REPUBLICANS AND GROWTH….Irwin Stelzer writes about economic growth in the Weekly Standard today:
FDR followed the advice of an adviser who promised “We shall tax and tax, and spend and spend, and elect and elect.” The result was a prolonged depression that ended only when America entered WWII. Kennedy and Reagan took the road less traveled, cut taxes, and set in train periods of extended and rapid growth.
Huh? The Great Depression was a result of FDR’s free spending ways? Where does the Standard get these people?
The rest of the article isn’t much better. Stelzer is writing about the lower productivity growth of Europe vs. the United States in recent years ? a genuine and somewhat perplexing problem ? but spends nearly the entire piece trying to make the case that the difference is due to a U.S. tax code that leaves people alone so that they can get rich:
But what the Europeans don’t understand that it is far “fairer” to foster rapid increases in incomes of low earners by encouraging still more rapid increases at the top end of the income scale, than it is teach low earners to concentrate on waiting for the next tax credit or handout.
(The chart at right, which is adjusted for inflation, shows household incomes since 1967. If median incomes had increased at the same rate as those of the top 5%, the median household income in America today would be $56,000. In reality, it’s only $42,000. This difference of $14,000 should be dubbed the “Republican Income Gap.”)
Far from “doing nothing,” Republican economic policy for ? well, forever, really, but certainly for the past 20 years, has been explicitly aimed at what Selzer unwisely acknowledges: “encouraging” rapid increases at the top end of the income scale. One of the enduring mysteries of American politics has been the ability of the Republican party to get away with this while still retaining the loyalty ? and votes ? of the middle class that they rather obviously don’t care a whit about. Middle class enthusiasm (or, at least, tolerance) for the dividend tax cut is merely the most recent example of this.
A vigorous and growing middle class is essential to the health of a nation, and ours has been mostly stagnant for the past 30 years. One of these days the middle class is going to learn just how rich the rich really are and just how little of our country’s enormous prosperity ever “trickles down” to them. But when?
BONUS HISTORICAL NOTE: I Googled the “tax and tax” quote, and it turns out that it was uttered by Roosevelt major domo Harry Hopkins….in 1938. What happened was that the previous year FDR had cut back on spending, causing the New Deal recovery to stall and GDP to decrease by 4.5%. The next year, 1939, taxes actually went down, spending did indeed go up, and the result? The economy grew 7.9%. Sounds like a pretty good plan to me!