Those tax and spend policies actually took more capital away from the private sector, thus perpetuating the economic woes of the nation. What the nation needed then more than any time in our history was more private capital to stimulate the economy. That is why tax cuts are so crucial to economic growth; they allow more capital to flow through the economy and create more products and jobs as a result.
Still not convinced? In the 1960’s, President John Kennedy used supply-side economic policies to stimulate our economy through income tax rate cuts and the economy soared. The GDP grew by 50.5% as a result.
In the 1980’s, Ronald Reagan used supply-side economic policies to cut income tax rates and again the economy exploded, leading to economic growth every month for seven years in a row.
Once again, it was Keynesian policies that stopped that economic growth when George H. W. Bush broke his campaign promise to not raise taxes and signed a Democrat tax increase bill. The result was an economic recession.
In 2003, President George W. Bush, along with a newly elected Republican majority in both houses of Congress, cut income tax rates and the nation’s economy grew immediately by 4.4%. It is interesting to point out that the rebate checks and tax cuts of 2001 helped grow the economy by only 1.9%.
Clearly, cutting taxes on income, business, trade and investment yields a much greater return for the American people than rebate checks. Thus, a true stimulus package would contain cuts in income tax rates, the corporate tax rate so our nation’s business community can compete in a global market, a cut in the capital gains and dividend tax rates to encourage more investment in the economy and a repeal of the inheritance tax, which is sometimes called the “death tax.”
A stimulus package of rebate checks alone is not the best solution to a sluggish economy, as the money returned to the taxpayer will only help the economy for a month or two at best.
Congress and the president should have pushed for a reduction of tax rates on income, business and investments in order to have long-term growth and expansion of our economy.
The evidence of history shows that only through supply-side economic policies can our nation create more jobs, produce more goods and expand the size of the economy -- which in turn begins to swallows up the deficit -- along with a greater standard of living for everyone. Anything less is not really much of an economic stimulus plan.