There was discussion on MSNBC’s Hardball whether the Bush tax cuts for the wealthy should expire as scheduled. I issued the following comment to the show having been in the top 1% of income earners during the 1990’s. The tax policies of that period did not hamper the growth my business one bit, we enjoyed the longest period of economic growth in our history, and our 401k’s never did better.
August 10, 2010
The failure of supply-side economic policy is right before our very eyes. US citizens this year paid the lowest tax bill since 1950, the Bush tax cuts are still in place, and we have added additional tax cuts – yet with their tax policies still in effect and even expanded, supply-side tax cut proponents complain that employment growth is disappointing – quite a paradox – one would think that the economy should be going through the roof with all these tax cuts in place. Historically, the weakest job growth we have experienced during recent decades has been during the supply-side tax policy years of Reagan/Bush41 and Bush 43, and these periods also economically underperformed the 1990’s when supply-side tax cut policy largely favoring the most wealthy was reversed. Supply-side theory is a top down driver of the economy, heavily weighted to those with high savings rates that would lead to capital accumulation and increased investment – yet the 1990’s, when taxes were raised on the wealthy, produced over 3 times the growth in investment than either of the supply-side tax cut periods, reversed debt accumulation and produced surpluses. Additionally, there is no guarantee that this tax benefit to the wealthy will remain in the US – it can, and has, been taken abroad. We have a consumption based economy and a tax policy that supports consumption (as did the policies of the 1990’s, e.g., the money that was distributed to 15 million low income families who returned it dollar for dollar into consumption) would seem to make sense, and the 1990’s has been cited as the longest period of growth in US history. My belief is that Obama’s plan to let the tax cuts for the wealthy expire, and to make tax cuts for the middle class permanent, should not be called ‘wealth redistribution’, it is about ‘smart capitalism’, investing in the driver of the American economy which is the US consumer, especially low income families that will return the benefit dollar for dollar back into the economy – the past 30 years has shown that all can do better under such a policy.