By By Tray Smith
With gas prices hovering at around $2.70 a gallon, a large national trade deficit, and a federal budget deficit predicted to reach $400 billion this year, most people have formed a negative perception of our economy. Unfortunately, the public has come to rely on political rhetoric and prices instead of traditional economic indicators to reflect on economic growth. While rapidly increasing gas prices may eventually have a negative economic toll, they haven't thus far. Studies increasingly show that budget and trading deficits have little effect on our overall economic growth. And a steady stream of positive economic news has been making its way into the headlines.
The truth is, our economy is strong and it is growing stronger. Unemployment, currently standing at 4.7%, is lower than the average rate of the 1960's, 1970's, 1980's and 1990's. Last quarter, we experienced an economic growth rate of 4.8% on top of a 3.5% growth rate during 2005. Hourly compensation increased by 5.7% during the first quarter. Over the past year, two million jobs have been created, including 138,000 in April.
Of course, all of these statistics are meaningless unless we have tangible economic growth in our own area. Atmore was hit hard by the last recession. However, now one can rarely pick up the newspaper without seeing signs of growth. Some of those signs include: Pepsi is expanding onto the Jerry's Hardware property, Jerry's Hardware is relocating, United Bank has just reopened after going through a major renovation and First National Bank is currently undergoing a dramatic facelift, Swift Supply is expanding, Muskogee Metal Works has received over $8 million in new contracts, Walgreen's is moving onto the David's Catfish property, David's is building a new complex for itself, Roasters Gallery and K&E Pets have recently opened on Ridgeley Street, Burkes Outlet and Moore's have each moved into larger locations, and several other developments for which I do not have room have been announced.
Instead of complaining about all of the things going wrong with our economy, we should begin thinking about all of the jobs and capital being created in our own community. Throughout our state growth is even more astounding, as we continue to expand into the automotive sector and the European aeronautics company EADS is preparing to open in Mobile.
This growth is not the result of complacency by our national leaders. After 9/11, our economy went into shock. The pain was increased by a string of corporate accounting scandals and the dot-com bubble bust. The ensuing war on terror and increased fear of attack continued to cause stagnant economic growth. Still today, our operations in Iraq and Afghanistan are straining our national budget and instability in the Middle East is putting a premium on gas prices.
However, President Bush and Republicans in Congress responded with large tax cuts that provided relief to businesses and families across America. The United States House of Representatives voted on Wednesday to rightfully extend several of those cuts through 2010, which will yield a total value of $70 billion to the taxpayer. In a time when the Republicans have been eaten by incompetence, they have finally gotten something right. The package includes preserving a lower rate for capital gains and dividends and the continuation of alternative minimum tax relief. For the past three years, lower tax rates have created more wealth, more capital, and more jobs for America, and by extending the tax relief, Congress will extend the economic growth.
While Democrats contend that the tax cuts are for the rich and will cause an enlarged deficit, that is like a person justifying bankruptcy because his boss did not pay him enough. Deficits in Washington, just like deficits in homes, are caused by spending.
Furthermore, increased economic growth caused by tax reductions will cause the deficit to decrease. That is because lower tax rates on a larger economy yield more government revenues than high tax rates on a small economy. While people of all classes will benefit from the tax reductions, when any class increases the amount of money it is willing to invest, all classes benefit from more jobs and more wealth.
I must also add that Governor Riley has put together a top-notch economic development team that has yielded positive results for our entire state. He has recently signed a tax cut bill that will help the working class keep more of their own money. Here in Atmore, our Chamber of Commerce has done a fabulous job welcoming new businesses into town, and Mayor Shell deserves high praise for his personal efforts to bring jobs to Atmore. Congressman Bonner has continuously supported lower taxes. At each and every level of government, the people we in Atmore have elected are handling our economy well. We should be thankful for the service of them all. That is the bottom line.
Tray Smith is a freshman at Escambia Academy. He may be reached for comment at tsmith_90@hotmail.com.