Ed Gillespie and Rep. Ford Debate Whether Dow Climb Proves Tax Cuts Work

This is a partial transcript from "Your World with Neil CAVUTO," September 27, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: The other story, of course, we are focused on today, financial — are we now on the brink of a record because of tax cuts, and we got those tax cuts when we needed them most?

Former RNC Chairman Ed Gillespie says yes. He's the author of "Winning Right."

Ed, what do you make of that, that we would have been in worse shape had we not had them?


If you look, Neil, especially the — as George Bush came into office, the economy was slowing down. And, then, of course, in the first year of office, we got hit by the attacks of September 11.

If we didn't have those tax cuts generating economic growth, 2.9 percent economic growth in the last quarter, 19 straight quarters of economic growth, 5.7 million jobs created since — since the attacks of September 11, 2001, without the tax cuts, we wouldn't be seeing this kind of strong economic recovery that we are in the midst of right now.

CAVUTO: All right, Tennessee senatorial candidate Harrison (sic) Ford joins me right now with his — his take on what's going on.

Harold Ford. I'm sorry.



CAVUTO: I know. I had just a mind blank there. All right.

I apologize, Congressman.

FORD: I'm a big "Raiders of the Lost Ark" fan.


CAVUTO: Let me ask you about whether the — the tax cuts brought us to this point.

What do you think?

FORD: Well, I don't think there's any doubt, when you — when you pass $2.5 trillion worth of tax cuts, you spend a half-a-trillion dollars on a war, there's going to be some stimulants, when you're talking about government spending.

So, no one denies that. And the Dow has grown. And I'm a beneficiary, and those of us who are in the market are beneficiaries.

But here's the challenge we face. And I think what we — and I agree a lot with what Ed has said. We have to figure out how we bring more Americans into this growth phase, into this growth pie, into this prosperity that the market is creating for some shareholders and for some who benefit from capital gains and dividend tax cuts, which I support.

When you consider that the national savings rate is negative and China's is upwards of 45 percent, and when you consider that real wages for ordinary workers have been in decline since 2003, or have not seen an increase, the real question has to be: With these corporate profits as high as they are, where's all of it going, because, generally, when you see these kind of gains, workers, and those particularly hourly workers, benefit in some ways?

So, as we go forward, I would agree with your previous guest that the market is always forward-looking. So, how is it that we in government can do two or three things: one, put us on a trajectory to balance the budget and bring some sanity to some of our spending here, which I support? Two, even though gas prices are down and commodities prices are coming down, we need to get serious about finding alternative and new energy sources, so we're not dependent on one source.

CAVUTO: All right. But — but could we stick to the subject, Congressman?

From your perspective, Ed, I guess...


FORD: I think — I'm sorry. I think this is the subject. I'm sorry.

CAVUTO: But the issue I'm trying to get at is whether tax cuts help or hurt this.

If, Ed, he is right that, yes, we got have these deficits now, this overspending, naturally, the stimulus that you're going to get...


CAVUTO: ... is going to help, but it's going to come back to boomerang, what do you make of that?


GILLESPIE: Well, let me make a couple points.

First of all, the — in economic growth periods, the — those at the lowest end of the income spectrum, there is a lag before they benefit. In this — in this recovery, it's been a longer lag than most. I think that's a reflection of some of the things going on in the global economy.

But the fact is that wages, real wages, did go up 7.6 percent in the second quarter of this year. And, so, it is starting to translate at the lower end of the spectrum as well. Median income went up for the first time since 1999. And that's a good thing. We do need to see more of that at the lower end of the spectrum, the — the benefit of the growth.

CAVUTO: All right.

GILLESPIE: In terms of the tax cuts and — and the deficit, let's remember something. April 2006 was the second highest month of revenue to the federal government in the history of our country. Only one other month was ever higher. We have record income levels coming into the federal treasury...

CAVUTO: OK, guys, I...

GILLESPIE: ... as a result of this growth. It's...

CAVUTO: I — I don't mean...

GILLESPIE: ... not tax cuts that...

CAVUTO: ... to jump on you guys. I wish we had more time.

And, Congressman, I promise we will bring you back.

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