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The Ideological Underpinnings of the Tax Rate Debate

One side supports "growth" while the other side supports "social justice."

by
Rand Simberg

Bio

November 23, 2012 - 12:00 am
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Other redistributionists have gotten into the tax-rate game as well. Paul Krugman, mystifying (at least based on his behavior since winning it) Nobel Prize in Economics laureate and Marxist organ for the New York Times, says that we should go back to the 91% rate of the booming Eisenhower years, and the strong unions, as though anyone ever actually paid that rate, or that the boom was caused by it and union power, rather than resulted despite them. What he fails to propose, of course, is that we obliterate the industrial infrastructure of much of the rest of the world, as we had a decade earlier, which gave us a world market for our products with little foreign competition. As Victor Davis Hanson comments:

In such a landscape of postwar monopoly, the United States, which had not recovered before the war despite eight years of statist policies, could sustain, for a brief time, Krugman’s dream tonics of a top income tax rate of 91 percent (with plenty of loopholes) — or almost any tonics within the broad parameters of free-market capitalism. Yet soon by the mid-1960s and 1970s, America reentered a competitive global economy, became increasingly dependent on soon-to-become-costly imported oil, and found its high-cost unionized labor, high taxes, and highly regulated 1950s economy inflexible and hardly able to adjust to the rise of dynamic competitors like Germany, Japan, South Korea, and later China. That is why the fossilized 1950s paradigm, which Krugman is nostalgic about, by the time of the Johnson, Nixon, Ford, and Carter administrations had stalled and was plagued with periodic bouts of high inflation, high unemployment, high interest rates, stagnant inner cities, a growing rust belt, and a generally stagflating economy.

It didn’t end until we got a president in 1980 who understood the wealth-generating power of reducing marginal tax rates. And note the missing president in that list: Democrat John Fitzgerald Kennedy. He, too, instituted tax-rate cuts, dropping Professor Krugman’s preferred 91% to 70%, and declared that “a rising tide lifts all boats.” And he would not recognize his party today, nor its members him, on either domestic or foreign policy. Barack Obama is not only no rocket scientist, but no Ronald Reagan, either. And sadly, in the end, neither was Mitt Romney, at least in his ability to display the common touch that gave Reagan two landslide victories.

Of course, in the other sense of the word, the current president’s real calculus is that he’ll be able to continue to wage class warfare, the economy will continue to be sick, he’ll continue to blame recalcitrant Republicans, and the media will help him in that endeavor. Given recent history, he’s unfortunately probably right.

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Rand Simberg is a recovering aerospace engineer and a consultant in space commercialization, space tourism and Internet security. He offers occasionally biting commentary about infinity and beyond at his weblog, Transterrestrial Musings.
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