May 29, 2003 | Commentary on Taxes
A World of Difference
Congress and President Bush finally have a tax cut everyone can
OK, almost everyone. After all, we've been hearing throughout the
entire debate from some pundits and politicians who never met a tax
cut they couldn't demonize.
Especially the one Congress approved in 2001. Only part of it has
gone into effect, but that hasn't stopped tax-cut foes from using
it as Exhibit #1 in their latest crusade.
"The Bush tax cuts have failed," Rep. Richard Gephardt, D-Mo., said
recently. "They are not making the economy better, they are not
helping people get jobs." Adds New York Times columnist Paul
Krugman: "It's clear that the administration's tax-cut obsession
isn't just busting the budget. It's also indirectly destroying jobs
by preventing any rational response to a weak economy."
Ironically, though, the president's economic strategy has made our
modest level of growth possible. A study
from The Heritage Foundation's Ronald Utt
notes that our
economy grew twice as fast last year as the European Union's.
That's even more impressive if you consider the unique challenges
our economy faces. The stock market bubble that popped on Wall
Street in 2000 was worse than in Europe. Then the terrorist attacks
of Sept. 11 hit us-hard.
Despite that, only Canada and Australia enjoyed more robust growth
than the United States did in 2002. And let's not forget that
Canada's economy is really an outgrowth of ours and that it gets a
boost because we absorb most of its exports, while Australia models
its relatively low-tax economy after America's.
True, a one-year snapshot proves little, but when Utt analyzed
economic performance over longer periods of time, he found
essentially the same trend. France's experience is typical:
Citizens there have seen their buying power decline relative to
America's over the past two decades-a period during which France
embarked upon an aggressive tax-and-spend policy. Today, taxes in
France consume more than 45 percent of the national economic
output, compared to just over 29 percent in the United
Yes, unemployment in America is up slightly. The jobless rate rose
by one-tenth of 1 percent last year, and we must work to change
that. However, in the Euro Zone (the 12 countries that share
Europe's single currency) unemployment soared by six-tenths of 1
percent. Clearly, the 2001 tax cut is helping us hold the line by
creating the jobs necessary to replace most of the ones we're
What does Gephardt propose? To repeal the 2001 cut and spend the
money on universal health care. He claims that such a step will
create economic growth.
To see if he's right, we need look no further than France and
Germany, two high tax countries with national health care. The
French economy grew barely half as much as ours did in 2002, and
unemployment climbed to 9.2 percent. Even that anemic growth is
better than Germany's. The economy there practically stood still
last year (a growth rate of one-half of 1 percent) while
unemployment climbed to 10.6 percent.
Higher taxes and more government spending aren't the answer.
Remember that, for years, while high-tax Europe struggled and
free-spending Japan suffered, the American economy soared, pulling
the rest of the world with it.
The worldwide downturn has finally slowed us down, and trimming
taxes is the way to get us back on track.
Good tax cuts boost our economy by encouraging people to work, save
and invest. Our growth since 2001 proves it, and our future growth
demands it. With the 2001 cut fully in place and an even better one
on the way this year, our economy will remain the envy of the rest
of the world.
Feulner is the president of The Heritage Foundation
(heritage.org), a Washington-based public policy research