by Dean Hartwell
Santa Claus did
not bring a healthy economy with him this Christmas.
Sales for the holiday season dropped this year to a
thirty-year low
while the nation's budget deficit climbs higher and
higher.
How bad is the economy?
It is so bad that corporate icon McDonald's reported the
first
quarterly loss in its fifty year history. Its
stock has split in half
during the last six months. And, Moody's Investor
Service, a leading
provider of independent credit ratings, has lowered the
burger giant's rating.
It is so bad that large retail companies like Wal-Mart
have lowered
their sales forecasts thanks to the poor holiday season
of shipping. So have Target and Best Buy Company.
It is so bad that in the public sector, more than half
of the
nation's states face significant budget deficits. One
of the leading
advocates of tax cutting, Governor George Pataki of New
York, now says
he cannot rule out tax increases. Arkansas
Governor Mike Huckabee will
ask the Legislature to increase the state sales
tax. In California, Governor Gray Davis must convince the California
Legislature to accept
some tax increases to resolve a $24 billion deficit.
When will the economy improve?
We may be able to answer this question by looking at the
economy's
history. In recent times, President George W. Bush
took office with a
federal budget surplus. Two years later, after his
large tax breaks
mostly for the wealthy, we now have a deficit.
Its large tax breaks
account for much of this problem.
When the Bush Administration pushed tax cuts through
early last year,
its supporters said that the cuts would improve the
economy. Almost
two years later, with the economy still shaky, none of
these supporters
will admit that the Bush plan has not succeeded.
Economic factors, such as the Gross National Product
(value of all the
final goods and services produced in a given one-year
period by the
country's residents), inflation and unemployment, tend
to rise and fall
in independent cycles. No economists have been
able to predict these
tendencies with much accuracy.
Bush's plan of cutting taxes on businesses and the
wealthy, also known
as "supply-side" economics, has been tried
before. President Herbert
Hoover used it right before the stock market collapse
and the Great
Depression. President Reagan used it during an
eight-year presidency
in which the economy expanded. However,
Reagan did create the
greatest deficit in the history of the United States.
On the other hand, those who have raised taxes have
sometimes gotten
different results. President Clinton, for one,
raised taxes at the
start of his eight years in office. The GNP went
up while unemployment
went down. Furthermore, and more likely because of
Clinton's tax
policies, the budget deficit turned into a budget
surplus by the end of
his time as president.
No matter the economic theory opted for by the current
president, it
appears likely our economy will sag for a while longer.
We would be
foolish to think our nation's leaders can do much to
bring back jobs
and overall business productivity. It makes about
as much sense as
believing Santa Claus can bring a healthy economy!