We are on a horse in the Merry Go Square which won't run.
Once again, we find ourselves saddled with a Republican President disguised as a Democrat.
The truth, which is not on either table in the ongoing (and yearly) US Budget discussion is that higher taxes are necessary along with higher Government spending.
After the economic collapse of 1929 the Republicans had 2 years to fix the economic situation. They were unable to do anything since they were trying much the same methods being thrown about by both the Democrats and the Republicans today. Cut taxes and cut spending. It didn’t work then and it won’t work today.
The tax cuts of the 1920's threw us over the cliff just as the tax cuts we are facing again will throw us off the same cliff.
In 1932 Franklin Roosevelt entered the fray and asked for dramatically increased taxes and spending. Both the battered political Partys gladly gave those to him.
Here are the Marginal Tax Rates from 1911 to today copied from the Tax Policy Center
http://www.taxpolicycenter.org/...
1914 7.0% 1947 86.45% 1980 70.00%
1915 7.0% 1948 82.13% 1981 69.13%
1916 15.0% 1949 82.13% 1982 50.00%
1917 67.0% 1950 91.00% 1983 50.00%
1918 77.0% 1951 91.00% 1984 50.00%
1919 73.0% 1952 92.00% 1985 50.00%
1920 73.0% 1953 92.00% 1986 50.00%
1921 73.0% 1954 91.00% 1987 38.50%
1922 56.0% 1955 91.00% 1988 28.00%
1923 56.0% 1956 91.00% 1989 28.00%
1924 46.0% 1957 91.00% 1990 31.00%
1925 25.0% 1958 91.00% 1991 31.00%
1926 25.0% 1959 91.00% 1992 31.00%
1927 25.0% 1960 91.00% 1993 39.60%
1928 25.0% 1961 91.00% 1994 39.60%
1929 24.0% 1962 91.00% 1995 39.60%
1930 25.0% 1963 91.00% 1996 39.60%
1931 25.0% 1964 77.00% 1997 39.60%
1932 63.0% 1965 70.00% 1998 39.60%
1933 63.0% 1966 70.00% 1999 39.60%
1934 63.0% 1967 70.00% 2000 39.60%
1935 63.0% 1968 75.25% 2001 38.60%
1936 79.0% 1969 77.00% 2002 38.60%
1937 79.0% 1970 71.75% 2003 35.00%
1938 79.0% 1971 70.00% 2004 35.00%
1939 79.0% 1972 70.00% 2005 35.00%
1940 81.10% 1973 70.00% 2006 35.00%
1941 81.00% 1974 70.00% 2007 35.00%
1942 88.00% 1975 70.00% 2008 35.00%
1943 88.00% 1976 70.00% 2009 35.00%
1944 94.00% 1977 70.00% 2010 35.00%
1945 94.00% 1978 70.00% 2011 35.00%
Just prior to 1929 the tax rate was 25%. It took several years before the economy went off the cliff but it did very dramatically. Today are taxes are 35%. We are very close to the cliff again and the Republicans and Democrats are negotiating another round of tax cuts.
In 1932, when he was elected President, F.D. Roosevelt changed the tax rate from 25% to 63% and he started an upward tax move which ended at 94% in the war years of 1944 and 1945.
Obviously he had no intention of taking 63% to 94% of the incomes of the large corporations and of the ultra rich. Instead, he wanted to force them to invest their incomes in American industry and that would employ millions of people. In other words, invest it or lose it. Invest it or lose it worked.
When Roosevelt took over the Presidency there was very little profit in American industry to invest. First, he was forced to dramatically increase Government spending in order to bring some profits to industry; profits he could force industry to use, through the tax code, to expand and grow, and hire the America people.
He spent money we didn’t have in order to get things moving.
The increasing tax base brought the funds to the Government needed to keep the system lubricated and working.
So FDR created massive Government spending and hiring programs like the CCC, TVA, and more.
Those new salaries slowly unleashed the private sector. They had sales and profits and those profits were forced back into their corporations in the form of expansion and hiring. It worked.
Harry S. Truman and Dwight David Eisenhower liked what they saw and they kept the high tax pressure on big business and the very wealthy. It was mostly 91% during HST, DDE, and JFK, even though JFK did lower it to 77%.
Then the tax cutters returned. Ronald Reagan started us moving closer to the abyss. His tax cuts and more open trade agreements allowed American corporations to invest in China instead of here.
Lest you don’t understand the power of American investments, China, a Third World Country went all the way from the bottom to number one in the World in less than 30 years.
In order for China to move up to number one many Countries had to move down. We are one of those Countries.
In 1988 the tax rate went as low as 28% and we went into a recession again. Clinton brought us back into solvency with a 39.6% tax. Can you imagine what would have happened if we had gone back to the Eisenhower 91% tax?
We need a different President. One who will bring back the ultra high tax codes and thus force American industries and the wealthy to invest in the US. We also need the open door to China and India closed.
China and India have to be removed as trade partners as do all Countries which manipulate their currencies. Having free and open trade with them is like playing poker with a partner who has sleeves filled with aces. We know the partner is cheating and yet we continue to play and lose.
The super low tax codes made it possible for American corporations to move to China.
Today the voices for lower tax rates are growing even though we already fell off the cliff twice as a result of lowered taxes.
Republicans and our President say "Tax increases are called job killers", and "We can't tax now with a fragile economy", when they are all totally mistaken. The truth is exactly the opposite.
No wonder the Merry Go Square isn't any fun.