“PAY-AS-YOU-GO” AND THE “BUSH MARKET”.
Nancy Pelosi , House Speaker, is insisting that the so-called “Paygo Rules” be in effect. On the surface, it sounds like a great idea, i.e. if the government spends more on program "A", then it must reduce spending on program "B". However, under the Pelosi plan,” Paygo” does not apply to current entitlements that can grow automatically over the next several decades. Her version of “paygo” applies to only new entitlements or changes in expanding current programs. “Paygo” will not affect Medicare, Social Security, Food Stamps and similar programs which are scheduled to increase federal spending from the current 21% of GDP to about 38% of GDP in 2050. “Paygo” restrains tax-cuts because it requires that tax-cuts be offset dollar for dollar with some entitlement reductions. Tax cuts do not reduce revenues to the Federal Government because of capital gain and dividend tax–rate cuts. Federal revenues climbed by a record $550 billion over the past two fiscal years. The Budget deficit has fallen by $165 billion in two years and it is now down to 1.00% of GDP. And this is without “paygo”. What is needed is spending discipline not “paygo”.
Since the tax-cuts on dividends and capital gains in mid-2003, the economy has created 7.2 million new jobs. Average hourly wages have climbed 4.2% over the past 12 months, which is twice the rate of inflation. The Democrats want the dividend rate to go back to 39.6% from 15%, capital gains back to 20% from 15% and the top marginal income tax rate to 39.6% from 35%. On Friday, January 12, 2007, the Dow Jones Industrial Average rose to a record close to end at $12,556.06. This is the 24th record close since the beginning of October 2006. Have you ever seen a main-stream media story on the “Bush” market of 2005 and 2006? The liberal media has made excuses for any positive economic news and down-played the rise of the stock market. I want to state here and now that we should give President Bush credit for our good economy and call this stock market the “Bush Market”.
Much of above information was obtained from the Wall Street Journal.
Gary E. Marsella