Welcome to the September Housing and Jobs issue of NorthBay biz magazine. It’s hard to believe, but it’s almost time to begin planning the 2011 editorial calendar. By the time you’re reading this column, we’ll be assigning stories for our December Growth vs. No Growth issue. Unlike newspapers, the culture of early deadlines is normal for the magazine industry. In compiling our editorial calendar, we endeavor to pick cover themes that address topics that have the greatest impact on the North Bay business community.
Inside, in addition to all the stories, you’ll find more than a dozen local columns and special features—information about local business often unavailable anywhere else. We welcome your comments, suggestions and ideas on how NorthBay biz, the area’s only locally owned business publication, can continue to serve you as the voice of business in the North Bay.
A Democrat Goes into a Psychiatrist’s Office…
“Come in. Make yourself comfortable. What’s that? You’re a congressional Democrat? You voted to triple the national debt, destroy a health care system the overwhelming majority of Americans were happy with in a way that creates a massive and infinitely complex new entitlement, bailout the banks and car companies, and ‘stimulate’ the economy with an $862 billion boondoggle that hasn’t created a single private-sector job? Your president is suing the state of Arizona for having the effrontery to enforce a law he wishes not to enforce (though he does have the constitutional responsibility to ‘take care that the laws be faithfully executed’)? The war in Afghanistan isn’t going well? The president’s approval ratings are under water? Congress’ approval ratings are running even with Mel Gibson’s? Naturally, you’re upset.” So begins Creators Syndicate writer Mona Charen’s recent column, “A Democrat Goes into a Psychiatrists Office…”
And in the midst of all this, as the nation struggles to add ballast to its economic ship navigating troubled waters, in just a few short months, unless the party in power acts, the entire country is going to be subjected to a huge across the board tax increase in the form of reinstating the expiring Bush tax cuts in January 2011. Just the tonic for what ails us. For example, despite a presidential promise to the contrary, tax rates will increase 50 percent for the bottom taxpayers rising from the current 10 percent level to 15 percent of income. Every tax bracket is impacted with the highest level returning to 39.6 percent from its current 35 percent—an increase of more than 13 percent. In fact, every tax bracket will see double-digit increases.
What especially seems to have been forgotten in the shuffle is that the Bush tax cuts were made in response to a national recession that was in progress as he took office. Much the same situation as when Obama took over the country’s reigns in 2009. What needs to be discerned is which of their differing approaches to solving our economic woes has the best chance of being successful—government infusing cash into the economy through massive spending that demands greater debt and higher taxes, or through trusting the private sector to create growth by cutting taxes to spur investment and job creation?
Here’s what happened. The 2001 Economic Growth and Recovery Tax Act cut tax rates across the board, increased the child tax credit, increased the standard deduction for married couples and increased the contribution levels for an assortment of tax-favored savings programs. However, as the economy was beginning to recover, 9/11 occurred and growth was slow throughout 2002. In 2003, The Jobs and Growth Tax Relief Reconciliation Act further enhanced the initial 2001 tax reductions and added tax relief for dividends and capital gains. In response, the economy took off. And contrary to all the hyperbole surrounding Bush’s “tax cuts for the rich,” the rich paid more taxes in 2005 than any time in the past 20 years. The richest 1 percent went from paying 25 percent of all income taxes in 1990 to paying 39 percent in 2005. In 1980, when the top tax rate was 70 percent, the richest paid only 19 percent of all income taxes. In addition, 1.5 million jobs were created in the first nine months after the 2003 tax cuts were enacted. The unemployment rate fell to its lowest level since WWII, and productivity grew at a 4.6 percent annual rate.
Contrast that to the current administration’s spend, bailout, borrow, takeover and tax plan. Unemployment is stuck at 10 percent, economic growth is stagnant, debt is at an all-time high, commercial credit is nonexistent and consumer confidence and, consequently, spending is drastically diminished. With the uncertainty connected to Washington’s newly concocted policies (health care and financial regulations to name only two) the private sector is extremely hesitant to spend or invest in new products or employees. Higher tax rates hurt competitiveness and growth, ensuring economic performance will suffer. Translated, this means fewer jobs, lower profits and incomes and in the greatest irony of all, a greatly diminished GDP, which means less money for the government to tax.
This administration has blundered ahead with little or no heed for the will of the people it represents. One way or another, this unresponsiveness must change. In a recent Rasmussen poll, likely voters were asked whether increased government spending is good or bad for the economy. Twenty-eight percent said it was good, while 52 percent said it was bad for the country. The same question was asked about the national debt—this time 56 percent said bad and only 17 percent said it was good for the economy. This last poll question, however, is the most telling: By a 69-to-15 percent margin, likely voters think cutting taxes is a better way to create jobs than more government spending. Maybe the days of the government hiring 1,000 people to dig holes and another 1,000 to fill them are finally coming to an end.
That’s it for now. Enjoy this month’s magazine.
