More Myths

How can a democracy best grow? Over the past 30 years, most economic growth has been confined to a very few. Most economists would point out the fact that only 2% of Americans have experienced any real growth in income or wealth. This was not he case from 1945 to 1079. During that 34 year period the greatest growth was not enjoyed by the wealthiest 2% but by over 50% of the population that was considered middle class. This growth, much of which was spurred on by veterans returning from World War II taking advantage of various government programs such as the GI Bill, resulted in more people having economic opportunity than any other time in history. While there are economists that have attempted to assert that low tax rates stimulate growth, during the 34 year period from 1945 to 1979, marginal tax rates were as high as 92%. The lowest marginal tax rate during that time was 70%. Keep in mind that during that time the creators of wealth enjoyed by today’s inheritors of wealth like the Koch Brothers were able to do so in spite of these high tax rates. In spite of high inheritance tax, many managed to pass much on to those who followed them. Why is it that those who are most vocal about the government deficit are also most vocal about reducing tax rates? These same people, when their businesses suffer drops in profits have no reticence when it comes to raising prices. It goes to reason that at a time when tax rates are at historic lows and tax revenue as a share of GDP are also at historic lows historically high deficits are the result. A further lowering of these tax rates will not increase revenue nor pay down the deficits. This is not complicated economics but simple math. You will not be able to pay down any personal debt by lowering your personal income. If you reduce spending, you may be able to reduce the growth of your personal debt, but you will reach a point where you are no longer able to reduce spending. At that point a further reduction in your personal income will definitely not reduce your personal debt. Reducing debt requires an increase in income for both individuals and for government. P. T. Barnum must have had the Tea Party in mind when he said, “there’s a sucker born every minute.” George Bush tried to say, “fool me once, shame on you; fool me twice, shame on me” but he failed in his attempt to iterate that quote just as he failed to reduce the deficit with his tax policies. People can make up facts, but history will validate or invalidate those facts.