AlterNet: Opinion: Robert Reich: Why America Has Forgotten Its Three Biggest Economic Lessons
What Robert Reich and others on the further left of me do not understand is that when we had those huge tax rates in the United States ranging from 25 to 90 percent in the Eisenhower Administration, we had several recessions and periods of high unemployment. Anyone who remembers the 1970s, starting in let’s say 1973 with the Middle East Oil Embargo, knows that the high inflation and interest rates were part of the recession of 1974-75, which was part of what is called by economists the Great Deflation of the 1970s, a combination of both high inflation and interest rates plus a recession that made for a pretty bad economy.
But you don’t have to go as far back as the 1970s and you could leave out the other recessions of 1979-80 and 1981-82 and you could go back to the 1950s, the early fifties and the late fifties of rough periods in our economy. Recessions and high unemployment were followed by a weak recovery in the early 1960s. Let’s also not forget that a liberal Democratic President Jack Kennedy first proposed cutting taxes in the early 1960s, which President Lyndon Johnson got through a Democratic Congress in 1964, to deal with a weak economy.
The real economic debate in the United States is not so much whether we have an income gap but really what to do about it. Over-taxing people because you believe they are too wealthy and by doing this you will be able to generate the revenue needed so to take care of everyone else will not accomplish this because the people who are doing very well will just move that money to other places, like countries that either have lower taxes on the wealthy or do not tax bank accounts.
What we need to do is to encourage people who are already very successful to continue to be very successful and to regulate them in areas that affect consumers and workers. They should not be making their money by punishing those groups but by empowering people who are barely in the middle and on the lower end of the economic scale to be able to do better by improving their skills so they can be productive enough to get the types of jobs (or open a business) that could generate sufficient income to meet their families’ needs.
You don’t get there by saying that some people have too much money and others have barely anything and the solution is to over-tax the haves to care for everyone else. First, government will never see that money because it will be moved elsewhere, with a loss to the country of important revenue. Second, you are now sending the message that the highly successful should not be rewarded.