Speaking eloquently and very thoughtfully from the deck of the aircraft carrier USS Abraham Lincoln last week, with the magnificent backdrop of our marvelous young men and women of the Navy, President Bush announced the end of major hostilities in Iraq. Unfortunately, we're not able to accompany that good news with any good news on the economy.
Overall, the economy grew at a tepid inflation-adjusted rate of 1.6 percent in the first quarter of 2003, virtually unchanged from last year's fourth quarter rate of 1.4 percent. No wonder: Fixed investment in the economy fell in the first quarter, including a 7 percent drop in the computer industry. Construction spending and manufacturing activity also were off in March, and there were worrisome indications of weakness in the housing market, which had been the one bright spot in an otherwise gloomy economic picture.
To top it off, Fed Chairman Alan Greenspan says there's no need to cut the top rates because there is sufficient stimulus in the economy already.
Despite the skepticism of Greenspan - whose job it is to keep the dollar stable, not conduct tax policy - we desperately need lower tax rates on capital and labor now.
Without more capital investment, the economy cannot sustain new job creation, so it is not surprising that the economy continues to shed jobs and we find ourselves mired in a jobless recovery with unemployment at its highest level since 1994. The Labor Department reported the day after the president spoke that the unemployment rate rose to 6 percent in March with 48,000 lost jobs.
Unfortunately, the only thing currently growing at a robust rate is the size and scope of the federal government. Left unchecked, this growth in government presents a significant drag on the potential for future growth of the private sector and the overall health of the economy.
Bush realizes that it is the private sector, not the government, that is the catalyst for economic growth, and so he has proposed an economic growth plan that centers on tax reforms and incentive-based tax-rate reductions rather than promoting pork-barrel spending schemes in the name of fiscal stimulus. As annoying as the misinformation about the president's tax proposals from the political left may be, they are not nearly as destructive as the rear-guard assault on the president's sound economic proposals by the "fiscal austerity" wing of the Republican Party, which continues to place budget deficits uber alles, even over restoring strong economic expansion.
It is really a shame that Republican Sens. Lincoln Chafee, Olympia Snowe and George Voinovich deliberately and single-handedly torpedoed Bush's tax-reform proposals to restore long-run vitality to the economy.