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ECONOMIC GROWTH
THE PERCEPTIONS OF THE MASSES OR
THE MISCONCEPTIONS OF THE MASSES
By Richard L. Kesner, President
The CommonWealth Group
November 2007
It has been almost eight years of the Bush Administration tax cuts. Despite the negativity from the media and the Democrats debating how terrible things have been under this administration, it is important that the facts be revealed in a nonbiased fashion.
Whichever the reasons (a hatred of President Bush, the War in Iraq, liberal bias in the media, etc.) the truth about the U.S. economy remains buried. The United States has a population of over 300 million, and the growth of the economy and increase in number of jobs created during the reign of this administration has been nothing short of fantastic. Incredibly, despite a falling (failing) real estate market, over 2 million jobs were created in the past 12 months; over 8 million jobs have been established in the past four years. Coincidence? Not at all. Even though the media will perpetuate the lie that the evil tax cuts that only benefit the rich have nothing to do with this, it is apparent that the tax cuts promoted economic expansion. Thus, with the lower taxes and the growth of the economy, corporations were able to provide jobs, benefits, and stability for many individuals.
The impact of these new jobs has been a catalyst for increasing United States tax revenues. These negative, disastrous tax cuts that only benefit the rich have increased government revenues 11.8% in the past fiscal year, and 14.6% in the previous fiscal year. Yes… these tax cuts benefit the wealthy. However, I would venture to ask the 8 million newly employed persons if they are happier with the stream of income, or if we should have refrained from the tax cuts because they did indeed help the wealthy. Would they like to go back to their previous state?
How does inflation affect this picture? If the United States has controlled inflation it is a good thing. In order to keep pace with inflation everyone needs to (a) make good investments that outperform inflation and (b) increase capital. The government (including President Bush) cannot control how individuals make investments, but the tax and economic policies of the nation do have an effect on corporate earnings and therefore individual wages. Amazingly, despite the doom and gloom of the press, despite all of the blunderings in Washington from both parties, wages have grown 1.3% in the past twelve months. This means the average full-time production worker had an increase of over $400 to spend last year. You may not be planning to buy a Porsche Targa at that rate, but it is certainly not the recession and bleak picture painted by the media.
In late July 2007, the Wall Street Journal and NBC News polled random people about the likelihood of an imminent economic recession. All of us have access to these statistics, yet the media declines to report said information. It is unlikely that the news would be disseminated to the masses. Since the media would rather present a negative spin (bad news = increased ratings), the common people who do not have the excess time to investigate the facts properly remain uninformed. Therefore, it should not be surprising that 22% of those polled believed that a recession would begin within a year, and that 46% more said that the country was already in a recession.
I believe that despite our flaws we live in the GREATEST COUNTRY IN THE WORLD. The United States, regardless of what the media would portray, produces the most jobs, best standard of living, most opportunity, and most of the cutting-edge technology than any other individual nation. Communism has imploded on itself (except for the giant economic powers of Cuba and Venezuela); the U.S. banking and financial systems continue to be the most respected in the world and are considered the most sought after “safe haven” on the globe.
The media will always report a bleak picture. Doom and gloom sells more newspapers, increases ratings, and no matter whether it is the markets, the war, the economy, or even the steroid use of professional athletes, these stories will continue to dominate our headlines. Since this will not change, we all must make a conscious effort to tune it out. We need to turn off the prognosticators of doom and ignore the fluff. These stories play on your emotions, and one should never run their business, or the business of managing their money by making emotional decisions. We, as your advisors, counsel you to ignore the garbage. Go to the World Series, travel, play with your children, read a book. It is difficult, but once you break the cycle of feeding your mind with this negativity, you will not only succeed in your investments and hopefully lead a less stressful and happier life.
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