Did the 2001 Tax Cut Work or Not?
Go figure – the National Review is on the tax cut bandwagon again. Lawrence Kudlow provides a summary of all the GOP Presidential candidate’s ideas but he offers no analysis beyond calling the Huckabee Flat Tax “flawed” and tossing words like “gonzo” around as if such terms carried some deep economic meaning. OK, Kudlow has decided to criticize President Bush for turning to the Keynesian dark side. But we have to turn to Thomas Nugent to see what the NRO nitwits are really thinking:
The idea is that a lower fed funds rate will free the economy from weakness by encouraging borrowing and spending. But the pundits seem to forget just what led the U.S. out of its most recent downturn, the Y2K-induced mini-recession of 2001. President Bush and his advisors saw the need for immediate fiscal stimulus, and they pushed through a tax-cut package that at least neutralized the downturn. Unfortunately, since there were not enough incentives built into that tax cut, financial markets were unimpressed and the bear market extended into 2002.
Hmm? It was that “perfectly timed” 2001 tax cut that saved the day! Or was it as Nugent admits that the recovery was really weak until late 2003. But then Nugent claims it was those 2003 reductions in dividend tax rates that led to the recovery. Increases in defense spending, business investment finally unwinding its overhang from the investment led recession and responding to falling long-term rates, and rising exports from dollar devaluation were all irrelevant I guess. What passes for economic commentary over at the National Review gets sillier and sillier.
Update: This source, which one of our rightwing trolls says does not exist, shows that real defense spending increased by 7.4% in 2002, 8.7% in 2003, and 5.8% in 2004. The biggest jump came in the second quarter of 2003. But our rightwing troll says this had nothing to do with the fact the real GDP growth finally took off in 2003. Yep – rightwing trolls get to call those of us who live in the real world liars as facts really do not exist in their world. Go figure.