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Proof Of An Improving Economy

An editorial in today’s Investor’s Business Daily (IBD) argues that the economic pie is indeed getting bigger. They begin:

“According to the latest data from the Internal Revenue Service, average adjusted gross income in 2006 hit $58,029 in 2006 dollars. It was the first time that average income had exceeded the peak year of 2000, the year before incomes began to decline. The average income in 2006 was 1.2%, or $739, higher than in 2000, when incomes were swollen by capital gains from a roaring market, and $1,369 over the 2005 average.”

The editorial explains why average income dropped from 2000:

“A stock market crash and the 9/11 attacks hit incomes hard, as did a series of Fed rate hikes. The effects of the resulting slowdown continued until Bush's economic policies, especially his tax cuts, kicked in.”

IBD includes the following graphic based on IRS data:

Tax cuts do help grow the economy. The problem with the federal budget is the inability to control spending. IBD concludes:

“Thanks to a growing economy, Americans' real disposable income has increased every quarter but two from the beginning of 2003, when Bush's policies started going into full effect, to the first quarter of 2007. Some of the growth was remarkable, including a 7.5% jump in the fourth quarter of 2004 and a 6.3% increase in the third quarter of 2003.”



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