Michelle Dubert: Bush's tax policy is right for our future

Congratulations to the Class of 2004; in just 19 days, you will emerge from the incubation that is college and try to find a way not to freeload off your parents anymore. Many will go on to various graduate programs in an effort to rack up the entire alphabet following their last names. And many still will come to grips with reality and understand that they can procrastinate no longer, that it is time to finally become immersed in the "real world." Or something like that.

The prospect of getting a job can be a horrifying thought, particularly if so few seem available. So if you don't plan on finding a paycheck in the mail any time soon, the state of the economy for the next couple years is that much more important, and it hinges upon the upcoming election in November: George W. Bush or John Kerry?

Bush hasn't had an easy time showing the American public that he's a true fiscal conservative; he has, on the other hand, managed to rile some of his constituents in his quest for a political balance. Since 2001, more than half of new spending initiatives have not been related to the war on terror. But that's also not saying that Bush's alternative would be any more responsible overall.

The naysayers like to criticize President Bush for what they perceive as the stagnation of job growth. But March saw the addition of 308,000 non-farm jobs nationwide, the largest gain in four years. The U.S. Department of Labor reports that over 513,000 jobs were created in the first quarter of 2004. As economist Larry Kudlow pointed out, this year could see the creation of nearly 2 million new jobs and come within reach of Bush's goal of 2.6 million. Perhaps there is hope for us College of Arts and Crafts students after all.

In the past two quarters, the GDP grew at a 6.1 percent annual rate, which accounts for the fastest rise in 20 years. The Dow Jones Industrial Average has risen 35 percent this past year.

One of the largest factors in furthering economic expansion is tax cuts. Yet Kerry is promoting the idea of tax increases that will not only affect the rich, but the middle classes as well; this includes raising the top tax rate from 35 to 40 percent. It sounds like a lofty goal, but it's not that simple. Specifically, the Congressional Budget Office shows that in fiscal year 2001, the top 20 percent of earners paid 26.8 percent of all individual income taxes, up 2.3 percent since 1984; interestingly, the four lower brackets underwent a substantial drop. Kerry intends to rescind last year's tax cuts to all earning $200,000 or more.

He also proposes to increase the maximum tax on stock dividends from 15 percent to 35 percent and capital gains tax from 15 to 20 percent. These latter proposals will affect all investors, since the value of dividend-paying stocks and all stocks in general will likely drop as a result. According to the Brookings Institution, the plan would take in $400 billion in additional revenue over a 10-year span. That $40 billion a year is a marginal, virtually inconsequential relief in reducing the $521 billion deficit. Even more, an April 9 Wall Street Journal editorial quickly pointed out that the National Taxpayers Union calculates Kerry's campaign spending promises at $276.88 billion. Per year. Who will pay for all this?

In addition to rolling back the tax cuts, Kudlow notes, Kerry also intends to punish American corporations that sell to consumers overseas as well as those here. This in itself is debilitating to job creation and the entire economic upswing.

As Brian Wesbury, chief economist with Griffin, Kubik, Stephens & Thompson Inc., wrote for the same publication early last month, "In May 2003, the most pro-growth tax cut since 1981 was signed into law. Immediately following the tax cut, the economy accelerated to its fastest growth in two decades. The economy would still be stumbling along without the 2003 tax cut." More to the point, Wesbury said, "It is clear that no matter how strong the data become, there are many ... who want the economy to be weak. But facts are stubborn things; the economy is soaring, not tanking, and President Bush is responsible for turning it around."

Repealing the tax cuts could have a devastating effect on the recovery. The point of cutting taxes in the first place was to generate more cash for the people, not the government. In the end, Americans will likely spend or invest that extra money, thus growing the economy. After the major events since the end of the Clinton administration -- the collapse of the stock market, a terrorist attack, corporate scandals abound and two wars -- the outlook without the cuts could have been much bleaker.

Quite obviously, the candidates have some differing views on how to handle the economy. We all want jobs, and therefore we have a vested interest in a healthy American economy. So unless living at home for another few years seems an appealing alternative, the Bush plan may work better than you think.

Michelle Dubert is a College freshman from Closter, N.J. Department of Strategery appears on Mondays.

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