Most opponents of Bush’s tax cuts have questioned the administration as to whether or not “the rich” should receive large cuts. Some of the Democratic presidential candidates say they favor tax cuts in general, but that the cuts should be primarily aimed at the poor and middle classes. Their reasoning is that the rich don’t need them.
If you believe that, then you must have been very pleased in 2001, when Congress passed the ideal demand-side tax cut — one in which the wealthy were excluded, and the poor and middle classes received consumer-demand stimulating rebate checks. Critics of Bush at the time said the tax cuts delivered the “worst economy since Herbert Hoover,” an incredible overstatement. In truth, 2001 was a recovery year, but a weak one — exactly what you should expect when you leave the wealthy out of the tax-cut equation.
It wasn’t until May of last year, when “the rich” were dealt into the game, that the weak recovery strengthened. More important, however, is the fact that the employment picture improved as well, as most of “the rich” are small-business owners running sub-chapter S corporations (which show profits as part of a personal income-tax return). The result is undeniable: When Bush signed his tax cut in May, unemployment was at 6.4 percent. At the time of this writing, it stands at 5.7 percent (much better than historical averages) and dropping.