A recent Treasury report has shown that the federal deficit in fiscal 2005 is already $11.5 billion less than it was in fiscal '04. This is mainly due to the across the board boost in tax revenues that Uncle Sam is bringing in. For example, business tax revenues have risen 45% due to the 20% increase in corporate profits. With more jobs being created, personal tax revenues are up 9%. Furthermore, even though the tax rates on dividends and capital gains were reduced to 15%, the government is still pulling in 14% more in tax revenues from both dividends and capital gains.
All of these gains are due to one thing, lower taxes. By cutting taxes on multiple occasions, the government gave people more money to spend and invest, which in turn creates more business, with more business comes more jobs to meet the increased demands, and with more jobs comes a larger tax base from which to bring in revenue. The government is now bringing in more than it is sending out, which is why the deficit has been shrinking for the last two years. Once again, as current events and history have shown, the best way to grow the economy is to put more money back into the hands of the people who earned it.
UPDATE (Wednesday, January 19, 4: 48 P.M.): This post was published in my hometown newspaper The Tacoma News Tribune today.
If the dollar were to stay low for an extended period of time than yeah it would probably be bad for the economy, but not many economists expect it to be a long-term problem.
ReplyDeleteBill Clinton enjoyed all the fruit of the Reagan Administration's tax policies. He was also smart enough to sign his name to Reagan ideals such as Welfare Reform and NAFTA.
ReplyDeleteBut I do agree that there is no excuse for the amount of discretionary spending President Bush and Republicans engaged in during the first term.