Higher rates, better growth

It’s simply assumed in Republican circles that lower tax rates will lead to stronger economic growth. Indeed, for the right, this is just common sense: if the government takes less from paychecks, people will have and spend more money, thus generating stronger growth. This is especially true of the “job creators” (i.e., the wealthy).

If only that pesky reality would go along, Republicans would have a great argument on their hands. Instead, the Center for American Progress’ Michael Linden explained yesterday that over the last several decades, “growth was actually fastest in years with relatively high top marginal tax rates.” He published this handy chart.

Just to be clear, this isn’t to say there’s a causal relationship. In other words, no one is saying we saw higher economic growth because there were higher top marginal rates.

The point, though, is that Republican dogma bears no resemblance to these demonstrable truths. As the GOP sees it, this chart should be literally impossible — with such high top rates, growth economic should have been crushed. Indeed, many Republicans consider any top rate over 35% “confiscatory” and “job-killing.”

I’m curious, then, whether the right reconciles conservative assumptions about economic policy and reality.

In fact, I wonder about this all the time. The right assumes business investments are bound to be reduced with that awful President Obama imposing burdensome regulations on the private sector — except business investments have gone up. The right assumes the job picture would have to get worse with Democrats increasing spending and racking up new debts — except job creation got better immediately after Dems ignored the GOP’s advice.

Do conservatives consider this some sort of magic? An elaborate, decades-long coincidence?

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