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Will Bush’s Tax Cut Stimulate the Economy, Create New Jobs?
by
Gregory J. Rummo
As the debate
over the president’s tax cuts heat up, it is clear
there are two major points of contention: Will it
stimulate
the economy creating new jobs? And is it fair that
the largest portion of a tax cut be given to “The
Rich?”
“The Rich” (read “The Filthy Rich”) is a phrase
invented by Democrats who have decided they can get
more votes by
vilifying Americans who pay the most in taxes every
year than to honestly identify this group as “those
hard-working Americans
in the highest tax brackets.”
It is mathematics—not a question of morality—that
in an across the board tax cut, those who pay the
most in taxes will
get the largest reduction. Similarly, those who pay
little or no tax, get little or no reduction.
Try singing the Billy Preston tune, “Nothing from
Nothing,” if you struggle with this concept.
The truth about which Americans pay the most taxes
is breathtaking.
The Internal Revenue Service records for 2000
reveal that over 50 percent of the tax revenues the
Treasury received
were paid by the top 5 percent of wage earners. (67
percent was paid by the top 10 percent of wage
earners; 84 percent by
the top 25 percent; 96 percent by the top 50
percent.)
Who says “The Rich” aren’t paying their fair share?
In many cases, “The Rich” are not as Webster
defines those who “possess great material wealth.”
The majority in the
group that pays 96 percent of taxes have incomes
below six figures. Many are small business
owners—employers—and in a
position to use a tax cut for reinvesting into
their businesses for things like replacing or
upgrading equipment or hiring people.
Because the U.S. economy is driven by consumption,
anything that places more money into the hands of
those most
capable of spending it and investing it will
ultimately help buoy everyone’s boat.
But is the president’s tax cut large enough and
will its effect be felt soon enough by those who
recently lost jobs?
That’s a tough question—especially for those among
the ranks of the unemployed, now hovering at 6
percent.
George managed the quality assurance department of
a mid-size software development company. He has
been out of
work for several months and prospects of finding a
new job in his field don’t look good. He has been
spending his time
networking by calling friends and associates. He
has also applied for jobs on the Internet.
“The last two human resources people that called
had 100 and 70 resumes in front of them
respectively. That makes
the odds of getting a job a little low,” he said.
Steve is an engineer. He was recently laid off from
his job as a sales representative for a scientific
instrument
manufacturer. He was less talkative but equally
frustrated over the prospects of finding another
job. Although he has been able
to uncover several opportunities in his line of
work, none offered anywhere near the salary he
should be making with his
experience.
Both of these guys have a wife, three children and
a mortgage.
George doesn’t blame President Bush for the
circumstances resulting in the loss of his job. “I
think it would be an
over-simplification to try and pin this sluggish
economy on one person,” he said.
When asked what he thought Washington could do to
help him find another job, he said, “Anything that
spurs job
creation. However, I must say that I don't look to
the federal government for much of anything.”
And herein lies a truth. The U.S. economy is
dependent on many factors. Fiscal intervention by
the federal government
is only one of them.
A tax cut is a short-term stimulus—a kick start—to
get things moving in the right direction.
Businesses then must take
the ball and run with it, building economic
momentum.
But if consumers and business owners are worried
about the future then they will lack the confidence
to invest and
spend.
The president understands that consumer and
investor psychology is an important factor in
economic growth.
Consequently, the security of the homeland and the
systematic dismantling of terrorist groups
worldwide are his top priority.
The bleak numbers reported by the airline industry
provides a convincing case that the fear of terrorism translates directly to the
erasure of both corporate profits and jobs. And the
bleaker economy in New York City—where unemployment
is up to 8.5
percent (11 percent in the Bronx)—is a direct
result of the terrorist attacks on 9-11.
But there are some factors that are out of
everybody’s control.
The economy is cyclical. The Hi-Tech boom during
the 90s that sent the NASDAQ spiraling upwards and
made
paper-profit millionaires out of taxi cab drivers
led to over-spending, over-hiring, and
over-capacity. We are still paying for
those excesses but the worst is over and many
companies are reporting earnings and offering rosy
forecasts.
The stock market is usually a good indicator of
what lies ahead. Recent upside moves in both the
Dow Jones
Industrials Average and the NASDAQ auger well for
the future. But often these bullish advances occur
months before an
appreciable economic upturn—the kind that causes
companies to hire people.
Can people like George and Steve hang on that long?
“I’m doing a lot of praying, too,” George said.
Gregory J. Rummo is a syndicated columnist. Contact
him at
www.GregRummo.com
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