'Every Reason to Be Proud'

Of course my scientific analysis predicted this long before.
Unfortunately for most of you it passed over your heads and you failed
to profit from it. Next time pay attention!


WSJ COMMENTARY



By LAWRENCE B. LINDSEY
October 13, 2006; Page A12

The government has just closed the books on the 2006 fiscal year and
released the figures for revenue collected. It has also been five years
since the first of the Bush tax cuts began to help the economy and
consumers' wallets, so it is a natural time to look back and evaluate
their economic and budgetary effectiveness.

We now know that economic activity first began declining in the third
quarter of 2000, although the data at the time didn't show it; and 2001
was a rough year, with growth moving back and forth around the zero
mark. In August most American families received the first part of their
tax cut -- a check, typically for $600. But this was overshadowed by
9/11. In the weeks following the attacks the economy began to gradually
shut down. The stock exchanges and New York bond markets were closed,
while air travel and transport stopped in an economy where over half a
million business travelers flew every day and 25% of trade by value
arrived and left by air. Uncertainty paralyzed the business community.

President Bush gave numerous speeches to rally the nation to return to
normal; administration officials fanned out across the country to urge
Americans to spend. The private sector did its part: Auto companies
began zero percent financing and some companies made promotions based
directly on the tax cuts. Far from being the disaster most forecasters
(including me) had feared, the fourth quarter showed the biggest
consumer-led surge since 1992. As business inventories were drawn down,
production could expand again.

Mr. Bush followed up with an investment-oriented tax cut proposal in
his 2002 State of the Union message. But by mid-year, with growth
returning but only at a modest clip, we began working on a proposal to
accelerate the multiyear tax cuts of 2001 to take full effect in 2003.
We also began developing proposals to improve investor psychology
through a long-overdue reduction in the double taxation of dividends.
The final bill was enacted in May 2003.

The tax-cut program was not particularly novel or
out-of-the-mainstream: It just combined some very sensible supply-side
oriented reforms to make the tax code less burdensome with some
much-needed demand-side relief. The focus of the early tax cuts was on
families with children, people with high propensities to spend. A
typical middle-class couple with two children got a minimum of $1,600
in relief -- equivalent to a 4% increase in their real take-home pay,
or two years' worth of real pay raises in the 1990s.

Nor did Mr. Bush propose the tax cut by accident. He unveiled it in
December 1999 in Des Moines, Iowa, at the height of the stock market
bubble, when everyone was feeling a little giddy and some economists
were arguing that we had repealed the business cycle. So it took great
courage for him to say, "Yet I also believe in tax cuts for another
practical reason: because they provide insurance against economic
recession. . . . I hope for continued growth -- but it is not
guaranteed. A president must work for the best case, and prepare for
the worst." He was well-prepared; and as Alan Greenspan said, the tax
cuts were "extraordinarily well timed from the point of view of the
economy."

* * *
While the good positive effects of the tax cut on the economy are
relatively non-controversial, their effect on the federal budget stirs
a great deal of controversy. The just-released figures on tax receipts
in 2006 allow us to shed some light on this debate.

First, a look back at 2002 shows that it was the collapse of the bubble
and the effects of 9/11 that were mainly responsible for the decline in
tax revenue and the rise of the budget deficit -- and not the tax cuts.
As a baseline for comparison, consider the economic and revenue
projections the departing Clinton administration prepared as background
for the FY 2002 Budget. That projection was based on continued solid
growth and no tax cuts, although growth had in fact already begun to
decline. As a result, the Clinton FY 2002 budget projected revenues of
$2.210 trillion; but only $1.853 trillion was actually collected. This
provided a FY 2002 shortfall of $357 billion, the result of both the
tax cuts and the drop in economic activity.

The Joint Committee on Taxation estimated that the FY 2002 revenue loss
of the first Bush tax cut was $38 billion and $51 billion from the
second Bush tax cut -- $89 billion in all. This leaves $268 billion of
the shortfall to be attributed to the effects of the collapse of the
1990s bubble, the attacks on 9/11, and other economic drags. Swings in
economic activity, not discretionary tax changes, drive the great
majority of the swings in federal revenues, and were the cause of the
deficits of the early part of the decade. Since then, it has been a
matter of fiscal "catch-up."

The data suggest that process of "catch-up" has been far more
successful than official estimates thought possible. In August 2003 the
non-partisan CBO forecast tax revenue in FY 2006 at $2.276 trillion
(which excluded $53 billion of tax relief passed subsequently). That
forecast included the effects of the slowdown, a return to more rapid
growth, and the 2003 tax cuts. But the data just released showed FY
2006 revenues of $2.407 trillion, $131 billion higher than CBO
projected after the tax cuts were accelerated and $624 billion higher
than the FY 2003 revenues. For perspective on that $131 billion of
extra revenues, the total 2006 revenue loss from all of the president's
tax cuts was only $193 billion.

There were two reasons for the revenue feedback. First, after the tax
cuts were passed the economy expanded more rapidly than most projected
at the time. Second, more taxes were collected from each dollar of GDP
than expected. When an economy of a given size produces
higher-than-expected revenue after a tax change, it must mean that the
tax code has become a more efficient revenue generator. Lower tax
rates, particularly on dividends and entrepreneurial income, provide
incentives for people to give up some of their previous -- economically
distorting but tax-efficient -- behavior.

This response is underscored by the distribution of receipts, which
have shifted decidedly up the income scale. Although critics endlessly
call the Bush measures tax cuts for the rich, the share of income taxes
paid by the top 1%, 5% and 10% of taxpayers has moved up. These people
were most affected by higher rates of the past, and have the greatest
ability to reorient their economic behavior when rates are reduced.

While economists will argue about how to divide up the extra revenue
between the demand-side and supply-side responses, the more interesting
question is what would have happened without an aggressive fiscal
policy response. In Japan, five years after its bubble burst, tax
receipts were still 14% below their peak because the economy was so
weak; in the U.S. they are 19% higher than in 2000. Evidence suggests
that monetary policy, though helpful, was not the lone cause of the
recovery. Consumption spending turned up sharply in the third quarter
of 2003, coincident with reduced tax withholding in paychecks. Nearly
every important macroeconomic variable, including the unemployment
rate, started improving noticeably in the second half of 2003, the
first time the full impact of the tax cuts hit the economy. Moreover,
consumption spending turned up in advance of the housing boom, whereas
in Australia, New Zealand and the U.K. the increase in home prices
clearly led an acceleration in consumption growth.

Mr. Bush has every reason to be proud of his tax cuts. Granted, he
shouldn't expect a chorus of bipartisan praise based on the numbers
just released. But he should rest assured that economic historians will
credit the tax cuts as having been a model of the successful
application of economic theory to the real world.

Mr. Lindsey, president and CEO of the Lindsey Group, was President
Bush's chief economic adviser from 2001 to 2002.

Earl Evleth wrote:
Of course my scientific analysis predicted this long before.
Unfortunately for most of you it passed over your heads and you failed
to profit from it. Next time pay attention!


WSJ COMMENTARY



By LAWRENCE B. LINDSEY
October 13, 2006; Page A12

The government has just closed the books on the 2006 fiscal year and
released the figures for revenue collected. It has also been five years
since the first of the Bush tax cuts began to help the economy and
consumers' wallets, so it is a natural time to look back and evaluate
their economic and budgetary effectiveness.

We now know that economic activity first began declining in the third
quarter of 2000, although the data at the time didn't show it; and 2001
was a rough year, with growth moving back and forth around the zero
mark. In August most American families received the first part of their
tax cut -- a check, typically for $600. But this was overshadowed by
9/11. In the weeks following the attacks the economy began to gradually
shut down. The stock exchanges and New York bond markets were closed,
while air travel and transport stopped in an economy where over half a
million business travelers flew every day and 25% of trade by value
arrived and left by air. Uncertainty paralyzed the business community.

President Bush gave numerous speeches to rally the nation to return to
normal; administration officials fanned out across the country to urge
Americans to spend. The private sector did its part: Auto companies
began zero percent financing and some companies made promotions based
directly on the tax cuts. Far from being the disaster most forecasters
(including me) had feared, the fourth quarter showed the biggest
consumer-led surge since 1992. As business inventories were drawn down,
production could expand again.

Mr. Bush followed up with an investment-oriented tax cut proposal in
his 2002 State of the Union message. But by mid-year, with growth
returning but only at a modest clip, we began working on a proposal to
accelerate the multiyear tax cuts of 2001 to take full effect in 2003.
We also began developing proposals to improve investor psychology
through a long-overdue reduction in the double taxation of dividends.
The final bill was enacted in May 2003.

The tax-cut program was not particularly novel or
out-of-the-mainstream: It just combined some very sensible supply-side
oriented reforms to make the tax code less burdensome with some
much-needed demand-side relief. The focus of the early tax cuts was on
families with children, people with high propensities to spend. A
typical middle-class couple with two children got a minimum of $1,600
in relief -- equivalent to a 4% increase in their real take-home pay,
or two years' worth of real pay raises in the 1990s.

Nor did Mr. Bush propose the tax cut by accident. He unveiled it in
December 1999 in Des Moines, Iowa, at the height of the stock market
bubble, when everyone was feeling a little giddy and some economists
were arguing that we had repealed the business cycle. So it took great
courage for him to say, "Yet I also believe in tax cuts for another
practical reason: because they provide insurance against economic
recession. . . . I hope for continued growth -- but it is not
guaranteed. A president must work for the best case, and prepare for
the worst." He was well-prepared; and as Alan Greenspan said, the tax
cuts were "extraordinarily well timed from the point of view of the
economy."

* * *
While the good positive effects of the tax cut on the economy are
relatively non-controversial, their effect on the federal budget stirs
a great deal of controversy. The just-released figures on tax receipts
in 2006 allow us to shed some light on this debate.

First, a look back at 2002 shows that it was the collapse of the bubble
and the effects of 9/11 that were mainly responsible for the decline in
tax revenue and the rise of the budget deficit -- and not the tax cuts.
As a baseline for comparison, consider the economic and revenue
projections the departing Clinton administration prepared as background
for the FY 2002 Budget. That projection was based on continued solid
growth and no tax cuts, although growth had in fact already begun to
decline. As a result, the Clinton FY 2002 budget projected revenues of
$2.210 trillion; but only $1.853 trillion was actually collected. This
provided a FY 2002 shortfall of $357 billion, the result of both the
tax cuts and the drop in economic activity.

The Joint Committee on Taxation estimated that the FY 2002 revenue loss
of the first Bush tax cut was $38 billion and $51 billion from the
second Bush tax cut -- $89 billion in all. This leaves $268 billion of
the shortfall to be attributed to the effects of the collapse of the
1990s bubble, the attacks on 9/11, and other economic drags. Swings in
economic activity, not discretionary tax changes, drive the great
majority of the swings in federal revenues, and were the cause of the
deficits of the early part of the decade. Since then, it has been a
matter of fiscal "catch-up."

The data suggest that process of "catch-up" has been far more
successful than official estimates thought possible. In August 2003 the
non-partisan CBO forecast tax revenue in FY 2006 at $2.276 trillion
(which excluded $53 billion of tax relief passed subsequently). That
forecast included the effects of the slowdown, a return to more rapid
growth, and the 2003 tax cuts. But the data just released showed FY
2006 revenues of $2.407 trillion, $131 billion higher than CBO
projected after the tax cuts were accelerated and $624 billion higher
than the FY 2003 revenues. For perspective on that $131 billion of
extra revenues, the total 2006 revenue loss from all of the president's
tax cuts was only $193 billion.

There were two reasons for the revenue feedback. First, after the tax
cuts were passed the economy expanded more rapidly than most projected
at the time. Second, more taxes were collected from each dollar of GDP
than expected. When an economy of a given size produces
higher-than-expected revenue after a tax change, it must mean that the
tax code has become a more efficient revenue generator. Lower tax
rates, particularly on dividends and entrepreneurial income, provide
incentives for people to give up some of their previous -- economically
distorting but tax-efficient -- behavior.

This response is underscored by the distribution of receipts, which
have shifted decidedly up the income scale. Although critics endlessly
call the Bush measures tax cuts for the rich, the share of income taxes
paid by the top 1%, 5% and 10% of taxpayers has moved up. These people
were most affected by higher rates of the past, and have the greatest
ability to reorient their economic behavior when rates are reduced.

While economists will argue about how to divide up the extra revenue
between the demand-side and supply-side responses, the more interesting
question is what would have happened without an aggressive fiscal
policy response. In Japan, five years after its bubble burst, tax
receipts were still 14% below their peak because the economy was so
weak; in the U.S. they are 19% higher than in 2000. Evidence suggests
that monetary policy, though helpful, was not the lone cause of the
recovery. Consumption spending turned up sharply in the third quarter
of 2003, coincident with reduced tax withholding in paychecks. Nearly
every important macroeconomic variable, including the unemployment
rate, started improving noticeably in the second half of 2003, the
first time the full impact of the tax cuts hit the economy. Moreover,
consumption spending turned up in advance of the housing boom, whereas
in Australia, New Zealand and the U.K. the increase in home prices
clearly led an acceleration in consumption growth.

Mr. Bush has every reason to be proud of his tax cuts. Granted, he
shouldn't expect a chorus of bipartisan praise based on the numbers
just released. But he should rest assured that economic historians will
credit the tax cuts as having been a model of the successful
application of economic theory to the real world.

Mr. Lindsey, president and CEO of the Lindsey Group, was President
Bush's chief economic adviser from 2001 to 2002.

You tell 'em pops.

"Earl Evleth" wrote in message
oups.com...
Of course my scientific analysis predicted this long before.
Unfortunately for most of you it passed over your heads and you failed
to profit from it. Next time pay attention!

Did your acute "scientific analysis" find that you have a living daughter?
See --
http://groups.google.com/group/alt.a...822023ca41957e

"Her family are all dead. Mine too. We are the survivors."
Apparently your daughter ****ed you off so much because she
was embarrassed by your anti-Americanism, that you have
disowned her.

Little question for you..just check the appropriate box ..

_________ I have disowned my daughter because she objects to
my anti-Americanism.

__________ I am senile and forgot I have a daughter.


Planet Visitor II
Official publisher of AADP Official dictionary
http://www.planetvisitor.name/dictionary.html


WSJ COMMENTARY



By LAWRENCE B. LINDSEY
October 13, 2006; Page A12

The government has just closed the books on the 2006 fiscal year and
released the figures for revenue collected. It has also been five years
since the first of the Bush tax cuts began to help the economy and
consumers' wallets, so it is a natural time to look back and evaluate
their economic and budgetary effectiveness.

We now know that economic activity first began declining in the third
quarter of 2000, although the data at the time didn't show it; and 2001
was a rough year, with growth moving back and forth around the zero
mark. In August most American families received the first part of their
tax cut -- a check, typically for $600. But this was overshadowed by
9/11. In the weeks following the attacks the economy began to gradually
shut down. The stock exchanges and New York bond markets were closed,
while air travel and transport stopped in an economy where over half a
million business travelers flew every day and 25% of trade by value
arrived and left by air. Uncertainty paralyzed the business community.

President Bush gave numerous speeches to rally the nation to return to
normal; administration officials fanned out across the country to urge
Americans to spend. The private sector did its part: Auto companies
began zero percent financing and some companies made promotions based
directly on the tax cuts. Far from being the disaster most forecasters
(including me) had feared, the fourth quarter showed the biggest
consumer-led surge since 1992. As business inventories were drawn down,
production could expand again.

Mr. Bush followed up with an investment-oriented tax cut proposal in
his 2002 State of the Union message. But by mid-year, with growth
returning but only at a modest clip, we began working on a proposal to
accelerate the multiyear tax cuts of 2001 to take full effect in 2003.
We also began developing proposals to improve investor psychology
through a long-overdue reduction in the double taxation of dividends.
The final bill was enacted in May 2003.

The tax-cut program was not particularly novel or
out-of-the-mainstream: It just combined some very sensible supply-side
oriented reforms to make the tax code less burdensome with some
much-needed demand-side relief. The focus of the early tax cuts was on
families with children, people with high propensities to spend. A
typical middle-class couple with two children got a minimum of $1,600
in relief -- equivalent to a 4% increase in their real take-home pay,
or two years' worth of real pay raises in the 1990s.

Nor did Mr. Bush propose the tax cut by accident. He unveiled it in
December 1999 in Des Moines, Iowa, at the height of the stock market
bubble, when everyone was feeling a little giddy and some economists
were arguing that we had repealed the business cycle. So it took great
courage for him to say, "Yet I also believe in tax cuts for another
practical reason: because they provide insurance against economic
recession. . . . I hope for continued growth -- but it is not
guaranteed. A president must work for the best case, and prepare for
the worst." He was well-prepared; and as Alan Greenspan said, the tax
cuts were "extraordinarily well timed from the point of view of the
economy."

* * *
While the good positive effects of the tax cut on the economy are
relatively non-controversial, their effect on the federal budget stirs
a great deal of controversy. The just-released figures on tax receipts
in 2006 allow us to shed some light on this debate.

First, a look back at 2002 shows that it was the collapse of the bubble
and the effects of 9/11 that were mainly responsible for the decline in
tax revenue and the rise of the budget deficit -- and not the tax cuts.
As a baseline for comparison, consider the economic and revenue
projections the departing Clinton administration prepared as background
for the FY 2002 Budget. That projection was based on continued solid
growth and no tax cuts, although growth had in fact already begun to
decline. As a result, the Clinton FY 2002 budget projected revenues of
$2.210 trillion; but only $1.853 trillion was actually collected. This
provided a FY 2002 shortfall of $357 billion, the result of both the
tax cuts and the drop in economic activity.

The Joint Committee on Taxation estimated that the FY 2002 revenue loss
of the first Bush tax cut was $38 billion and $51 billion from the
second Bush tax cut -- $89 billion in all. This leaves $268 billion of
the shortfall to be attributed to the effects of the collapse of the
1990s bubble, the attacks on 9/11, and other economic drags. Swings in
economic activity, not discretionary tax changes, drive the great
majority of the swings in federal revenues, and were the cause of the
deficits of the early part of the decade. Since then, it has been a
matter of fiscal "catch-up."

The data suggest that process of "catch-up" has been far more
successful than official estimates thought possible. In August 2003 the
non-partisan CBO forecast tax revenue in FY 2006 at $2.276 trillion
(which excluded $53 billion of tax relief passed subsequently). That
forecast included the effects of the slowdown, a return to more rapid
growth, and the 2003 tax cuts. But the data just released showed FY
2006 revenues of $2.407 trillion, $131 billion higher than CBO
projected after the tax cuts were accelerated and $624 billion higher
than the FY 2003 revenues. For perspective on that $131 billion of
extra revenues, the total 2006 revenue loss from all of the president's
tax cuts was only $193 billion.

There were two reasons for the revenue feedback. First, after the tax
cuts were passed the economy expanded more rapidly than most projected
at the time. Second, more taxes were collected from each dollar of GDP
than expected. When an economy of a given size produces
higher-than-expected revenue after a tax change, it must mean that the
tax code has become a more efficient revenue generator. Lower tax
rates, particularly on dividends and entrepreneurial income, provide
incentives for people to give up some of their previous -- economically
distorting but tax-efficient -- behavior.

This response is underscored by the distribution of receipts, which
have shifted decidedly up the income scale. Although critics endlessly
call the Bush measures tax cuts for the rich, the share of income taxes
paid by the top 1%, 5% and 10% of taxpayers has moved up. These people
were most affected by higher rates of the past, and have the greatest
ability to reorient their economic behavior when rates are reduced.

While economists will argue about how to divide up the extra revenue
between the demand-side and supply-side responses, the more interesting
question is what would have happened without an aggressive fiscal
policy response. In Japan, five years after its bubble burst, tax
receipts were still 14% below their peak because the economy was so
weak; in the U.S. they are 19% higher than in 2000. Evidence suggests
that monetary policy, though helpful, was not the lone cause of the
recovery. Consumption spending turned up sharply in the third quarter
of 2003, coincident with reduced tax withholding in paychecks. Nearly
every important macroeconomic variable, including the unemployment
rate, started improving noticeably in the second half of 2003, the
first time the full impact of the tax cuts hit the economy. Moreover,
consumption spending turned up in advance of the housing boom, whereas
in Australia, New Zealand and the U.K. the increase in home prices
clearly led an acceleration in consumption growth.

Mr. Bush has every reason to be proud of his tax cuts. Granted, he
shouldn't expect a chorus of bipartisan praise based on the numbers
just released. But he should rest assured that economic historians will
credit the tax cuts as having been a model of the successful
application of economic theory to the real world.

Mr. Lindsey, president and CEO of the Lindsey Group, was President
Bush's chief economic adviser from 2001 to 2002.