The news is out, and I was right: this recession, or slowdown if you prefer, is finally ending. Of course, I have been predicting that the tough times were ending for more than a year now. With economic cycles, if you predict something long enough eventually you’ll be right.
How do I know that brighter days are at hand? Because everyone says that they are, and our economy depends on confidence to fuel growth.
The statistical economic indicators have been ripe for a recovery for months and months. All that was lacking was people having enough confidence to commit themselves and spend a few bucks. Anticipation of war with Iraq, and then the actual war itself, slowed the pace of the recovery, but with the stunning success of the military campaign, international issues have faded into the background.
Attention is now squarely focused on domestic factors shaping the economy.
Tax cuts: good for what ails us?
There’s an interesting scenario playing out in Washington regarding tax cuts.
George W. Bush, on the campaign trail in 2000, proposed a huge tax cut when the economy was running along at a good clip. At that time, before the implosion of the technology sector and the slew of stock market scandals, few foresaw the coming slowdown. So, tax cuts are good when the economy is good.
Following the economic problems of the last few years, President Bush has been proposing a massive tax cut to get things going again.
Thus, tax cuts are needed to stimulate a sagging economy.
Part of his tax cut plan was passed last year, and he is using his wartime popularity to push Congress to pass more cuts.
However, with the economy showing strong signs of recovery, wouldn’t a tax cut to stimulate the economy be too late? Bad times, good times don’t really matter. Republicans are generally in favor of cutting taxes as a sort of cure-all for any and everything ailing the country.
Underlying fundamental questions
The central issue really has nothing to do with whether the economy is expanding or contracting. It has everything to do with how big the federal government should be. In President Bush’s opinion, our national government has become too large and intrusive and the only way to shrink government is to cut its funding.
The debate really should be about the proper role of the federal government.
Congressman Dick Gephardt, the former House Minority Leader, now Democratic presidential hopeful, recently proposed undoing President Bush’s 2002 tax cut and using those funds, and more, to provide health insurance for all working Americans. Not since Hillary Clinton proposed nationalizing our health care system during her husband’s first term in the Oval Office has anyone seriously suggested such a dominant role for the federal government in dispensing health care.
Is access to health care a right which should be accorded to every U.S. citizen at taxpayer expense? Or, should the government operate on a much more limited agenda and concentrate on defending the beaches and carrying the mail?
Similarly, what’s to be done about state government? With many, if not most, states facing huge deficits this year, what are our expectations about the size and role of state government?
These are fundamental questions that will be answered by the election process over the coming years.
We have developed the best system of governing ever devised by human beings. Its disorganization, twisting and turning is necessary as we make up our minds about what responsibilities are within the purview of government, how big we want our government to be, and what parts of life remain the sole responsibility of the individual.
Regardless of what the federal government does or doesn’t do, it appears that Americans have decided two years of recession is enough and it’s time to let the good times roll. I’m for that!
Thought for the Moment — Never ruin an apology with an excuse. — Benjamin Franklin (1706-1790)
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at email@example.com.