The front end of a boom

Laurence Kudlow:

A year after the Bush tax cuts, the U.S. economy stands at the front end of an economic boom.
Recent government reports on consumer spending, industrial production, corporate investment, and business sales suggest overall second-quarter growth could come in around 6 percent annualized. That would put the trailing four-quarter recovery rate at 5.7 percent — the fastest pace since 1984.
That year followed the big Reagan tax cuts. This year follows the big Bush tax cuts. A coincidence? No. The incentive power of lower marginal tax rates on economic growth is one of the most underrated mainstream economic ideas.
Most economists obsess over Federal Reserve interest-rate policies, or the effect of energy prices, or consumer spending, or budget and trade deficits. Even when they observe tax changes, they look either at the temporary effects of tax rebates or the big-budget deficit impact on Keynesian aggregate demand.
It rarely occurs to economic thinkers that people work or invest to generate the highest possible after-tax return. When it pays more, after tax, to take investment risks, more individuals are willing to change their behavior and assume greater risk. Tax risk less, and get more of it. Tax production more, and get less of it.

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