Sighting: The Birth of the Boom
"According to the National Bureau of Economic Research, the official end of the last recession — and the origin of the current expansion — was November 2001. It's true that since November 2001 lots of economic indicators have markedly improved.
But I have a better theory. It depends on using a different date for the end of the recession and the beginning of the expansion. Let's see what happens if we use April 2003. In the 17 months from November 2001 (NBER's official recession end-date) to April 2003 (my proposed recession end-date), real GDP grew 3.2 percent. But in the 36 months from April 2003 to now, real GDP has grown much more: 11.3 percent. From November 2001 to April 2003 the unemployment rate actually went up — from 5.5 percent to 6 percent. And 1 million payroll jobs were destroyed. Talk about a jobless recovery! But from April 2003 to now, the unemployment rate has fallen to 4.7 percent and 5.1 million payroll jobs have been created. From November 2001 to April 2003 the S&P 500 fell 18 percent. Some bull market! But from April 2003 to now, it is up 51 percent. Now that's a bull market.
Sure, economists at the NBER can trot out their own numbers and make November 2001 look like the turning point. But I'm not buying it. Today's booming economy was born just after April 2003. The numbers that really count — the ones I've listed above — prove that beyond the shadow of a doubt.
So what caused it? What happened in the world just after April 2003 that triggered so much prosperity? Haven't you guessed? It was the 2003 tax cuts on personal income, dividends, and capital gains. They were enacted into law in May 2003. The rest is history. Very prosperous history. It's really so simple. Tell people they will get to keep more of the fruits of their labors and the fruits of their investments, and they will labor more and invest more. The economy will grow."
— Donald Luskin on www.nationalreview.com
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