More Solid Economic Growth
Despite the increased price of oil, now pulling back from near record highs, and despite the toll taken by last year’s spate of killer hurricanes, the US economy is doing very nicely indeed.
As widely reported yesterday, the US economy grew at a robust 4.8% annual rate during the first quarter of 2006. Since the summer of 2003, the economy has grown at an average rate 4%, while creating over 5 million new jobs, according to Congressional testimony by Federal Reserve Chairman Ben Bernanke earlier this week.
Even the NYT was forced to note yesterday that despite recent rate hikes by the Federal Reserve,
“The average rate on a 30-year conventional mortgage was 6.3 percent last month, lower than at any point in the 1970′s, 1980′s or 1990′s, according to the Fed.”
Economist and former Reagan advisor Larry Kudlow quotes from a WSJ story that a deal is in place on extending the tax cuts on investment income.
Look for a two-year extension for dividends and capital gains at the current 15 percent marginal rate.
This is critically important because for the first time in history, more than half of all American households own stocks in some fashion, be it IRA’s, 401-K’s, mutual funds, individual equity holdings, or some combination, according to a recent survey. Extending those tax cuts will increase the wealth of more than half of US households.
So while the torrid pace of economic expansion is expected to subside somewhat, and interest rates will rise a bit more, there is little indication of inflation, and no sign of the recession that Democrat pessimists had been hoping for just a few short months ago when the yield curve was briefly inverted.
The economy is doing very well indeed. Tax cuts work.
