We pick up the story in 2003, when in the middle of a war and the aftermath of the dot-com burst, 9/11 and corporate scandals, the Republican-controlled Congress did the unthinkable—it cut taxes. Reactions were dire and predictable: fewer jobs, bigger deficits, weakened economy. An example was the comment of one House member who said, “The real question is whether or not the GOP plan will create jobs and jumpstart our sagging economy? It will not. … The real question is whether the GOP plan will only drive our nation further into debt? It will.”
Fast forward three-and-a-half years to now and a very different reality:
* In October, the budget deficit fell to $248 billion. While it’s $248 billion too much, it’s about half of what it was in 2003.
* More than 6.6 million jobs have been created in three years. In the past 37 consecutive months with payroll job gains, more than 5.8 million new jobs have been created. Unemployment is historically low at 4.6%.
* The economy has experienced 19 consecutive quarters of growth, expanding faster annually than any major industrialized nation.
* Tax cuts, pilloried for being “only for the rich,” resulted in the top 1% of earners funding 37% of the $2.047 trillion in income tax revenue over the past year. Corporation tax collections have increased 76% over the past two years.
Doubling the child tax credit, reducing the marriage penalty, reducing taxes on capital gains and dividends-these tax cuts work. The economy grows when families can spend money on personal priorities, rather than priorities imposed by the federal government. It doesn’t make sense to punish healthy financial risks. It makes sense to reward creativity and achievement by keeping the federal government out of people’s pockets. And pockets are filling: per capita disposable income has increased $2,000 since 2001.
Our economy is stable and growing solidly. Consider recent housing market fluctuations—prices are leveling out without dropping off. Also, as difficult as gas prices have been, consumer spending remains vibrant. These signs point to an economy that can absorb negative fluctuations and correct itself without sinking.
Obviously, tax cuts must be made permanent. Furthermore, we must control federal spending. Mandatory programs—Medicare, Medicaid and Social Security—account for nearly half of all federal spending. It’s not fiscally responsible to have these programs on spending autopilot. Reform will ensure these programs’ future viability.
Legislation I introduced earlier this year with my colleague, Budget Chairman Judd Gregg (R.-N.H.), incorporates mandatory spending controls into the budget process. The Stop Our Spending (S.O.S.) Act includes a line-item veto tool that allows a President to target wasteful spending, ask that it be rescinded, and send it to Congress for expedited consideration. The measure adds procedures to automatically slow growth rates for mandatory programs if Congress fails to meet deficit reduction targets, and reinstates statutory caps on discretionary spending. In addition to the S.O.S. Act, I’m proud to be the lead sponsor of legislation that would make tax cuts on capital gains and dividends permanent.
The story of our economy has unfolded quite differently than some predicted. Much has changed in the past three years, but unlike fortune tellers of Congress past, it has changed, unsurprisingly, for the better.