If there is more regulation and taxation, it increases the costs of doing business. If you increase the cost of doing business, all things being equal, there will be less business. Conversely, if you decrease the cost of doing business, by easing taxes and regulations, there will be more business. If there is more business, there will be more employment and better returns on investment. Wages will go up, and there will be more innovation. Social spending will go down (less unemployment) and total tax revenues will increase, as taxable wealth increases.......
We have also been fortunate to live in a period of revolutionary change in the marketplace, that has not only generated more business, but helped to increase productivity without fueling inflation, largely through the application of the new computer technology.....
According to Milton Friedman, on average it takes about 18 months to feel the effect of a policy change that has been enacted. Thus, the recession in the early '80s belonged to Carter, and the boom belonged to Reagan. The recession in the early '90s, although it rattled people, was shallow and brief, and, in fact, fourth quarter growth was robust before election day, only the Commerce Department did not revise its figures until after the election.....
Clinton has been prevented from taking any major economic initiatives, and had budget discipline pretty much forced on him by the Republican Congress. He gets some credit for keeping steady people on, like Greenspan, and for not fighting the inevitable too much, but yes, it is mainly the fact that he has not gotten his way that has saved the economy....... |
