The economy: Summer of
our his discontent, yet it’s the truth that counts
While Krugman continues to moan (which caused VikingPundit to say Corrections? We don’t need no stinkin’ corrections), Donald Luskin unleashed the truth squad, and Larry Kudlow listens to The Silence of the Bush Boom
Meanwhile, a splendid group of economic data points show clearly the effectiveness of the president’s marginal tax-rate reductions of two years ago. The tax-cut package was in large part directed at stock market and business capital formation, both hard hit a few years back. This was the correct target. Share prices have recovered about 70 percent in recent years, with a number of widely tracked indexes, like the NYSE and the S&P small- and mid-cap indexes, now trading at all-time highs. The economy itself is growing at about 4 percent per annum since the tax cuts, with business investment leading the surge.
Breaking down the major components of the economy, business spending on equipment and software is now contributing close to 30 percent of the increase in gross domestic product. (Prior to the Bush tax cuts on capital gains, dividends, and personal incomes, cap-ex was a net drag on economic growth.) The business surge has caused industrial production to rise by nearly 9 percent in the past couple of years, or 4.1 percent annually.
As Kudlow says, “The president has a good story to tell, but he must tell it.”