The Bush Tax Cuts worked: Exposing the Obama Lies

by on 2 January, 2013

Sun Yong Kim cover picture

Sun-Yong offers his take on the contentious matter of US politics. The coming days may see moves and shifts from unlikely players as they bid to save the day. GC. Ed.

The central tenet of the current ‘Fiscal Cliff’ negotiations between President Barack Obama and Republican Speaker John Boehner has revolved around the extension of the Bush Tax Cuts. It has been contended by President Obama that the Bush Tax Cuts for the so called ‘rich’ should not be extended because they had no effect on stimulating the economy and are the primary reason for the US fiscal situation. Nancy Pelosi perfectly sums up this view through the following remarks:

"I don't see any reason why we should renew a tax cut that only gives a tax cut to the wealthiest people in America, increases the deficit, and doesn't create jobs. That doesn't make any sense.”- Nancy Pelosi, 2009 

Such comments play to a blue collar audience that recently lost jobs at the hands of employers who used taxpayer funded bailouts for their own salary bonuses. However appealing this message of Class Warfare is to some, it fails in reality. Contrary to Nancy Pelosi’s assertions, the Bush Tax Cuts stimulated the US economy and reduced deficit.

Bush Tax Cuts stimulated the economy


Contrary to the Obama fantasy, the Bush Tax Cuts were very effective at stimulated economic growth. Following the introduction of the Tax Cuts, the growth rate increased from 1.7- 4.1%, non-residential fixed investment expanded for 13 consecutive quarters and job growth was uninterrupted for 52 consecutive months. However the benefits of the Bush Tax Cuts also extend to deficit reduction.  

Bush Tax Cuts cut the deficit

Contrary to the left wing media, The Bush tax cuts did not explode the deficit. Subsequent to the Bush Tax Cuts, the deficit was reduced by 60% from 2003-2007 due to federal revenues rising to 18.5% of GDP by 2007, above the long term historical average of 18%. Moreover the Bush deficits averaged just 2% of GDP, one-third less than the average over the prior 50 years. These facts alone warrant the extension of the Bush Tax Cuts; however the political environment remains very challenging. 

Republicans caving to Obama

Given the undeniable facts in favour of extending the Bush Tax Cuts, it is very troubling indeed that the congressional GOP is now caving in to Obama. The Republican House Speaker John Boehner recently proposed a failed ‘Plan B’ to allow the Bush Tax Cuts to expire for those making an income above $1 million USD. Whilst this Republican attempt to raise taxes has failed, it has been rumoured that a compromise deal has been reached between Republican Senate Minority Leader Mitch McConnell and the Senate Democrats to let the Bush Tax Cuts on incomes above $400 000 USD. 

The GOP must stand strong

Whilst the temptation to cede to a popular Democrat President is politically hard to resist, the GOP must do all it can to preserve the Bush Era Tax Cuts. Hundreds of thousands of taxpayers rely upon the GOP as the last line of defence against a string of tax increases that will form part of the Obama agenda if the GOP cedes on the Bush Tax Cuts. For this reason, it is time that the GOP reaffirm itself to the idea of lower taxes for all by exposing the Obama lies on the Bush Tax Cuts and recommitting itself to the extending the Bush Tax cuts for all. If they don’t, not only will the American Economy go down under but so will the credibility of a once great GOP.

Sun Yong Kim studies Commerce/Law at Macquarie University and is a member of the Young Liberal movement. He has also launched a policy magazine/blog, Aus Solutions. www.aussolutions.com.au

 

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