Tax cuts bolster US economy to 7.2% growth rate.

[Sabastian]

This certainly flys in the face of all the nay sayers that suggested tax cuts would not help the economy.

U.S. economy booms with 7.2% growth

Peter Morton, Washington Bureau Chief
National Post, with files from The Canadian Press


Friday, October 31, 2003

WASHINGTON - U.S. economic growth exploded during the third quarter, hitting the fastest tempo in nearly two decades and pumping the economy past the US$11-trillion mark for the first time in history.

Sharply higher consumer spending and long-overdue corporate spending helped push the growth rate to 7.2% between July and October, far higher than the 6% most economists -- including Alan Greenspan, the U.S. Federal Reserve chairman -- had expected.

"It really was a spectacular number, right across the board," said Dick Wolf, senior economist at RBC Capital Markets in Toronto.

Growth during the third quarter more than doubled the 3.3% expansion rate during the second quarter of the year, prompting economists to start revising upward their forecasts for the final three months of the year.

U.S. consumers mostly spent their combined US$26-billion in tax breaks and refund cheques mailed out this summer by the administration of George W. Bush, the President, and this is helping to boost consumer spending to the highest level since 1997.

"The tax relief we passed is working," Mr. Bush said, citing the new numbers. "We left more money in the hands of the American people, and the American people are moving this economy forward."

Besides a 6.6% increase in consumer spending -- the strongest since 1997 -- growth was also driven by an 11.1% increase in business spending and a 9.3% increase in exports.

Adjusted for inflation, U.S. gross domestic production during the third quarter reached US$9.8-trillion. Unadjusted for inflation, GDP rose 9% to stand at just less than US$11-trillion.

"There's nothing but good news here," said Laurence Meyer, a former Federal Reserve governor and visiting scholar at the Center for Strategic and International Studies, a Washington-based think-tank.

"There was broad-based strength in final demand, and a key component that people had been worried about -- business fixed investment -- was very, very strong. The economy has turned the corner."

EDITED for additional quotes.

http://www.nationalpost.com/home/story.html?id=977912F5-01BC-424B-B8B8-B3EA4C52066B

 

[Clashman]

I would like to see exactly where this growth is occurring. It seems to me that there are very, VERY few businesses hiring new workers. And there also seems to be no large rash of people getting raises or bonuses. Giving to charities is down for the first time in over a dozen years, which I find surprising, given this "economic resurgance" we are witnessing, it would seem that disposable income for most Americans is quite tight at the moment.

 

[RussSchultz]

As in all economic data, we've got a correlation, but does it mean causation?

Though it is mighty strange seeing some people out there claiming the uptick was due to Clinton/Gore's economic policies.

(But secretly, yes, in your face you anti-tax cut whiners)

 

[RussSchultz]

I would like to see exactly where this growth is occurring. It seems to me that there are very, VERY few businesses hiring new workers. And there also seems to be no large rash of people getting raises or bonuses. Giving to charities is down for the first time in over a dozen years, which I find surprising, given this "economic resurgance" we are witnessing, it would seem that disposable income for most Americans is quite tight at the moment.

Remember those tax rebates that came back? Suprisingly they correspond with the quarter with the growth.

You don't need job growth for the economy to grow. Its certainly better, but it is not necessary. (And speak for yourself concerning raises and bonuses. Both the company I work for and my wife's have been through bad times, turned the corner, and are now *shock* profitable and hiring.)

 

[Clashman]

BTW Sabastian, I'm pretty sure that you're misinterpreting that Einstein quote of yours. Here's another one:

This crippling of individuals I consider the worst evil of capitalism. Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career.

I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals.

Einstein was an avowed Socialist who was also very critical of the Soviet regime.

Nevertheless, it is necessary to remember that a planned economy is not yet socialism. A planned economy as such may be accompanied by the complete enslavement of the individual. The achievement of socialism requires the solution of some extremely difficult socio-political problems: how is it possible, in view of the far-reaching centralization of political and economic power, to prevent bureaucracy from becoming all-powerful and overweening? How can the rights of the individual be protected and therewith a democratic counterweight to the power of bureaucracy be assured?

Taken from "Why Socialism?" by Albert Einstein.

 

[Saem]

In general, my thoughts on the matter are that the tax cuts helped, the US doesn't have too much interms of social programs when compared to other nations with simillar population densities, that said they don't need to get taxed as much to sustain them.

Sabastian,

I've read the National Post many times and it's usually right-wingers slagging all that doesn't suite them. I don't read it any more except to check up on their reporting. I believe this article along with others is just crap to proport right-wing mentalities in Canada. Which will ultimately screw us since our population's economic stratas have ridiculous gaps. I'm not a huge believe in distribution of wealth, but there is something wrong with the way things are in Canada. But like I said before, they're probably right in this regard.

 

[Clashman]

There's a difference between economic growth and sustained economic growth, Russ. Which is why I would be cautious when looking at those numbers. I'm willing to bet that probably in excess of 80% of all people who recieved rebates have spent the sum total of their rebate already, meaning that the growth witnessed here will probably not transfer into long-term growth.

 

[RussSchultz]

There's a difference between economic growth and sustained economic growth, Russ. Which is why I would be cautious when looking at those numbers. I'm willing to bet that probably in excess of 80% of all people who recieved rebates have spent the sum total of their rebate already, meaning that the growth witnessed here will probably not transfer into long-term growth.

Its certainly possible, and only time will tell.

However, from what I've read (and seen personally), business investment is up, inventories are down, consumer spending is up. There will be economic activity to replenish the inventories, etc. My personal opinion is the economy IS doing better, though certainly not going to grow a sustained 7%.

edit: forgot to finish a sentence. oopsie

 

[Sabastian]

In general, my thoughts on the matter are that the tax cuts helped, the US doesn't have too much interms of social programs when compared to other nations with simillar population densities, that said they don't need to get taxed as much to sustain them.

Sabastian,

I've read the National Post many times and it's usually right-wingers slagging all that doesn't suite them. I don't read it any more except to check up on their reporting. I believe this article along with others is just crap to proport right-wing mentalities in Canada. Which will ultimately screw us since our population's economic stratas have ridiculous gaps. I'm not a huge believe in distribution of wealth, but there is something wrong with the way things are in Canada. But like I said before, they're probably right in this regard.

The National Post has a variety of content. Some very liberal ideas are expressed and often. As well there are conservative perspectives. The Globe and Mail as it was before had a monopoly on being the only national newspaper and it was nothing but liberal hogwash entirely before the National Post hit the scene. Now they are forced to compete for readership but more specifically conservative readership so I find now the Globe is more balanced then it used to be but still I find it left leaning. So regardless if you like conservative writings or not, the Post is a fantastic paper from my perspective and long over due. The Globe never had my political perspective expressed and now I have a national newspaper with some conservative content for which I find rather palatable. People need a variety of perspectives so they might judge for themselves what is right, the globe by itself did not have any conservative material at all and was entirely one sided. I say the National Post is a rather realistic paper. On that note I would invite all who post here to go to their front page and read the headlines and articles so they might decide for themselves.

 

[Ilfirin]

There's certainly no sign of improvement around here, quite the opposite in fact. More and more companies are doing more and more layoffs. My mum's company started 6 months ago (and has gotten far worse over the last month) or so and let all their most skilled employees go, which of course, resulted in the business doing far far worse than they were previously. So, to counter that they laid off more people.. and so on. My mum's the controller and doesn't expect to have a job a couple of months from now after working there for 13 years. She's also pretty much the sole provider in our family, and despite posting her resume all over the country for the last few months, has yet to hear a single response.

And when I was in Rhode Island for a wedding, there were a large number of engineers working McDonalds types of jobs just to earn enough to survive. My uncle, who works at On-Semi (a fab), has to work a 2nd, construction, job just to survive.

But yeah, everything's peachy.

 

[Sabastian]

BTW Sabastian, I'm pretty sure that you're misinterpreting that Einstein quote of yours. Here's another one:

This crippling of individuals I consider the worst evil of capitalism. Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career.

I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals.

Einstein was an avowed Socialist who was also very critical of the Soviet regime.

Nevertheless, it is necessary to remember that a planned economy is not yet socialism. A planned economy as such may be accompanied by the complete enslavement of the individual. The achievement of socialism requires the solution of some extremely difficult socio-political problems: how is it possible, in view of the far-reaching centralization of political and economic power, to prevent bureaucracy from becoming all-powerful and overweening? How can the rights of the individual be protected and therewith a democratic counterweight to the power of bureaucracy be assured?

Taken from "Why Socialism?" by Albert Einstein.

Boy, your some proud of that aren't you? That article was written in 1949 BTW. You can take then my quote of Einstein's as some sort of a conclusion, by Einstein (A one time admitted socialist.) that capitalism has some sort of inherent advantage over socialism then. I would like to look into this a little further as well to see if he had any latter reservations with regards but I simply don't have anymore time.

 

[Clashman]

Einstein was only around another 6 years, so that article did come from pretty late in his life. The quote you cited was both an admiration and a critique of capitalism. Admiring in the sense that capitalism has accomplished much. Critiquing the fact that it has largely come at the expense of "public spirit and sense of duty". For a good read on Einstein and his political beliefs, check out http://www.amnh.org/exhibitions/einstein/ , specifically the sections on "peace and war" and "global citizen".

 

[Joe DeFuria]

My uncle, who works at On-Semi (a fab), has to work a 2nd, construction, job just to survive.

Odd...I thought this economy had a jobs problem, and you're uncle has two of them?

 

[pax]

That 7.2 % growth was accompanied by no job growth. I dont think its sustainable and Id bet it was at least partly realized by adding to consumer debt... But any economy will have short bursts of growth like this. I just dont see the foundations for long lasting growth.

 

[Joe DeFuria]

Of course, 7.2% growth is not going to be sustainable. A large portion of it was likely due to one-short refund checks distributed this past quarter for the retroactive 2002 child-tax credit.

That being said, the rebates are not the whole of the tax cuts. They are a small part of it. (Think of the amount of this refund being "sent" to the same people next year...just distributed over the course of the year.)

The foundation for a healthier economy is laid by an overall lessening of the tax burden.

 

[pax]

Well I understand why you believe that but most of the tax burden outside of debt servicing is for services that would cost a lot more in the private sector. Or in loss of services which would result in more unemployment and lost quality of life. Its obvious to me job and wage growth and minimal unemployment is the key to healthy economy.

Taxes are a burden if over time they are an ever bigger share of the economy and up here at least its not the case much except for the shifting of the tax load onto the middle class from business and corporations which has occured in the last 30 or so years...

 

[Joe DeFuria]

Well I understand why you believe that but most of the tax burden outside of debt servicing is for services that would cost a lot more in the private sector. Or in loss of services which would result in more unemployment and lost quality of life.

? Explain.

Its obvious to me job and wage growth and minimal unemployment is the key to healthy economy.

So, based on unemployment statistics, the U.S. economy is pretty damn good, relatively speaking, to say, Canada and most large Euopean countries?

...up here at least its not the case much except for the shifting of the tax load onto the middle class from business and corporations which has occured in the last 30 or so years...

Where is "up here?" (Canada?)

And I thought businesses were made up of people?

 

[Ilfirin]

My uncle, who works at On-Semi (a fab), has to work a 2nd, construction, job just to survive.

Odd...I thought this economy had a jobs problem, and you're uncle has two of them?

He had to because of an extreme lack of job security and insane pay cuts. Makes less with 2 jobs than he used to with one, and the only reason the construction job was open is that it's a job no one wants to do.

 

[Willmeister]

The National Post is nothing but a corporate rag. These guys we pushing for Stockwell Day for cripes sake.

Canada actually has a much more regressive tax system if your poor than the USA. The upper tax rate in Canada is a full 3% less than the comparable US rate, and the cutoff for most deductions is much lower too ($59,000, I believe). One of the dirty little secrets of Mr. Martin's budget 'miracle' has to do with the fact he looted the Unemployment Insurance (and denying workers at a greater rate than Lyin' Brian) to help balance the books and then cut taxes on those who were pushing for tax cuts and balanced budgets. The fact that UI had a surplus basically debunks that the myth that it was just a government handout... Tax-wise, Canada is worse than the USA, but not the way the Canadian Taxpayer Federation would have you believe, since their mandate is to provide 'independent thought' to distract the masses from seeing their true colours. Most think tanks operate that way.

One of the big ways that Canada has maintained it's quality of life is that this taxmoney is spent much more wisely. For how much longer no one can say, but Martin as PM is really starting to scare me. If Harper (or Mackay) manages to get to the PMO, I'm moving.

 

[Sabastian]

The National Post is nothing but a corporate rag. These guys we pushing for Stockwell Day for cripes sake.

Canada actually has a much more regressive tax system if your poor than the USA. The upper tax rate in Canada is a full 3% less than the comparable US rate, and the cutoff for most deductions is much lower too ($59,000, I believe). One of the dirty little secrets of Mr. Martin's budget 'miracle' has to do with the fact he looted the Unemployment Insurance (and denying workers at a greater rate than Lyin' Brian) to help balance the books and then cut taxes on those who were pushing for tax cuts and balanced budgets. The fact that UI had a surplus basically debunks that the myth that it was just a government handout... Tax-wise, Canada is worse than the USA, but not the way the Canadian Taxpayer Federation would have you believe, since their mandate is to provide 'independent thought' to distract the masses from seeing their true colours. Most think tanks operate that way.

One of the big ways that Canada has maintained it's quality of life is that this taxmoney is spent much more wisely. For how much longer no one can say, but Martin as PM is really starting to scare me. If Harper (or Mackay) manages to get to the PMO, I'm moving.

First off I remember more then a few editorials in the National Post that made it quite clear they really thought Stockwell Day was unsuitable. However some of the writers were positive about the Alliance party. Of course you wouldn't know that you don't even read the publication.

Martin did well by putting a more stringent unemployment program in place IMO. It was his economic policy that brought the government out of spending deficits.

I am more then a little pleased that the Federal Liberals are taking Martin as their leader as at least he is a fiscal conservative. The current moron (Our PM.) would have been more properly placed as the leader of the NDP socialist party. Mr. Cretin is an absolute humiliation to our nation. With any luck he steps down to let Paul Martin in earlier. Even with Mr. Martin in though I wouldn't vote for the federal liberals they have too many left wing nut bars in their ranks. I am encouraged by the new federal conservative party in the coming election. BTW I hear New Hampshire is a great place to move these days. Some great things happening there.

Canada could use a tax cut to help boost our economy as well and follow the lead from the south, seems our economy going down the tube.

http://www.theglobeandmail.com/servlet/story/RTGAM.20031031.wgdp1031/BNStory/Business/