This is one for the cheap seats. “THERE HAS NEVER BEEN AN ECONOMY IN THE HISTORY OF THE WORLD WHICH HAS RECOVERED AS A RESULT OF GREATER REGULATION AND HIGHER TAXES. IT’S NEVER HAPPENED.”
The Financial Reform Bill of 2010 is not a reasonable or thoughtful response to the Financial Crisis of 2008 – it is quite clearly nothing more than government over-reach, intrusion into the private sector, and policies which have never worked before and won’t work now.
Our free, democratic society HAD rules in place to govern excessive behavior in the financial markets, but we did not enforce them. (Obama’s pick for the No.2 post at the Federal Reserve, Janet Yellen, testified this was the case – oversight, not regulation, was the key element of failure in the 2008 crash, AP, “Yellen: Lax regulation contributed to 2008 crisis.”)
Consider just for second a little bit of history. We had been taught in school that FDR (President Roosevelt) was a transformative figure – which his progressive platform saved us from the ravages of the Great Depression. Not true.
By the time FDR had taken over as President in early 1933, the economy had recovered from the Stock market crash of 1929, but then “double-dipped” again into a fearsome recession. FDR’s progressive response was a massive government intrusion into the private sector. Including:
1.) Institution of Wage and Price controls
2.) Encouraged people to join unions
3.) Cut farm production to raise prices against deflation
4.) Social Security program along with dozens of other government bureaucracies was created
The results were dismal:
1.) Tax revenue to the government collapsed by20%
2.) The Federal debt exploded to 40% of GDP, 4 times higher than at any previous time in history.
3.) Employment improved during the decade but was NOT restored to 1920 levels until the war drafted 40 million into overseas service.
4.) Economy essentially did not recover for the entire decade.
5.) Republicans running on the first “conservative” platform won the 1938 mid-term elections and repealed a good portion of the New Deal with the exception of certain programs including Social Security (see Taft-Hartley Act).
In retrospect, the New Deal lengthened and worsened the Great Depression. America did not emerge from this economic collapse until the near full employment of World War II.
History shows as fact that massive government intrusion into the private economy does not halt a depression, it stifles growth. It didn’t work, so why would we do something that history has taught us does not work? Listed below are examples of what does work. Let’s learn from history.
President John Kennedy did the following:
1.) JFK instituted across the board tax cuts and tax revenue to the government grew by 6.2%.
2.) The deficit fell from $7.1 billion to 1.4 billion by 1969.
3.) The economy grew 4.5% from 1961 through 1968, compared to 2.1% growth under the higher nominal tax brackets of the 1950’s. (91% highest nominal tax bracket from 1946-1961, Kennedy lowered them to 71%). National Center for Policy Analysis
Hmmm. Do we see a trend? Facts are stubborn things. There is a point where taxing provides diminished returns, and that you have over-taxed the taxpayer. This results in sheltering income, lower productivity, and fraud – thereby REDUCING tax receipts to the government.
Let’s see, do we have another example? Of course – the Reagan era. What did our most successful modern President achieve?
1.) Reagan came into office with 13% unemployment, 16% interest rates, and 9% inflation. The “misery index” as envisioned by Arthur Okun was 21.98% He also termed it “stagflation,” – the combination of stagnant growth and inflation.
2.) Reagan lowered the highest tax rate from 71% to 28%.
3.) Economic growth from 1981-89 under Reagan went from contracting under Carter in 1978, to 3.6 percent average annual growth for Reagan’s 8 years in office.
4.) Most importantly, tax receipts to the government during the Reagan years went from approximately $500 billion in 1980 to $1.1 trillion in 1988.
I can hear liberals right now – “Houston, we have a problem.” But now, let’s turn to the dreaded George Bush. Just the utterance of his name sends Stuart Smalley, er-Al Franken into a frothing-at-the-mouth seizure. But these are the facts, and they are not in dispute. Economic policy under George Bush included two massive tax cuts:
1.) According to the IMF (not a conservative or liberal group, but the International Monetary Fund) total US GDP grew 19% from 2001-2008 INCLUDING THE ECONOMIC MELTDOWN OF 2008! This is after the 2001 and 2003 Bush tax cuts.
2.) Tax revenue increased to the government from 2001 to 2008: going from $1.9 trillion to $2.6 trillion, an increase of 37% in revenue collected by the government over that period of time.
So in review, what can we say has not worked, and what can we say has worked? Here is the short, simple answer:
1.) Massive government intrusion into the private economy destroys markets, capital allocation, economic growth, and dampens revenue to the government. Borrowing and spending destroys the ethic of a free society.
2.) Lowering excessive tax rates, deregulation, and freer markets improves the economy, creates jobs, and increases tax revenue to the government.
Which one have we been doing since the new Administration has taken office? You do the math. The clock is ticking on our children’s future, and the adults seem to have left the room. If cutting taxes improves the jobs numbers as well as the income stream to the government, why would we do anything else?
This reform bill is about making government bigger and more powerful, while making the average American poorer and less free. Our politicians should reject this bill, and if they will not, let us elect leaders who will vow to repeal it.