|Here we look at the last 30 years. The graphs show the annual growth
rate measured each quarter. We mark some of the long term trends with
orange arrows. The second graph adds, in green,
the normalized employment growth rate for comparison.
First we note, the two strongest persistent growth spells occurred
from 1975-1979, and 1996-2000. Neither of these eras were characterized
by a tax cut. In fact, the second was a time of a "tax on the
Next look at the two years of tax cuts. A tax cut went into effect
in the beginning of 1982. The economy continued downward until 1983
when both interest rates, and oil
costs dropped. Tax cuts went into effect in 2001. The economy
remained sluggish until 2003. And even this "surge" averaged
lower than the era of Clinton's "tax on the rich."
So, both tax cuts were followed by sluggish economies. The tax
on the rich was followed by a strong economy. This seems to negate
the economy-stimulating tax-cut hypothesis. (Note: this does not
mean the author supports high taxes. Simply, we're checking to see
if we can validate the hypothesis. Also, we are surprised to see
that the downward trend under Bush Sr started long before the Gulf
|Real Economy: Opportunity and Stability for the populace
We added the growth in employment to the graph above recognizing
that regardless of the GDP, the economy is only strong if its creating
opportunities and security for the citizens. We measure GDP because
we believe that if there is more wealth total, there will be more
for the citizens. But this is not guaranteed.
Since the tax cut of 2001, real employment growth never really
resumed. So the oxymoron "jobless recovery" was coined
to create the illusion that growth without opportunity is good.
|But do we always need more jobs? Did the growth provide wealth enough
to go around, even without new jobs? We can look at both incomes and
the poverty rates for that.
|Except for the formation of a bubble, incomes dropped in the 8 years
following the 2001 tax cut. The highest GDP growth occurred in 2003.
However, in 2003 the bottom half of wager earners suffered a drop
in income. So the "growth" was not reaching the populace.
Not surprisingly, with incomes dropping, poverty was increasing. Again,
the "growth" was not reaching those who need it most. Ironically,
poverty was dropping in the 8 years before the tax cuts, but increasing
|We already know better, but we might ask is the increase being
used to pay off old debts? No. The federal deficit is growing
at the fastest rate since WWII. In fact the deficit is growing
at about $650/citizen each year.
|A Quandary: Where is the money going?
|So the information above leads to a quandary? Is the GDP growth
since 2001 real? If so, where is the money going? It's not going to
improve the standard of living for over half of us. It's not pulling
people out of poverty. It's not reducing the deficit. Either the money
is disappearing into a hole somewhere or the growth is not real!