This week marks the third anniversary of the implementation of President Bush’s tax cuts on capital gains and dividends. It is worth noting, as Secretary Snow departs, that his time at Treasury corresponded almost exactly with this amazing three-year experiment in supply-side tax policy.
Because he actually shared the president’s pro-growth philosophy and agreed with his program, Snow was able to aggressively promote those tax cuts. Setting aside the “half loaf” compromise of 2001 — which deferred tax cuts for high-income individuals and as a result deferred the recovery too — Snow pushed hard for the pro-growth package of 2003.
The results have been remarkable. The year before the tax cuts passed Congress, the economy was producing a bit more than $10 trillion annually. As of this writing, our yearly gross production is above $13 trillion — an added $3 trillion per year in wealth creation. Even when adjusted downward somewhat for inflation, this aggregate jump in GDP is extremely large. The only larger spikes in modern time came during the bubble years at the end of the Clinton administration and the 2002-05 time period.
There are leadership lessons here. For all of us to prosper, it is necessary that the president’s economic vision match reality. No amount of “vision” or charisma will make bad economic policies work. However, it is also necessary that top economic officials follow the president’s lead. As the above chart shows, when both factors are present, the results can be remarkable.
History should record that Treasury Secretary Snow presided over one of the greatest wealth expansions in modern American history.
– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Independence Portfolio Partners. He can be reached through www.BowyerMedia.com.