Thursday, September 28, 2006

It’s the taxes stupid

New York Stock Exchange building
Today as Dow Jones Industrial average closed just a few points below its all time high, recorded on January 14th of 2000, virtually erasing all losses from the most recent “great recession” (that regardless of the fact that oil prices are still far above what once was said to be disastrous levels) it’s time to confront yet another misconception instilled in us by those who ultimately benefits from it.

It is a common belief that regulating economic growth is an extremely complicated and delicate matter. But in fact economic growth is simply inversely proportionate to taxation levels with several years of lag time. A sharp drop in taxation levels during Reagan’s administration caused an economic boom several years later, but steadily rising taxes during both Bush the elder’s and Clinton’s administrations brought about a recession that was reversed only by current administration’s tax cuts a few years ago. I’ll spare you citing earlier examples as all this has been brought up many times before.

So, you ask, if achieving economic growth is so easy, why doesn’t every administration (and Congress) just do it? Why every time things start looking up we keep raising taxes up until we slip into another recession? It’s because some politicians see economic growth as an opportunity to collect “excess” money and use it to gain popularity by paying off their potential voters (directly or indirectly). Some even think they really help people and thus rightfully deserve their votes, but in fact all they do is make their voters dependent, “hooked up” on government help. Making more and more people dependent on government help and at the same time undermining the source of government’s income – economic growth, is a downward spiral that can be broken only by reducing taxes just as George W. Bush and Congress did a few years ago.

So on this day let us congratulate President George W. Bush and Republican Congress for job well done in putting the results of past two administration’s tax policy behind us.


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