Bush’s ‘permanent tax cuts’ are creating bullish bubbles: Low interest rates and budget deficits


(base image by Jim Cole, AP)


Bush’s ‘permanent tax cuts’ are creating bullish bubbles:
Low interest rates and budget deficits

Nipawin - Friday - March 26, 2004 - by: Mario deSantis

Here at home, my economic advisors, economic team presented a very upbeat assessment about our economy. It's strong, and it's growing stronger. Inflation is low. Interest rates are low. Manufacturing activity is up. The job base is growing… We need to make sure that we have legal reform… we need to make sure the tax cuts are permanent."

President George Bush

  In my last article on the anniversary of Bush war in Iraq I outlined the incompetence of the Bush administration in understanding terrorism and terrorists. The incompetence of Bush’s foreign policies has been covered up with the ideology of "you are with us or against us." At the same time, the consistent incompetence of Bush’s economic policies has been covered up with the ideology of "permanent tax cuts."
  Bush’s ideologies can be summarized with what we commonly understand as the bullish behaviour of "my way or the highway." The bullish behaviour of the Bushes of this world is the culprit of our own social problem, of war, poverty, hunger, violence and terrorism. This bullish behaviour is intrinsic in the ideology of the Free Market, that is, freedom for the Bushes, but enslavement for common people at large. As Bush is incompetent in understanding terrorism, so he is incompetent in understanding our social and economic growth.
  I express below some current concerns of Bush’s America in the hope, again, that our own thinking and understanding will help break down the myth of the insane ideology of "permanent tax cuts."
  • "Link Between Taxation, Unemployment Is Absent." Jonathan Weisman[1]

  • "Tax Cuts Are The Single Largest Way Policymakers Have Increased." Center on Budget and Policy Priorities[2]
  • "Tax cuts don’t need to be paid for [with offsets] — they pay for themselves."House Budget Committee Chairman Jim Nussle[3]

  • "As US cuts taxes, states hike them." Abraham McLaughlin[4]

  • "Republican Still Think They Can Cut Taxes & Reduce Deficits." Alan Fram[5]

  • "The total amount owed – by consumers, businesses, governments and financial institutions – totaled $34.4 trillion at the end of 2003, according to the Federal Reserve. The economy produced $11.3 trillion of output. That makes the nation's debt triple its gross domestic product. In 1933, debt was about 2 1/2 times GDP…This debt bubble comes with the lowest interest rates in four decades." Danielle DiMartino[6]

  • "With interest rates so low, money has been rushing into assets like shares of stock and real estate. Over the past 12 months, the stock market has experienced its biggest gain in 50 years, if you adjust share prices for inflation. And just last quarter, home prices rose at the fastest pace in a quarter century. The low interest rates are also feeding what appears to be a consumer bubble. Household debt increased last year at its quickest rate in two decades, as consumers borrowed against these soaring values of their homes and stock portfolios. If all these bubbles keep expanding, and then burst, the sound will be heard around the world." Robert B. Reich[7]

  • "Housing prices have accelerated at an unprecedented rate since 1995 -- more than 35 percentage points nationwide above the overall rate of inflation… The $3 trillion question (that's an estimate of housing wealth that could disappear): will it happen before the election? Not if Alan Greenspan can postpone it." Mark Weisbrot[8]

  • "Employment growth is anemic in the wake of a 2001 recession that zapped 2.3 million jobs. Manufacturers have cut employment for 43 consecutive… Homeowners can get 30-year mortgages at less than 6 per cent and car loans at near zero. That sent mortgage debt soaring to $6.8-trillion last year from $4.9-trillion just two years earlier" Barrie McKenna[9]

  • "The effect of the rising oil price on America could be even more disturbing." Buttonwood [10]

  • "Tax cuts and debt have fueled consumption over the last two years, but with savings rates near record lows, and further tax cuts unlikely, it is not clear that consumers will be able to sustain spending growth unless the wage and job growth pick up very soon." Dean Baker [11]

Mario deSantis


  The author, Mario deSantis, doesn’t subscribe to the use of econometric models in the area of broader economic public policies
  White House Remarks by the President After Meeting with the Cabinet March 23, 2004 http://www.whitehouse.gov/news/releases/2004/03/20040323-5.html
  deSantis, Mario One year after Bush’s war in Iraq: The building of the ominous ideology "you're with us or against us" March 23, 2004 Ensign


Weisman, Jonathan Link Between Taxation, Unemployment Is Absent (PDF) March 15, 2004 Washington Post, http://www.washingtonpost.com/wp-dyn/articles/A58658-2004Mar14.html


Center on Budget and Policy Priorities Tax Cuts Are The Single Largest Way Policymakers Have Increased Deficits Revised February 1, 2004


Center on Budget and Policy Priorities TOO GOOD TO BE TRUE: "Tax cuts don’t need to be paid for [with offsets] — they pay for themselves." Revised March 22, 2004


McLaughlin, Abraham As US cuts taxes, states hike them: New York's $2 billion-plus tax hike is just the latest of several overhauls that could recast the social safety net (PDF) May 28, 2003 The Christian Science Monitor,


Fram, Alan Republican Still Think They Can Cut Taxes & Reduce Deficits(PDF) March 18, 2004 Associated Press, http://www.capitolhillblue.com/artman/publish/article_4250.shtml


DiMartino, Danielle U.S. Debt Burden Is Higher Now than During Depression, Study Says (PDF) March 15, 2004 The Dallas Morning News, http://www.miami.com/mld/miamiherald/business/national/8192892.htm


Reich, Robert B.In The Interest Of Interest March 17, 2004 Marketplace®,


Weisbrot, Mark Is the Fed Playing Election-Year Politics? March 22, 2004 Knight-Ridder/Tribune Media Services, http://www.truthout.org/docs_04/032404I.shtml


McKenna, Barrie Low rates fuel fears in U.S.: Analysts warn of asset bubble from hot housing market (PDF) March 20, 2004 The Globe and Mail,


Buttonwood Crude arguments: Markets should worry about the surging oil price (PDF) March 23, 2004 The Economist Global Agenda, http://www.economist.com/agenda/displayStory.cfm?story_id=2534075


Baker, Dean Profits Shares Hit Record High In 2003: THE TAX SHARE OF CORPORATE PROFITS IS NEAR ITS POST-WAR LOW (PDF) March 25, 2004


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