Government does not create wealth. American businesses and workers and farmers and entrepreneurs create the wealth for this country. And so the role of the government is to create an environment where the small businesses can grow into a big business, where the entrepreneur can flourish, where people who dream about owning a home are able to own a home. In our economy, our most precious resource is the talent of the American worker – and there is no limit to what we can do when people have the freedom to make a better life for themselves and their family.

President Bush, Kernersville, N.C.
December 5, 2005

Supply-side is back, and not a moment too soon. In a major speech yesterday, President Bush finally retook the offensive in Washington’s brewing economic policy fight. In the face of Democratic calls for allowing the president’s first-term tax cuts to expire and Republican lack of willpower on spending restraint, Mr. Bush noted that those tax cuts are working to spur economic growth. His speech was not merely a matter of resting on his laurels. The president has struck the notes that many of us have been waiting for and that he can use to inspirit the next three years of his presidency.

Save for the dollar, he has made great gains, which he made the best of yesterday. Unemployment is down to 5%, better than the average for the 1970s, 1980s, and 1990s. The economy has expanded by 4.5 million new jobs since May 2003, including 215,000 in November. Just last week, the third quarter estimate for growth in domestic output was revised upward, to 4.3%.

Much of the credit goes to Mr. Bush’s tax cuts both on individual income tax rates – which also, as he pointed out in his address yesterday, apply to many small businesses that file as individuals – and on capital gains and dividends.

The president’s emphasis was on the need to keep this boom going and on his vision for how to do so. He comprehends that, as he put it, “we can’t take this growth for granted.” His proposed solution is “a commitment to keeping your taxes low, and at the same time being wise about how we spend your money.” The post-tax cut numbers speak for themselves now that Mr. Bush is actually trumpeting them. His speech yesterday also reminded us of why the supply-side creed of tax cuts and spending restraint should be an easy sell for Republicans who bother to try.

When the president spoke of America being a “confident and optimistic nation,” he used language that President Reagan proved resonates with the American public. It’s a view that leads him to emphasize an ownership society in which Americans can buy into the American dream – hence his focus on expanding homeownership and offering health savings accounts, as well as keeping the Social Security reform debate alive. And to approach trade issues in the context of a broad optimism.

In the heart of protectionist North Carolina, Mr. Bush argued that “keeping this economy strong means welcoming opportunities that a global economy offers…. By opening up new markets for our goods and our farm products and our services, we will help our economy continue to grow and create opportunity for people right here in our country.” He called on “economic isolationists” in Washington to “have more faith in the American worker and in the entrepreneur.”

The president showed yesterday that on a fundamental level he “gets it.” He understands that economic policy should be oriented toward creating the wealth of the future, not divvying up the wealth of the past, so that growth-spurring tax cuts must be a centerpiece of any economic program. He understands that this is a fundamentally optimistic message about the possibilities of America’s markets and that the public will respond to this optimism.

Mr.Bush clearly comprehends the principles of the Reagan era. “Some of us remember hearing the pessimists in the 1970s and 1980s, when we were told that America was tired and could no longer compete with Japan. At that moment, Ronald Reagan’s tax cuts were just beginning to kick in, and that set off one of the largest economic expansions in history,” he said.

“At the start of this new century,” Mr. Bush said yesterday, “we have proven that pro-growth economic policies out of Washington, D.C., do work, and can overcome some mighty obstacles. At the start of the century, we recommit ourselves to the notion that the more free people are, the better off your economy will be…. This economy is strong, and the best days are yet to come for the American economy.” And, it would appear, for the Bush administration.