The Economy of 2003 and Tax Cuts
So far in 2003, the economy continues to lose jobs, unemployment is near 6% nationwide and the Bush administration and Congress are wrestling over what to do about it. The administration has requested a $726 billion tax cut consisting of tax rate reductions and the elimination of taxes on dividends. The US House has passed a $550 billion tax cut of tax rate reduction and a decrease in the tax rate on dividends. The US Senate is considering a $350 billion tax cut of tax rates only.
The ongoing recession that we see in 2003 is a product of business cut and consumer spending cut backs. All can be traced back to a combination of the dot-com excesses of the late 90's and lack of corporate accountability by companies like Enron and Worldcom. The dot-com and investment market growth helped fuel corporate IT infrastructure spending and gave consumers a feeling of wealth with regards to their investments and 401ks. Once the bubble burst in mid-2000, corporations found themselves with excess IT capacity and consumers found their personal wealth to be much less that they thought. Excess of one kind usually leads to an economic swing in the other direction. In this case, corporations stopped spending and consumers began to postpone purchasing large ticket items. Combined they generated layoffs and a decrease in consumer spending. Those still with a job, are wondering if they will still have one in the near future.
An elimination or reduction in the dividends' rate, though long overdue should not be considered a priority in the current economic conditions. Tax rate cuts should be aimed at lower and middle income workers as they are the primary engine that will drive the economic recovery. Tax cuts will increase the federal deficit but the economic pump needs to be primed regardless of the effects on the deficit. Left alone, the economy will eventually right itself, but not before many more job losses occur and it citizens suffer.
05/14/03 ( 444 )
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