A serious omission from Bernanke’s list, however, was tax policy. Total marginal tax rates for the U.S. workforce are substantially lower than in Europe and Japan. In particular, the 15 percent tax rate on investment (capital gains and dividends) put in place by President Bush (following President Clinton’s cap-gains tax cut from 28 percent to 20 percent) has given tremendous torque to productivity, job creation, and economic growth.
Capital formation is the key to worker productivity and consumer prosperity. Visionary entrepreneurs, those who discover new technologies or innovate those that exist, must be financed with capital. In the longer term, capital-induced productivity increases lead to greater wage gains and enhanced consumer spending power.
This is precisely what separates the men from the boys in the world economy.
Despite all this, the economic Left is rebelling against the Bush prosperity. Along with articles in the New York Times and Washington Post, the Economic Policy Institute released a Labor Day study complaining that while productivity has increased 33 percent over ten years, real wages have declined since 2000.
But this neglects a broader measure called total compensation, which includes tax-free retirement and health benefits. Across the 2000-05 period, inflation-adjusted total compensation has increased 13.1 percent, and over ten years has advanced 31.8 percent, in line with the productivity rise. That’s a bright picture.
It’s okay to have a pessimistic point of view. But it’s not okay to cherry pick data in order to reveal a worst-case Bush-bashing scenario. It’s equally pathetic when the class warriors on the Democratic left can only carp about one alternative proposal: raise taxes on the rich.
This political loser has relegated the Democratic party to secondary status for twenty-five years. Just take a look at the exit polls from the 2004 election. President Bush carried 49 percent of those earning between $30,000 and $50,000, 56 percent of the $50,000 to $75,000 earners, and 55 percent of the $75,000 to $100,000 earners. Meanwhile, 41 percent said Bush’s tax cuts were good for the economy, as opposed to 32 percent who said they were bad.
Tax cuts are a winner. They throw off benefits across the board: capital formation, profitable business, job gains, wage increases, and consumer spending power.
You’d think the Dems would learn. But they never do.