gains, while at the same time investing heavily in new plant, equipment, and technology. This good news hits home. At lower tax rates on dividends and capital gains, 57 million equity-owning families will have the option of reinvesting their new cash or spending it. The economy benefits either way.
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