Kudlow on Balanced Budgets and Prevailing Tax Rates
Lawrence Kudlow dons his Bush cheerleader suit again. A few of his claims follows:
Prior to this triumphant return, Bush delivered a major economic speech that touted his plan for a balanced budget at the prevailing low tax rates – a plan geared to extend the economic boom that began in 2003 … It’s about time more people start giving Bush credit for today’s strong economy. That’s right – it’s the greatest story never told. Just look at some of the latest numbers. Real GDP for the fourth quarter of 2006 came in at 3.5 percent at an annual rate. Price inflation inside the report was very low, around 2 percent, with one major price gauge actually dropping its greatest amount in fifty-two years. For the whole of 2006, GDP advanced 3.4 percent. This followed increases of 3.2 percent in 2005, 3.4 percent in 2004, and 3.7 percent in 2003. The latest jobs numbers tell the same story. The most accurate employment gauge, called “adjusted households” (which the Bureau of Labor Statistics created in order to combine the non-farm payroll survey with the civilian-employment household survey), shows nearly 3 million new jobs annually over the past three years – all since Mr. Bush’s supply-side tax cuts of 2003. And the president (or anybody else) shouldn’t fret about so-called wage stagnation, or inequality. Hourly earnings for non-supervisory wage earners averaged $16.76 in 2006, a near 20 percent gain from the last business-cycle peak in 2000 and a 64 percent increase from the $10.20 cycle peak in 1990.
Kudlow keeps saying no one is talking about the alleged Bush boom with his “greatest story never told” but that’s all Kudlow seems to be doing. Maybe he’s worried that no one is listening to him. And why should anyone? He talks about the increase in NOMINAL wages as if that were the same thing as an increase in real wages. And he talks about how the economy has improved in terms of employment growth and the growth rates since late 2003 – forgetting to tell folks that real GDP growth since 2000 has been anemic and that employment FELL from early 2001 to mid-2003.
But let’s take the growth in wages from the end of 2003 to the end of 2006. For average hourly earnings of production or nonsupervisory workers, nominal wages rose by about 10.2% but most of that increase was merely to cover the cost of living. Real wages rose by only 0.6%. Since I trust Kudlow is not stupid enough not to know about the difference between nominal versus real changes, one has to wonder why he assumes his readers are and why he continues to lie to them.
Kudlow later decides to attribute this alleged Bush boom to reductions in tax rates on capital income as if we were witnessing an investment led boom. Funny he forgot to tell us what happened to investment demand during the latest quarter. I was if that is because investment demand fell?
But the greatest whopper that Kudlow told had to do with balancing the budget “at the prevailing low tax rates”. The only projections that show a balanced UNIFIED deficit by 2012 are the ones that assume that the 2001 and 2003 tax cuts expire and are not extended. This is what Kudlow means by prevailing low tax rates. So it seems he must believe that the tax rates under Bill Clinton were low.