Thursday, August 1, 2013

Obama's Tax Increases Have Slowed Post Recession Economic Growth

From The Wall Street Journal, "Data of Prosperity Past: The latest GDP revisions underscore how subpar the current recovery is:"

Source: The Wall Street Journal
The tragic difference is how poorly the economy has emerged from this last recession. In the 1980s, growth averaged about 5% in the first four years of expansion compared with 2.2% since the current recovery began in mid-2009. If this had been a normal post-World War II expansion, the economy would be $1.3 trillion larger now.

The Commerce [Department] calculators found that the beginning stages of the Obama recovery were stronger than first estimated, but growth dipped to 1.8% in 2011, rising to 2.8% in the election year, only to decelerate again in the last nine months to average about 1%.

The question is why the setbacks?
The data suggest that a major cause of the recent slowdown has been the Obama tax increase. The uncertainty about whether and how much taxes would rise caused business to seize up in 2012's fourth quarter, and the arrival of the increase in January has slammed business investment. Residential investment has rebounded with the housing recovery, but real nonresidential fixed investment fell by 4.6% in the first quarter and rose a modest 4.6% in the second, for a net of zero in the first half.

Without business investment, wages and incomes won't rise. The tax hike raised rates on capital gains, dividends and small-business income—that is, on the returns from investment—at a time when nurturing more private investment and risk-taking should be a priority. In other words, the growth gap on President Obama's watch is best explained by policy blunders that have added risk, uncertainty and new tax and regulatory burdens on investment, hiring and risk-taking.

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