Mon, Nov. 06, 2006
PRO/CON
Is
the economy of the
YES: Economic output and
employment are now at all time highs
MARK J. PERRY MCCLATCHY
TRIBUNE NEWS
During the five-year economic expansion, more than
9 million jobs have been created, a pace of more than 152,000 jobs on average
every single month. The national unemployment rate of 4.6 percent is the lowest
in more than five years.
The
Forecasts by the Congressional Budget Office
indicate that average to above-average growth in real output will continue for
at least the next 10 years, putting the U.S. economy on track to break the
previous 120-month record expansion from 1991 to 2001.
If the CBO is correct, the continuation of this
economic expansion will increase output by $8 trillion over the next 10 years
as technology and education continue to enhance worker productivity. By
comparison, the last $8 trillion increase in goods and services took 25 years.
With economic output and employment at all-time
highs, and unemployment rates near historical lows, it should be no surprise
that federal and state tax revenues have exploded. All but five states
currently have budget surpluses because of the strong economy and huge
increases in revenue.
Federal tax payments keep hitting record highs, and
they surged by more than $250 billion in each of the last two years, marking
the two largest percentage increases in federal tax revenues since 1981.
Especially worth noting are the annual increases of 44 percent, 47 percent and
27 percent over the last three years in income tax revenues on corporate
profits, which have grown substantially as a direct result of the expansion,
along with the added economic stimulus of the 2003 tax cuts.
The unexpected surge in tax revenues has brought
the budget deficit down to less than 2 percent of GDP, well below the 2.7
percent average over the last 40 years. And it's not only federal and state
government tax collectors who benefited from the strong economy. Private
charities reaped a $63 billion increase in donations last year, the second
largest boost in history.
Reflecting record corporate profits and a healthy
economy, the stock market is once again reaching record-setting levels. When
you add low inflation, stable interest rates, and falling gas prices to all of
these positive economic indicators, you have all of the necessary ingredients
for an economy that is hitting on all cylinders.
There is overwhelming evidence to suggest that the
economy is not just in good shape, it's in great shape, and it keeps getting
better.
Mark J. Perry is an
associate professor of finance and economics at the