Why Aren't Democrats Supply Siders?
Has a public policy with such an incontrovertible record of success ever been as maligned as tax cuts? Yesterday, Obama flippantly dismissed them as the "same tired arguments and worn ideas..."
The great irony is that the very people who should be most supportive, Democrats, fight them at all costs. The revenue they so need to fund their expansive and expensive social agenda is choked off by short-sighted and reflexive ideological opposition. Undeniable empirical evidence that federal receipts are substantially increased as a result of tax cuts is set aside in favor of class warfare rhetoric. Why? Is it so repugnant to see the more fortunate benefit, even when it means the less fortunate will also gain, often in a disproportionately positive fashion? In the 1930's many New Dealers believed that heavy taxes on the rich were a moral imperative. Unfortunately, the nowhere-near-rich were forced to endure more than a decade of pain while Roosevelt attempted to extract his pound of flesh.
The history of tax policy from 1789 until today is rather unequivocal—federal revenue and tax rates have an inverse relationship. In fact, the data is so consistent that a regression analysis would surely show an R squared value near 1.
Whatever happened to JFK Democrats? He was a staunch fiscal conservative, but still supported the standard Democrat social agenda (e.g. raising the minimum wage; empowering unions; growing entitlements; etc.). Kennedy was the first president to push through major tax cuts while the government was running a deficit. He did so with a goal of doubling GDP—understanding that a higher budget deficit would have to be endured for a short time until the anticipated growth brought the budget back into balance. Which it did.
Significantly, Kennedy rejected advice from noted Keynesian and preeminent Harvard economics professor, John Kenneth Galbraith. Galbraith, in his book, The Affluent Society, criticized "private affluence and public squalor (class warfare speak of the time)." He strongly encouraged Kennedy to stimulate the economy by dramatically ramping up outlays for public works (even though doing just that was a categorical failure for both Roosevelt and Truman). Sound familiar?
Kennedy ended up spearheading the passage of an investment tax credit for businesses, followed by across-the-board reductions in individual and corporate income tax rates. Those measures triggered a major economic boom in the 1960's, which included a doubling of federal revenue. Real GDP growth jumped from 2.5% in 1960 to 6.4% in 1965. Unemployment fell from 6.6% to 4.0% during roughly the same period, and the budget deficit was wiped out.
The results were similar during the Reagan years. In the 1980's, as a result of Reagan's tax cuts, revenue doubled. Tax "fairness" also improved. For example, total taxes paid by the top 1% of earners rose from 18% to 28%.
Despite much demagoguing to the contrary, Bush 43's tax cuts also delivered solid outcomes. Revenue rose $276 billion between 2003 and 2006, and those in the upper income brackets now pay a record percentage of all taxes.
So, why aren't Democrats supply siders? Either they just don't recognize the facts, or they believe there is more political mileage in playing the rich against the poor. To the detriment of their constituents, when it comes to tax policy, the Democrats shoot themselves in the leg more than Plaxico Burress on a St. Patrick's Day bar crawl.
JFK liked to say that a "rising tide lifts all boats." In 2009, the tide is rising, but it's from a tsunami of government spending.
The great irony is that the very people who should be most supportive, Democrats, fight them at all costs. The revenue they so need to fund their expansive and expensive social agenda is choked off by short-sighted and reflexive ideological opposition. Undeniable empirical evidence that federal receipts are substantially increased as a result of tax cuts is set aside in favor of class warfare rhetoric. Why? Is it so repugnant to see the more fortunate benefit, even when it means the less fortunate will also gain, often in a disproportionately positive fashion? In the 1930's many New Dealers believed that heavy taxes on the rich were a moral imperative. Unfortunately, the nowhere-near-rich were forced to endure more than a decade of pain while Roosevelt attempted to extract his pound of flesh.
The history of tax policy from 1789 until today is rather unequivocal—federal revenue and tax rates have an inverse relationship. In fact, the data is so consistent that a regression analysis would surely show an R squared value near 1.
Whatever happened to JFK Democrats? He was a staunch fiscal conservative, but still supported the standard Democrat social agenda (e.g. raising the minimum wage; empowering unions; growing entitlements; etc.). Kennedy was the first president to push through major tax cuts while the government was running a deficit. He did so with a goal of doubling GDP—understanding that a higher budget deficit would have to be endured for a short time until the anticipated growth brought the budget back into balance. Which it did.
Significantly, Kennedy rejected advice from noted Keynesian and preeminent Harvard economics professor, John Kenneth Galbraith. Galbraith, in his book, The Affluent Society, criticized "private affluence and public squalor (class warfare speak of the time)." He strongly encouraged Kennedy to stimulate the economy by dramatically ramping up outlays for public works (even though doing just that was a categorical failure for both Roosevelt and Truman). Sound familiar?
Kennedy ended up spearheading the passage of an investment tax credit for businesses, followed by across-the-board reductions in individual and corporate income tax rates. Those measures triggered a major economic boom in the 1960's, which included a doubling of federal revenue. Real GDP growth jumped from 2.5% in 1960 to 6.4% in 1965. Unemployment fell from 6.6% to 4.0% during roughly the same period, and the budget deficit was wiped out.
The results were similar during the Reagan years. In the 1980's, as a result of Reagan's tax cuts, revenue doubled. Tax "fairness" also improved. For example, total taxes paid by the top 1% of earners rose from 18% to 28%.
Despite much demagoguing to the contrary, Bush 43's tax cuts also delivered solid outcomes. Revenue rose $276 billion between 2003 and 2006, and those in the upper income brackets now pay a record percentage of all taxes.
So, why aren't Democrats supply siders? Either they just don't recognize the facts, or they believe there is more political mileage in playing the rich against the poor. To the detriment of their constituents, when it comes to tax policy, the Democrats shoot themselves in the leg more than Plaxico Burress on a St. Patrick's Day bar crawl.
JFK liked to say that a "rising tide lifts all boats." In 2009, the tide is rising, but it's from a tsunami of government spending.
Interesting post. I agree with JFK's approach, however are is it safe to say the funds from the tax cuts from 43 were invested offshore with a greater return than in the homeland? Based on the JFK and Reagan approach the savings from the tax cuts where invested in America. With a Global economy there isn't a guarantee that savings from the tax cuts will go to direct US investment. How would conservatives approach this?
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Insofar as a global economy is concerned, we have to accept the bad with the good. The best way to ameliorate the negative is to make the U.S. the best place to do business and invest capital. That is primarily accomplished through tax policy and intelligent regulation.
Appreciate your participation.
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