WASHINGTON -- What if Barack Obama had begun his presidency by enacting a permanent tax cut that further lowered income tax rates, cut the capital gains rate in half and reduced business taxes across the board?
Instead of a $1 trillion spending stimulus that enlarged government and created few jobs, and instead of the other wasteful initiatives he tried and has since proposed that have or will cost our economy several trillion dollars, what if he had invested that money in pro-growth tax cuts that would have significantly shortened what is turning into a monster, four-year recession with no end in sight?
If he had, the Great Recession would be behind us, the economy would be growing at a brisk clip, unemployment would be declining, federal revenues would be rising and the deficit would be shrinking by now.
That's what happened with the Kennedy tax cuts in the 1960s when that decade ended with a budget surplus, and in the 1980s with the Reagan tax cuts that ended a severe recession in two years, created millions of new jobs and resulted in surging quarterly growth rates that Obama can only dream about.
Former President Bill Clinton doesn't mention it now, but the economy took off in his second term after he signed a capital gains tax cut that unlocked investment capital and led to an explosion of jobs in the high-tech sector and a budget surplus.
Obama came into office with the twisted belief that George W. Bush's tax cuts worsened if not actually caused the economic catastrophe he inherited. To a large extent, he turned half the voters against tax cuts.
But the recession was triggered by the subprime mortgage debacle, not by Bush's tax cuts, which actually carried the economy through some major body blows -- from the 2001 dot-com recession, the 9/11 terrorist attacks, a series of scandals on Wall Street and Hurricane Katrina.
By the year before the 2008 recession, federal receipts had risen by more than $800 billion, the national jobless rate had fallen to a low 4.6 percent and the budget deficit was a modest $161 billion.
That fiscal record was virtually erased from the nation's public memory by the fierce recession that followed and by Obama's false charges that the Bush tax cuts got us into this mess. That's right, the very same tax cuts that Obama agreed to extend for two years to give the economy time to recover.
Obama's advisers underestimated the severity of the recession and the need for stronger medicine. Capital investment was on strike, banks toughened lending rules, and businesses large and small were struggling or going under.