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We start today with Thomas Sowell addressing the “tax the rich” theories of the left. Sowell starts by writing about actual events in the 1920′s and then shows how the same ideas moved President Kennedy to call for, not new and higher taxes, but tax cuts. The point of these efforts is to recall a time when the country was not treated to such a large contingent of diehard Democrat doctrinaire demagogues.
… high tax rates that many people avoid paying do not necessarily bring in as much revenue to the government as lower tax rates that more people are in fact paying, when these lower rates make it safe to invest their money where they can get a higher rate of return in the economy than where they can get a higher rate of return in the economy than they get from tax-exempt securities.
The facts are plain: There were 206 people who reported annual taxable incomes of one million dollars or more in 1916. But as tax rates rose, that number fell to 21 by 1921. After a series of tax-rate cuts in the 1920s, the number of individuals reporting taxable incomes of a million dollars or more rose again, to 207 by 1925.
It should not be surprising that the government collected more tax revenue under these conditions. Nor is it surprising that, with increased economic activity resulting from more investment in the private economy, the annual unemployment rate from 1925 through 1928 ranged from a high of 4.2% to a low of 1.8%.
The point here is not simply that the weight of evidence is one side of the argument rather than the other but, more fundamentally, that there was no serious engagement with the arguments actually advanced but instead an evasion of those arguments by depicting them as simply a way of transferring tax burdens from the rich to other taxpayers. …
… President Kennedy, like Andrew Mellon decades earlier, pointed out that “efforts to avoid tax liabilities” make “certain types of less-productive activity more profitable than other more valuable undertakings” and “this inhibits our growth and efficiency.” Therefore the “purpose of cutting taxes” is “to achieve a more prosperous, expanding economy.”
“Total output and economic growth” were italicized words in the text of Kennedy’s address to Congress in January 1963, urging cuts in tax rates. Much the same theme was repeated yet again in President Reagan’s February 1981 address to a joint session of Congress, pointing out that “this is not merely a shift of wealth between different sets of taxpayers.”
Instead, basing himself on a “solid body of economic experts,” he expected that “real production in goods and services will grow.”
Even when empirical evidence substantiates the arguments made for cuts in tax rates, such facts are not treated as evidence relevant to testing a disputed hypothesis, but as isolated curiosities. Thus, when tax revenues rose in the wake of the tax-rate cuts made during the George W. Bush administration, the New York Times reported:
“An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”
Expectations, of course, are in the eye of the beholder. However surprising these facts may have been to the New York Times, they are exactly what proponents of reducing high tax rates have been expecting, not only from these particular tax rate cuts, but from similar reductions in high tax rates at various times going back more than three-quarters of a century.
John Taylor, econ prof at Stanford shows in WSJ how the left’s governance has given us stagnation and high unemployment.
… In my view, the best way to understand the problems confronting the American economy is to go back to the basic principles upon which the country was founded—economic freedom and political freedom. With lessons learned from the century’s tougher decades, including the Great Depression of the ’30s and the Great Inflation of the ’70s, America entered a period of unprecedented economic stability and growth in the ’80s and ’90s. Not only was job growth amazingly strong—44 million jobs were created during those expansions—it was a more stable and sustained growth period than ever before in American history.
Economic policy in the ’80s and ’90s was decidedly noninterventionist, especially in comparison with the damaging wage and price controls of the ’70s. Attention was paid to the principles of economic and political liberty: limited government, incentives, private markets, and a predictable rule of law. Monetary policy focused on price stability. Tax reform led to lower marginal tax rates. Regulatory reform encouraged competition and innovation. Welfare reform devolved decisions to the states. And with strong economic growth and spending restraint, the federal budget moved into balance.
As the 21st century began, many hoped that applying these same limited-government and market-based policy principles to Social Security, education and health care would create greater opportunities and better lives for all Americans.
But policy veered in a different direction. Public officials from both parties apparently found the limited government approach to be a disadvantage, some simply because they wanted to do more—whether to tame the business cycle, increase homeownership, or provide the elderly with better drug coverage.
And so policy swung back in a more interventionist direction, with the federal government assuming greater powers. The result was not the intended improvement, but rather an epidemic of unintended consequences—a financial crisis, a great recession, ballooning debt and today’s nonexistent recovery. …
Tony Blankley has a proposal for the debt limit negotiations.
… Now, as summer 2011 reaches its steamy zenith, it falls to the only group of Washington politicians still trying to actually fix the debt problem – the House Republicans – to deny those political nihilists in both parties and in both branches the realization of their truly abhorrent plans.
This is a moment for both principle and cool realism on the part of the House Republicans. The principled part still requires them to use the debt ceiling requirement to make real cuts in the deficit in the current fiscal year.
Here is the realism part: 1) Is Aug. 2 the real date? Truth is, the American system is so big and complex that no one knows when and whether the borrowing runs out on any given day; 2) could the president use the actual tax revenues to pay interest, Social Security, Medicare and armed services salaries? He doubtlessly could, but Congress probably cannot compel him to do so without a Supreme Court decision, which would take many months to obtain; 3) would fully rational international bond and equity markets react dangerously to Aug. 2 without the debt ceiling being raised? No, but we do not have fully rational markets currently. Misleading headlines, unsupported rumors about unnamed bankers in Europe have driven world equity and bond markets careening all over the place in the past two years.
The reality that House Republicans have to deal with is that between the words coming out of the executive branch and the mainstream media and given the general nervousness of the markets, we cannot rely on rationality to win the day on Aug. 2.
So here is my proposal for principle and realism. The House should pass a debt ceiling rising for 190 days that raises the ceiling by about $1 trillion. The president said he would not sign a short-term bill less than 180 days. Give him something he can sign without contradicting himself.
Attach to it about $1 trillion in discretionary spending cuts as identified by Vice President Joseph R. Biden Jr.’s negotiations. That gets real cuts and doesn’t let Washington kick the can past the next election. …
Commentary at Market Watch says we’ll see 10% unemployment soon in the Obama Depression.
After the nationwide unemployment rate peaked above 10% in late 2009, we saw a fairly rapid decline in jobless rolls during the next 12 months. By March of this year, the headline jobless number had crept back under 9% and renewed optimism in the economic recovery and equity markets.
Well, we’ve been reading a much different story in the last month or two, with disappointing job creation and a rise in the overall unemployment rate as the meager number of new positions can’t keep up with the sheer volume of folks looking for work.
To make matters worse, we are now seeing a disturbing new spate of layoff announcements — not just a dozen or so workers here and there, but pink slips issued by the thousands at some of the biggest blue chips on Wall Street. Read about 6,500 jobs cut at Cisco.
In short, there aren’t enough jobs to go around now and there will be even fewer jobs a few months down the road. All this points to significantly higher unemployment in the near future, possibly over the 10% mark.
So where will the biggest damage be done? I think these three sectors top the list: …
Victor Davis Hanson reminds us there was a time when our country could get something done.
… For the way things used to be, consider the Big Creek hydroelectric project, begun here in the central Sierra Nevada mountains of California 100 years ago. It was the nation’s first large effort to generate electricity from falling water — spurred by the need to provide electric power for a growing Los Angeles nearly 250 miles away.
Industrialist and entrepreneur Henry Huntington conceived the gargantuan effort, begun in 1911. In just 157 days, a supply railroad up the mountains was built by thousands of workers struggling at over 6,000 feet in elevation with picks, shovels, and horse-drawn scrapers. In just two years, electricity was flowing southward from a new powerhouse at Big Creek that harnessed San Joaquin River water released from the new Huntington Lake reservoir. …
… Quite simply, Big Creek could not be built today in the United States. Environmentalists would claim that the pristine nature of the San Joaquin River would be unnecessarily altered, citing a newly discovered colony of spotted newts or dappled dragonflies in the way of the proposed penstocks. Unions would demand blanket representation without elections — and every imaginable compensation for such hazardous duty. Workers would apply for stress-related disability benefits given the dizzying heights and the dank subterranean digging. Government regulators and inspectors would outnumber project engineers. Private entrepreneurs world never risk such a chancy investment without ironclad government guarantees of profits despite enormous cost overruns. And the public would be as skeptical of the risky project’s success as they would be eager to enjoy its dividends when completed.
The Big Creek project, like the Panama Canal, the Hoover Dam, the San Francisco Bay and Golden Gate bridges, and the interstate highway system, was the work of a less wealthy but confident bygone generation. They understood man’s ceaseless elemental struggle against nature to survive one more day, and they did not have the luxury of second- and third-guessing the work of others before them. ..
Our cartoons today come from an International Liberty blog post that sums up all of today’s Pickings with a modern day version of Aesop’s “Ant and the Grasshopper.”