Nov 27, 2017
WSJ: Is America Doomed to The Slow Growth & Stagnant Wages of the Past 11 Years? Republicans Must Decide with Tax Reform
Post by Freedom Partners
Congress has the once-in-a-generation opportunity to enact pro-growth tax reform, and with it lower rates for millions of Americans and take positive steps toward unrigging the system set up to benefit the well-connected few at the expense of ordinary Americans.
As Congress inches closer towards this goal, analyses from organizations like the Congressional Budget Office (CBO) are often put under the microscope by lawmakers and the press.
However, according to a Wall Street Journal editorial, there’s reason to be wary of “inherently speculative” CBO estimates that have “typically underestimated” the economic growth and revenue returns from tax cuts.
“A classic example is the 2003 cut in the tax rate on capital gains. Dan Clifton of Strategas Research notes that in January 2004, eight months after the tax cut passed, CBO predicted $215 billion in capital-gains revenue through 2007. The actual figure? $377 billion. CBO underestimated economic growth and how much investors would cash in their gains,” the editorial board wrote.
In fact, CBO’s current estimates for this year’s tax reform proposals are based on the projection of a confounding average economic growth of 1.9% a year.
“[T]he U.S. economy has never grown that slowly for so long,” the Wall Street Journal explains. “CBO says that every 0.1% increase in GDP adds about $270 billion in revenue over 10 years. That means a mere four years at 3% growth—the U.S. historical norm—could fill a $1 trillion hole. An average growth rate of even 2.4% over the decade would more than fill the hole.”
The Journal editorial board also points out that Larry Lindsey, former director of the National Economic Council under President George W. Bush, previously predicted that economic growth under the GOP plan would accelerate to 3.2% for three to five years and then settle at 2.5%.
Under the Obama administration, the U.S. economy never reached 3 percent average annual growth – instead hovering around an anemic 2-percent. During this time, Americans fell further behind while special interests leveraged the rigged system to get ahead.
“…[A]nnual GDP growth never hit 3% under Obama, prompting economists to dub the era a ‘low-growth’ environment. Prior to the 2000s, the U.S. was no stranger to annual GDP growth upward of 3%,” Fortune reported. According to PolitiFact, every president since Hoover “has seen at least one calendar year with annual GDP growth of at least 3 percent or higher.”
Tax reform represents the once-in-a-generation opportunity to help unrig this broken system, grow the economy, and create jobs and bigger paychecks ordinary Americans deserve.
“Republicans need to decide if they still believe America can prosper again, or if it is doomed to the slow growth and stagnant wages of the last 11 years,” The Journal states.
History proves that tax reform, which lowers rates and creates a simpler, fairer and flatter tax code, will benefit all Americans. Tax cuts under presidents Kennedy, Reagan and Bush resulted in strong economic growth, billions of dollars more in federal revenue, thousands of dollars more in disposable income and millions more jobs Americans deserve.