Am I imagining it or has the US economy suffered since the Democrats took control of Congress this past January?
Could it be that their constant talk of killing the 15% capital gains tax, which I believe had reinvigorated our economy, has investors nervous? Or is it their talk of increasing the income tax rate for that segment of the population that already pays the most taxes?
Or perhaps it is the Democratic Congress’s failure to continue the free trade path of the Bush administration which had allowed developing countries around the world to grow themselves out of poverty rather than rely on foreign handouts including those from our taxpayers?
Some are even hinting that the Democratic leaders are purposely sabotaging our economy to stoke up fear and anger at the Bush administration and, thus, all Republicans in the upcoming 2008 election cycle.
In my opinion, it is all of the above.
Say what you will about the Bush administrations efforts in Iraq and Afghanistan but the record is clear that, prior to the Democratic takeover of Congress earlier this year, the Bush economic record included creating more than 8 million jobs which was more than were created in all of the European countries and Japan combined. GNP growth continued at a brisk pace. And consumer confidence was high.
Tax receipts to the federal government are higher than they have ever been. The problem continues to be that Congress – be it under Republican or Democratic control – keeps spending more and more. Just look at the Democrats recent about face on wasteful pork barrel spending – also known as “earmarks”.
The Chairman of the Appropriations Committee Democrat David Obey, who at the start of the year promised an open and transparent earmarking process, has now come out and said he will not allow a debate on earmarks to go forward until it is too late for public and Congressional scrutiny. Get ready for more bridges to nowhere and libraries named after Congressmen.
With the US and world stock markets whip sawing higher and lower for the past month, the Democrats are even trying to minimize any possible blame for spooking investors by saying that their constituents are not big investors in the market so it is not their concern. That demagoguery fails to take into account that the pension funds of their union buddies, government workers, and academic elite are very active investors.
Certainly normal seven year business cycles are also at play here. And a good cleansing of the speculative investments in high yield mortgage funds and securities backed by risky adjustable rate mortgages which are becoming unaffordable for many consumers. If the Democratic Congress really wants to do something useful, they should introduce tough legislation to better regulate the mortgage industry which is more concerned with loan placement fees than qualifying customers for their riskiest products.
With the real estate market still in the doldrums, the stock market in the midst of a correction, and businesses concerned about the cost of capital due to tighter financing options and increased federal taxes, let’s hope that the Democratic leaders will look beyond partisan politics and will renew all of the Bush tax cuts which will give a renewed boost of confidence and activity to the country’s economy.
