A common accusation hurled at the Republican majority leading up to the 2006 elections was that it had abandoned the principles it used to get there. This wasn’t the party of Reagan any more, we were told. Leaving the issues of foreign policy aside for the moment, however, we can clearly see that Reagan’s legacy with regard to tax policy is alive and well.
On May 28, 2003, President Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003. The act accelerated certain aspects of his 2001 tax cuts and lowered capital gains and dividend taxes, among other things.
The results were predictable to supply-siders and anyone else who favored ‘Reaganomics.’ GDP shot up, and the job market, in particular, has produced dramatic improvements. Since the 2003 cuts, nearly 8.4 million jobs have been created, according to the household survey (which polls individuals), and we’ve seen an increase of 6.4 million in the narrower payroll survey (which polls corporations).
Just as impressive, however, is the fact that even though 326,000 people re-entered the work force in December, the unemployment rate rose just 0.05%. The job market easily absorbed almost all of its new entrants.
Three-and-a-half years after their latest test, Reagan’s economic principles are running up the score, and his opponents, at least in the markets, are running up the white flag.