J O B S
by Rense Johnson, Chairman
Citizens for Term Limits … for a fresh Congress!
November 25, 2008
We wrote in October of this year C’mon McCain-Palin, Now is the Time for a Market-Steadying Tax Cut. In it we said:
When President George W. Bush got his famous tax cuts approved by Congress early in his first term, he was putting into practice what Presidents John Kennedy and Ronald Reagan already knew. In Kennedy’s words: “A rising tide lifts all boats.” Meaning, that lower tax rates stimulate economic activity, benefiting the economy as a whole. Paradoxically, as the economy benefits from that increased activity, the government takes in more tax dollars, even with the lower tax rates. The rising tide metaphor is indeed apt. Indeed, that increased economic activity also means more jobs for Americans.
After the Bush tax cuts passed early in his first term, the stock market, as measured by the Dow Jones Industrial Average, tacked on a gain of approximately 25% to the all-time intra-day high of 14,198 on October 11 of 2007, just over a year ago. This was promptly followed by a Democrat-created initial 2563-point plunge as of July 31, 2008. Then another Democrat-created low of 10,828, then the gut-wrenching 500-point plunge of September 15, 2008, a product of all those which for years had preceded it.
The big drops occurred about six months after the tax-and-spend Democrats took over in Congress. Is there a connection?
Absolutely. Why? Their lack of legislative accomplishment and politically-motivated infighting left Americans gasping.
Democrats, the perennial enemies of tax cuts, do their best to pauperize the American people.
But the tax cut idea didn’t originate with Kennedy. According to an article written by Glen Abel for the Calvin Coolidge Memorial Foundation...
“On April 12, 1921, President Harding went before a contentious Congress and presented his program for economic recovery which he called “A Return to Normalcy”. Harding’s normalcy program consisted of the following measures.
1) A call for a national budget program (which was vetoed by his predecessor).
2) National debt reduction
3) Tax reduction
4) An emergency tariff to protect American industry and farm commodities.
5) Farm relief legislation (farm bankruptcies were up 20% from 1914).
6) Immigration restrictions to protect American jobs.
“President Harding pushed hard for his program and got it passed by Congress in 1921. By late 1922, the economy began to turn around. Harding did not live to see it, but his normalcy program proved to be the foundation that Coolidge prosperity was built on. Harding’s successor, Calvin Coolidge had the wisdom to stay the course and build on Harding’s program. The American people were the beneficiaries of the unprecedented prosperity of the 1920’s. Unemployment was pared from its high in 1921 of 20% to an average of 3.3% for the remainder of the decade. The misery index which is a combination of unemployment and inflation had its sharpest decline in U.S. history under President Harding. The Gross National Product averaged 7% from 1924 to 1929. Wages, profits, and productivity all made substantial gains during the 1920’s. Harding slashed federal spending by two billion from Wilson’s last year and Coolidge maintained that spending level of 3.3 billion per year for the rest of the decade. The Harding-Coolidge tax cuts produced increased revenue that went to cut the national debt left by Wilson by one-third.
“The 1920’s saw the tax burden of middle Americans decrease while most lower income Americans were relieved of their tax burden altogether. By 1930, their was a sharp increase in the number of Americans who could afford what were then middle class luxuries such as ranges, ice boxes, radios, vacuum cleaners and other household appliances. There was even an increase in the amount of time Americans found for recreation and entertainment.
“Despite what our historical elite have professed to us, the economic policies promoted by Harding and Coolidge during the 1920’s created a level of prosperity our nation would not see again until the 1980’s. It is long overdue for Harding and Coolidge to receive the acclaim they deserve for rescuing America from economic depression and returning it back to normalcy.”
When we called for a market-steading tax cut, we were following in the footsteps of the Kennedy, Reagan and Bush, as well as Harding and Coolidge. There is plenty of evidence that tax cuts work whenever practiced. President-elect Obama would do well to heed this wisdom. It is also great ammunition for Republicans in the congressional minority. Americans instinctively understand the benefits of tax cuts.
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