By Jerry Bowyer
Last Sunday on This Week with George Stephanopoulos, Bill Clinton’s core political values were put on full display. Unencumbered by any looming electoral evaluations (at least for the ex-president personally), Clinton played the race and class cards with sincerity and passion. It’s clear now that the Bill Clinton of welfare reform and capital-gains tax cuts is the construct, and that the Bill Clinton who blamed black looting in New Orleans on tax cuts for the rich is the real deal. Thirteen years after he was first elected to the Oval Office, it’s nice to know the face from the mask.
But did tax cuts for the wealthy really make things worse in the Gulf Coast? Should they be repealed, as some (including Clinton and former presidential candidate John Kerry) have suggested?
To answer these questions we should take a careful look at the period of time between the current president’s first tax cut (which cut taxes for the poor and middle class but deferred tax cuts for the wealthy) and the full implementation of his tax cuts for all, which occurred in May 2003. You see, there was recently a period of time when tax rates were exactly what Clinton/Kerry say they want today — a period of roughly two years when the lower bracket tax cuts were implemented and the higher bracket tax cuts were not.
Comparing the Clinton/Kerry tax regime to the “Bush getting everything he wanted” tax regime reveals a tremendous difference in wealth creation and (more to the point) tax revenues. The new cash that’s flooding into the Treasury today, compared with the period before the 2003 “tax cuts for the rich,” is more than enough to pay the entire imagined Katrina reconstruction cost for the entire life of the project. In other words, one year’s supply-side revenue growth is enough to do the job.
Whether or not the government should rebuild the Gulf region is a philosophical question. Libertarians and small-government conservatives are skeptical of a federal role in the process. For the record, BuzzCharts stands with the “compassionate conservatism” of George Bush, but reasonable people can debate this from principled corners.
Philosophical niceties aside, the governing coalitions of the right and the left in Washington seem to agree that there’s a national interest in rebuilding the Gulf. The only question left is whether we want to do so with the economy producing $10.9 trillion in new wealth per year, like it did before taxes were cut for the wealthy in 2003, or with the economy producing $12.2 trillion per year, as is the case today.
Whether we fund reconstruction through the direct expenditure of current revenues or through deficit spending, we will reconstruct this region of the South by setting aside a portion of our annual wealth creation. But the more wealth we create, the easier this will be.
– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Blue Vase Capital Management. He can be reached through www.BowyerMedia.com.