Friday, April 27, 2007
Interesting article in today's U.S. News & World Report: The Dow and the Bush Tax Cuts, by James Pethokoukis:
With the Dow industrials making new records every day of late–even cracking the 13,000 barrier to fascinate all the Wall Street numerologists out there–I thought it would be a real kick to see how the stock market has performed since Congress passed the 2003 Bush tax cuts on May 23, 2003. (The Jobs and Growth Tax Relief Reconciliation Act accelerated the 2001 tax cuts and cut taxes on capital gains and dividends.) Since then, the Dow is up 52%, the S&P 500 60%, and the Nasdaq 69%. (Overall, the stock market has created some $6.8 trillion in new wealth since then as the size of the economy has grown by some $2.8 trillion, not adjusted for inflation.) ...
[O]ne could argue that the super stock market and declining deficit are somehow happening independently of the tax cuts. That is what the government's "static analysis" economic models do. They're the same ones, of course, that predict no negative economic effect from $2 trillion of tax hikes if the Bush tax cuts from 2001 and 2003 are left to expire at the end of 2010, as some in Congress and in the Democratic presidential race advocate. I wonder if investors will have the same benign analysis.