Tuesday, June 13, 2006

Persective Is Everything

You know the freaky little tendency where you buy a new car (or at least new to you), and then you see that model everywhere you go? It's like the roads are suddenly filled with Civic hatchbacks, or whatever your car du jour happens to be. My husband and I have been experiencing that phenomenon on an entirely different level lately. Since we're in the middle of our own building project (the oft-mentioned garage/shop), we've been noticing new construction everywhere. There's a new Asian market/mini mall going in near our house, which is causing much rejoicing in Meowville, because my husband loves to cook Thai food, and you just can't beat a good Asian market for fresh herbs and vegetables. There's a giant 24 Hour Fitness going in near his office, which might come in handy for burning off all the phad thai noodles the new market will engender. There are office buildings and retail outlets springing from the ground like demented jack rabbits, new housing projects galore, and, it being the all too brief pot-hole repair season in Portland, road crews are making life miserable for commuters all over the City of Roses.

I'm still hearing complaints about our lousy economy, though--complaints still largely settled on how Bush is leading us to hell in a hand-basket, with his tax cuts for the rich and all. I've wondered where all this construction can be coming from, if things are indeed as bad as the woe-is-me set would have us believe. So, I read an article today with great interest which pointed to the signs that things are flowing along quite nicely with the American economy, thank you very much. Jed Graham, at Investor's Business Daily, has a rundown of how we're doing as a country economically, and where we're headed.

The first big news is that we're ahead of schedule in terms of deficit reduction, at least ahead of the schedule that President Bush proposed when the economy was still looking pretty shaky in 2004. At that point, he promised to cut the deficit in half by 2009, but it looks like that promise might be fulfilled three years early. Jumping revenue, due to increased wages and salaries, and corporate income taxes that have risen by 30% over last year, are filling the national coffers. (Well okay, making them less empty.) That's not the corporate tax rate that's gone up 30%; that's the taxes generated by the same rate applied to a bustling economy:

Tax revenues are running $176 billion, or 12.9%, over last year, the Treasury Department said Monday. The Congressional Budget Office said receipts have risen faster over the first eight months of fiscal '06 than in any other such period over the past 25 years — except for last year's 15.5% jump.

The 2006 deficit through May was $227 billion, down from $273 billion at this time last year. Spending is up $130 billion, or 7.9%.

Did you catch the part about tax receipts increasing by more than they have at any time (except last year) in 25 years? This despite the lowered tax rate. That means that there's a lot of profit to be taxed, and higher wages to be taxed as well. That means we're headed toward lower deficits (as long as the politicians don't go on a spending spree.) An interesting note in Graham's article was that increased salaries in the higher tax brackets led to the most gains, in terms of individual taxes, for the government's piggy bank. Because those in the upper brackets earn more, they pay more:

While gains are broad, those at higher-income levels are enjoying bigger salary hikes. Because they pay higher rates, federal tax revenues soar when they do well.

Those making over $200,000 now pay 46.6% of total income taxes, presidential adviser Karl Rove recently said. That's up from 40.5% — despite Bush's tax cuts.

This dispels the tax cuts for the rich myth, if ultimately the rich end up paying a higher percentage of the tax burden as a result of the cuts. Looks to me like the evidence is pretty solidly in the camp of tax cuts stimulating the economy, which is good for the federal bottom line. People and corporations make more money, and pay more taxes. Everybody wins.

According to Graham, budget experts claim that economic growth can't wipe out the entire deficit on its own. That makes sense. If the budget hawks in Washington (or is that an oxymoron?--no, I'm sure there are a few) don't throw their weight around a little more, the spenders will always find a way to keep the government in the red. However, the growth is encouraging, and remember that a good deal of the deficit also has come from the wars in Afghanistan and Iraq. Hopefully, those conflicts will cost less and less as the new governments in those countries continue to gain strength. Of course, we will always have military needs, the world being filled with sinful humans, inclined to exercise their free will.

So, if the economy is continuing to gain ground at a beating-the-predictions rate, why is there the perception for some that things are still so bad? Well, part of it is probably individual experience. It's hard to tell someone that just lost their job that the economy is booming, even if their job got cut because of hot new technologies that made the job obsolete. It doesn't matter to most people if ten people got new jobs at the time they lost theirs. We each see things from our own little corner of reality. Another reason for the idea that the economy is bad is that certain areas of the economy only gain our notice when we're not happy with them. Gas prices for example are very much on the national radar. It's ironic actually that high gas prices stem to a certain extent from the economy doing well. Everyone wants to go someplace or ship something, driving up the price. Of all the possible reasons that some people still think we're on the verge of economic ruin , however, Instapundit has hit on one of the most plausible, striking me as pretty darned accurate anyway. While linking to the Investor's Business Daily article that I've cited here, he points out the New York Times take on the deficit being cut in half three years early:

MORE BAD NEWS FOR BUSH: "Aided by surging tax receipts, President Bush may make good on his pledge to cut the deficit in half in 2006 — three years early."

The New York Times headline: "Bush deficit reduction plan falls off-schedule."

Perspective is everything. For some people, no matter how good the news, it's all in how you spin it.

Update: James Glassman is also examining this trend of Americans' economic perspective not lining up with the facts, and drawing some interesting conclusions.

1 comment:

  1. Well stated, Kat! It is sad that much of the rhetoric coming from popular news media and/or politicians does not contain actual information but rather, is a pushing of agenda. Deception running rampant in those forums does an incalculable amount of damage to people and society. It is TRUTH that will ultimately set us free.