GOP Report: Bush Economic Plan Has Economy on Road to Recovery

CSE note: This year’s tax cuts are working, as this study indicates, but CSE has concerns that the recent economic good news is not sustainable. America needs to do a lot more in the quest for fundamental tax and regulatory reform.

View the full report (.pdf)

EXECUTIVE SUMMARY

The U.S. economy is well into a period of robust recovery, thanks in large part to the pro- growth tax relief signed into law by the President:

· Gross Domestic Product grew by 7.2 percent in the third quarter of 2003 – the fastest growth in nearly 20 years – and consensus economic forecasts suggest that it will grow by at least 4 percent in the fourth quarter of this year and the first quarter of next year.

· Shareholder wealth has increased by $3.1 trillion in the past 13 months. Half of this 22-percent increase in shareholder wealth has occurred since the passage of the 2003 tax relief act.

· Spending by businesses (fixed investment and expenses) grew at an 11.1-percent annual rate in the third quarter, following an impressive 7.3-percent gain in the second quarter. In October, inventories decreased for the fifth consecutive month and new export orders increased for the third consecutive month.

· Payroll employment increased by 125,000 jobs in September, and increased again by 126,000 jobs in October. The unemployment rate fell from 6.1 percent to 6.0 percent in October and the number of people who have reported being employed has increased by 1.8 million since the end of the recession.

· Non-farm labor productivity grew at a rate of 8.1 percent in the third quarter of 2003, which has raised real wages and reduced inflationary pressure so that interest
rates have remained at their lowest level since 1954.

· The economic recovery is evidence that the Bush economic plan is working. The tax relief should be made permanent in order to provide taxpayers with certainty
about future rates. This certainty will further assist the recovery.