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October 16, 2011 in Opinion
Smart Bombs: Peons of prosperity
So what’s the difference between letting the economy breathe free, and crushing its sternum with the anvils of Marxism? A few percentage points in marginal tax rates, if you listen to congressional debates.
The Bush tax cuts reduced the top income rate from 39.6 percent to 35 percent, and the 36 percent bracket to 33 percent. For capital gains, the rate was dropped from 20 percent to 15 percent. According to the alarmists, reversing this and other cuts would set the country on the road to serfdom, otherwise known as where we were before 2001.
Let’s take a quick trip down that path for a reminder of just how scary it was. A 2010 report from the nonpartisan Congressional Research Service will be our guide:
“Before the Bush tax cuts were enacted the Congressional Budget Office (CBO) projected gradually rising federal budget surpluses – from 2.7% of GDP in 2001 to 5.3% of GDP by 2011. Within a few years, CBO was projecting budget deficits. The Bush tax cuts, with a $1 trillion 10-year price tag, contributed to this shift from budget surpluses to deficits. Other major contributing factors included the 2001 recession, the increase in defense spending for the wars in Iraq and Afghanistan, and the Medicare prescription drug benefit.”
As for the economy, it was in the longest period of sustained growth in the nation’s history, despite the “job-killing, economy-crushing” tax increases that were passed in 1993.
In December 2000, the unemployment rate was 4 percent.
If this is serfdom, bring on the chains.
Target-rich environment. To be fair, many other factors are involved in whether economies grow and tax revenues flow. But the facts belie the scare tactic that we would somehow asphyxiate the economy, widen the budget deficit and fundamentally change the nature of our country if we raised taxes to a level that would still be historically low. After the vaunted tax cuts under President Kennedy, the top income tax rate was still double what it is now.
And yet, there’s this piece of hyperventilation at gop.gov., the website of U.S. House Republicans (emphasis mine): “The President’s budget for 2012 calls for $1.5 trillion in job-destroying taxes. The President says that the bulk of these tax increases would only impact the rich. But the fact remains that these tax increases will kill American jobs. More than 75 percent of America’s small businesses file their taxes as individuals. Half of them would suffer from a higher tax burden under the President’s proposed tax increases, hurting their ability to hire more workers and pay their current workers more.”
I sure don’t want to hurt anyone’s ability to help workers – I happen to be one myself. But what are we to make of the fact that our pay and benefits have declined despite 10 years of tax cuts, while the fortunes of the rich have soared? That low-tax decade featured two recessions, with the purchasing power for most workers failing to return to pre-2001 levels. In short, the “job creators” failed to leverage $1 trillion in tax cuts to create and preserve jobs and improve the plight of American workers. So why would it be different this time?
Apart from the president’s budget, there is the Senate Democrats’ attempt to impose a 5.6 percent surtax on income over $1 million. Lori Montgomery of the Associated Press pored over a just-released report from the Congressional Research Service on this very topic. It looked into the effects of the so-called Buffett Rule, which has inspired the Democrats’ tax-the-rich proposal. Warren Buffett is the mega-wealthy investor who has called on the government to raise taxes on folks like him.
Congressional Republicans divert attention from the very wealthy by saying this would punish mom-and-pop businesses, which they claim are the primary providers of job growth.
Montgomery notes: “The CRS report offers a withering rebuttal to both of those claims. The report notes that just 1 percent of tax returns with business income have adjusted gross income of more than $1 million a year. And those businesses are some of the least likely to create jobs.”
Did I mention that the Congressional Research Service is nonpartisan?
Boo! Halloween costume idea: Warren Buffett. Apparently, nothing could be scarier.
Smart Bombs appears Sundays on the Opinion page.
Smart Bombs: Greatest generation? Not us 
mmspowaus on October 16 at 6:10 a.m.
President Reagan persuaded a hostile DNC dominated congress to reduce the number of tax brackets from 30+ in 1978 under Carter to just two in 1988. The top paying a whopping 28%…
The economy boomed as a result and ignited the longest period of sustained growth in the nation’s history…The micro computer revolution (completely independent of government) was the engine the powered the economy then as well…
The Clinton election in 1992 and the retroactive tax cuts of 1993 combined with the scandal plagued administration led to a GOP majority in Congress for the first time in 40 years… The GOP got busy under the leadership of Newt and balanced the budget, welfare reform etc….
Lower taxes, cheap energy, highly trained labor force and low rent on money…how could we fail?
Any womanizing clown could have been a successful president from 1993- 2000 …oh wait…
drywitt99 on October 16 at 6:34 a.m.
And to think…..but for the swing of a single vote in the Senate or House….Clinton’s economic plan of 1993 would have failed.
A plan which EVERY SINGLE REPUBLICAN in Washington
KNEW would lead to the economic collapse of the nation!!!
Sure….they were wrong.
But being Republicans….THAT would have ben a small price to pay to give a Democratic President a black eye!
Now….the ONLY Republican President to balance the budget in my considerable lifetime did so in the ‘50s with a Democratic House and Senate,,,,,and a 91% top marginal tax rate.
That seems to prove that neither a low tax rate….nor fiscally responsible Republicans in control in Congress….are necessary to balance the budget.
What it takes is a President with the WILL to balance the budget…..and not play politics with it as an issue.
Eisenhower had that WILL. So did Clinton, Johnson and Truman.
The names Nixon….Reagan….and both Bushes are starkly absent.
Orphan on October 16 at 8:26 a.m.
Drywitt AKA Frank
So you really believe that every Republican in 1993 wanted to ruin the economy, WOW what a bold statement or should I say what a grand fairy tale. Keep making these kinds of statements it helps validate your position to the rest of us.
Jeffrey_Grey on October 16 at 10:30 a.m.
Regan also tripled the deficit in his first two years in office and, eventually had to sign into law the largest peace-time tax increase in our nation’s history. An increase aimed mostly at the wealthy.
http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm
Funny how regressives always omit that part of “Dutch’s” administration.
Dazzeetrader11 on October 16 at 12:51 p.m.
Jeffrey….and what has Obama done? Worse! And his little presidency has done “what” for America. Reagan improved things, Obama’s worsened things.
Reagan generated hope and lot of good things…like a bustling economy.. Obam’s done the opposite despitre being the wildest spending president on record….wit high unemployment and very depressed economy.
What’s good at one time is bad at another. it depends largely on understanding the mileiu we’re in. Reagan understood that as he brought the country out of the Carter Dem Lib goofiness.
Obama’s never understood the economy…never has. No experience. Probably doesn’t care anyway.
I do think that when Obama took on the healthcare system, he misunderstood the needs of the country. He spent his first year trying to change the healthcare system when the public just want the costs to be controlled. As most megalomaniacs…he tried to nuke the old scheme and rebuild it in a whole new socialist concept. Didn’t and won’t work.
What was ignored was the biggest need…….the economy.
That set the tone for his failures. 40 years ago, Reagan had the wisdom to understand the US system. 40 years on, Obama not only refuses to understand the system, he’s tried to radically change what he’s never understood.
Reminds me of that old “Ten Years After” song…..”I’d love to change the world..but I don’t know what to do”…
gmorton on October 16 at 1:33 p.m.
Gary Crooks wrote,
“So what’s the difference between letting the economy breathe free, and crushing its sternum with the anvils of Marxism? A few percentage points in marginal tax rates, if you listen to congressional debates.”
Well, no. No one that I know of is spouting that hyperbole. The argument is simply that raising taxes will make the US business environment even less competitive, and drive more production overseas.
Which I should think would be obvious.
gmorton on October 16 at 1:43 p.m.
Jeffrey_Grey wrote,
“Regan (sic) also tripled the deficit in his first two years in office and, eventually had to sign into law the largest peace-time tax increase in our nation’s history. An increase aimed mostly at the wealthy.”
Er, no. Reagan’s 1986 tax increases cancelled only half of the 1981 cuts. The net tax burden over his terms was reduced substantially.
Nor were the increases “aimed mostly at the rich.” The largest increase (half of it) was in the SS payroll tax, paid by all employers and employees.
He did not reduce the overall size of government, though, largely due to a large increase in the military budget.
misjustice on October 16 at 2:58 p.m.
Ahh, Saint Reagan, who increased taxes at least 10 times, today would be deemed too liberal/moderate for the TeaO’Cons (if they cared enough to learn what he truly did, rather than chanting Raygun, Raygun, Raygun).
Jeffrey_Grey on October 16 at 3:33 p.m.
gmorton,
I was referring to that part of the 1986 law that taxed capital gains, implemented the ‘bubble’ rate and eliminated several loopholes favorable to more wealthy tax payers, including for example the restriction on IRA deductions and the closing of tax shelters.
You are right on one point however, I did misspell Reagan’s name for which I truly apologize. While I think “Dutch” implemented some truly ruinous economic policies that we’re still trying to pay down to this day, I also think he was a basically a well-intentioned man who truly loved America - at least more than he loved politics.
DeadHandsofChe on October 16 at 3:53 p.m.
Just because the CRS is nonpartisan doesn’t mean they are correct.
Hey, back in 2010 the nonpartisan CBO told us that that Obama’s CLASS Act would save us money. On Friday, even supporters agreed that it would not save money but cost lots of money and that is why they dumped it.
http://www.washingtonpost.com/national/health-science/white-house-kills-long-term-care-program/2011/10/14/gIQAVZLYkL_story.html
garyc on October 17 at 11:55 a.m.
The Senate was controlled by the GOP from 1980-86. The sustained growth began four years before the 1986 tax deal (Dems back in charge), which dropped the top rate to 28 percent and simplified the code. In the first four years of that growth, the top rate was 50 percent.
Too much emphasis is placed on where the rates are in relation to economic growth. If low rates = economic growth, we’d be in the midst of record growth.
Also, Congress was cooperative on a bipartisan basis (Bradley, Dem; Packwood, GOP). They set the top cap gains rate at 28 percent, same as income. It has been lowered by Clinton and Bush since then.
So, go back to the 1986 deal? Works for me, but it would entail raising taxes on the rich by a heckuva lot more than the millionaire tax.
But, alas, there are no more Bob Packwoods, Bob Michels and Howard Bakers around to fend off those tax pledges signed by GOP pols.
http://www.npr.org/2011/10/17/141407285/times-have-changed-since-reagans-1986-tax-reform
The moderates have been drummed out.
gmorton on October 17 at 10:46 p.m.
garyc wrote,
“In the first four years of that growth, the top rate was 50 percent.”
Yes, having been reduced from 70% in 1981.
“Too much emphasis is placed on where the rates are in relation to economic growth. If low rates = economic growth, we’d be in the midst of record growth.”
That does not follow. Tax rates are not the only factor affecting growth. Lower tax rates (actually, a lower total government burden on the economy) *tend* to promote growth, and a greater burden *tends* to inhibit growth. But other factors can augment or offset the effects of current tax rates – including expectations of *future* burdens.