Archive for the ‘tax policy’ Category
I just finished watching the third presidential debate. Admittedly, many people will be swayed by what he said. However, any thinking person who has a modicum knowledge of economics and national security as well as respect for all people, regardless of race, creed culture, gender or religion can upon reflection agree with him.
By and large, Trump repeated over and over that he would make America great again but without ever delving into how he would do so. On trade, he said NAFTA was bad, but the completely failed to explain how or what he would do to create better trade policies. Throughout his campaign, he has repeatedly called for isolationist trade policies which would be an economic disaster. The USA relies upon our exports for jobs and economic growth. Granted the TTP and other current proposals fail both the American people and other countries by putting too much power into the hands of major corporations – the reason Hillary Clinton does not support them – but international fair and free trade policies are needed worldwide, especially by mature economies like the US. To put it simply, US full employment cannot be supported without international trade.
On tax policy, Trump doubles down of supply side economics. His tax policy, outsourced to Steven Moore, a penultimate supply-sider who consistently ignores the demand side of the economic equation and is no economist, would increase the national deficit by trillions. Some say as much as $5 trillion. Since the financial melt down in 2007, the US has had an overabundance of supply but not enough demand. In other words, there’s plenty of product but not enough buyers. When wages are low or lowered (as has been the case since 2009 when companies lowered wages in the face of an oversupply of qualified candidates) wages, the demand side of the economic equation has gone down. If people can’t afford to buy, demand goes down regardless of the supply quantity. Thus, continuing the feed the supply side, i.e. Wall Street investors, does nothing to increase GNP (Gross National Product). The only way to increase GNP and, thus, GDP is to build up the demand side of the economic equation. Moore’s tax and economic policies, which Trump bought lock, stock and barrel, utterly fail this test.
On National Security, Trump sounded smart when when you delve into what he actually said but yet again failed to propose any solutions, he’s frightening. Does he want an all out war in the Middle East – a la the Crusades? If so, that is one sure way to push moderate Muslims into the freedom fighter camps of ISIS and the Taliban. Imagine if you will an invading force in the US (intent on stealing our national resources to pay for the invasion). Would any American stand by and let that happen, no matter how moderate they were? Of course not. The same principle applies in the Middle East. Throughout history all over the world, people have always fought against a foreign invader, even when they strongly disagreed with their own government. It would be no different in the Middle East now. Moreover, Trump and his neo-con allies have chosen to make his foreign policy about a clash of civilizations – a clash of religions much like the Crusades. And much like during the Crusades, Muslims would come together, regardless of their internal conflicts, to fight off the invaders. Smart policy, which Clinton advocated, is separating the moderates from the extremists…and backing the moderates who see a better way forward for Middle East countries than a 12th Century ideology in the 21st Century world.
Additionally, the idea of Trump denying or ignoring Putin’s spying and hacking and interference with this election shows his incredible naivety. Of course, his financial records prove, as Newsweek and other legitimate media outlets have shown, he has a huge income stake in protecting the Russian (and thus Putin) oligarchy. Do I think Trump would take his order from Putin the way Mussolini did from Hitler? I don’t know; but I’m not willing that that chance, given that Trump is all about himself and his ego and his fortune even as he sells out other and stiffs his suppliers. Trump’s entire career has been one long running steam of conning and lying and cheating others including failing to pay his suppliers. Believing him is like believing in Hitler’s promise to not to invade the restof Europe after stealing Austria.
On issues of his personal morality and how he think about woman and minorities, what more needs to be said other than that he has offended everyone with his misogynist and xenophobic mindset. Even the uber conservative Utah-based Mormon (Church of Latter Day Saints) has come out against Trump in a public statement.They consider his words and ideas…and his behavior…highly toxic. No matter how much he denies his behavior, the numbers of people coming out against him for how he has behaved and what he has done keeps growing. As a result, he’s proven himself to narcissistic megalomaniac who refuses to accept responsibility for his own behavior. In his words, everything is the fault of someone else…and he is totally innocent. That may go over well in the modern Republican conservative movement, but it doesn’t necessarily sit well with a majority of people who have been raised to believe they have to take responsibility for their own behavior.
On border control and minorities, polling shows that the list of minority voters switching from the Republican side of the ledger to the Democratic side ha gown dramatically since Trump became the Republican nominee. Beyond his polling numbers though is the fact that to implement his wall across the US Southern border and round up & deport every non-citizen (i.e. alien) would cost multiple trillions of dollars. Are you willing to agree to a major increase in your taxes to pay for it all…or are you going to shut your eyes and ears and put it on the national credit card and blame someone else for the outrageous deficit once again?
I could go on ad infinitum on the disastereous affects of Trump policies (or lack of coherent policies) but there is little doubt that committed Trump voters will change their minds. To far too many of them, the world is made up of “us against them” which the GOP has pushed, in various and sundry dog whistles, for over 50 years.
Nevertheless, regardless of how reasonably sounding Trump came off sounding in this third debate, the fact remains that all of his ideas, from every perspective, are extraordinary expensive and a national disaster. Moreover, the fact that the national GOP supports and endorses this caricature of a human being shows the party has descended into the bowels of hell.
Clinton may not be everyone’s favorite candidate…and granted she’s been vilified and lied about by the GOP in the national media for nearly 30 years…but compared to Trump, she’s an angel. Her policies are reasonable, well-thought out, progressive, equitable, and fiscally sound. But, of course, that won’t matter to die-hard Trump supporters who choose to ignore the reality of the man and his ideas by focusing only on his fantastic rhetoric as a way out there circumstances.
So, you liked your job – or at least it paid the bills and kept you going. Well, all that may be coming to an end. Congressional Republicans have chosen the consequences of the sequester over raising more tax revenues from closing tax loopholes that favor the uber wealthy.
From Neil Gillies: The New York Times on what the republican party is about to do to America: “These cuts, which will cost the economy more than one million jobs over the next two years, are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt. Many Republicans say they would still prefer the sequester to replacing half the cuts with tax revenue increases. But the government spending they disdain is not an abstract concept. In a few days, the cuts will begin affecting American life and security in significant ways.”om Neil Gillies: The New York Times on what the republican party is about to do to America: “These cuts, which will cost the economy more than one million jobs over the next two years, are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt. Many Republicans say they would still prefer the sequester to replacing half the cuts with tax revenue increases. But the government spending they disdain is not an abstract concept. In a few days, the cuts will begin affecting American life and security in significant ways.”
The GOP obviously know what the sequester will do the economy. They can’t be that dumb! But it appears they don’t care. They’d rather kill millions of jobs…as well as increase the deficit due to increased social safety net spending for the newly unemployed…than raise one more dime in new tax revenues. That attitude not only put the lie to their deficit reduction stance, but it should show every American just how little Republicans care about their jobs and lives.
According to Matt Taibbi’s Rolling Stone reporting, in 2003 when then Senator Lincoln Chaffee confronted Vice President Cheney on the second round of tax reduction legistation, stating that it would probably lead to out of control increased deficits, Cheney said we (meaning he and his wealthy friends) deserve it. My hunch is the GOP still believes that the Plutocrats deserve every tax break and cut they’ve received.
My, how times have changed in less than 100 years. At the beginning of the 20th Century, our Plutocrats – men like Rockefeller, JP Morgan, Carnegie and to a lesser extent railroad magnate, Commodore Vanderbuilt – dominated our industrial landscape. Absolute profit, by and large, was their motive. Each actively sought to become the most wealthy, not because they needed the wealth or the cash. Instead the accumulation of wealth for them was like winning real live a Monopoly game. If worker lives were destroyed or communities ruined, to many of them it mattered not. Only winning the game of becoming the most wealthy and powerful…and controlling entire industries.
Not being blind to the rising populist movement against them, they spent millions to elect McKinley twice to protect their interests, even going so far as to choose TR, whom they rightly saw as a threat, for what they thought was the politically dead end position of Vice President. However, when McKinley was killed shortly after his second election, TR became president and game changed entirely for those plutocrats. The country was ripe for change…and TR ushered it in.
Populist worker movements in the early 1900s had sprung up all across the country. Labor was becoming aligned with the new socialist and communist movements which would have ended private ownership in favor of labor-public ownership. Labor unions became more than popular among working class people who saw them as the only way to fight back against corporate giants for economic justice and the rights of workers to decent wages and working conditions. Religious and charity groups supported the labor movement, decrying the vast accumulation of wealth by a few. Violence and extreme turmoil were seen everywhere across the country. Capitalism, itself, was under a massive threat to its existence.
Into this conflict, following McKinley’s assassination, stepped TR. He’d been greatly affected by a few highly influential progressive economists who recognized the dangers facing capitalism. In their minds, if capitalism was to survive, the federal government needed to address the concerns of the growing, vast majority of working class citizens for economic justice and fair play. Those economists proposed better, safer working conditions, higher minimum wages, and shorter working hours (a la 40 hours/week). But TR, once in office, went even further, recognizing that the monopolies retarded growth and innovation, he chose policies to to break up the monopolies that had dominated the previous couple of decades and thereby invigorated 20th Century innovation.
That action alone led to an era of creative destruction and innovation that lasted throughout much of the 20th Century. Only during the latter quarter of the 20th Century, did his anti-monopoly policies begin to lose the favor among the political elite who saw their own personal fortunes or futures rise through choosing policies that favored the plutocrats over labor, creative destruction innovation, and monopolistic business practices.
Yet, his policies for the working classes are probably the best known and appreciated among working people. For the first time, labor, en masse, was guaranteed the right to demand better wages, safer working conditions, and moderately legislated time off.
Throughout the entire era of vast changes, however, Congress never once failed to do its duty to the Country by taxing the people progressively as needed to hold down the nation’s debt – regardless of how much progressive taxes were disliked once they came into being, they were deemed a moral responsibility…and every church and parish and synagog repeated that message of individual and national responsibility in sermons all across the nation.
Presidents from FDR to LBJ only added to what TR began: to create a more perfect nation for every citizen, regardless of wealth or gender or race or religion or ethnicity, could live a sustainable life and to expect their children to accomplish more than they had. In other words, to live the American dream. Now, it appears the GOP would take away that dream to return to an even more perverse rendition of McKinley’s economic policies.
If Republicans refuse to comprise with Democrats on the sequester then our nation will suffer major job losses, home value decreases again as more homes go into foreclosure, and rising deficits in both state and federal budgets as more people require assistance. As Paul Ryan explained, his real emphasis is on tax cuts – or avoidance – and not the deficit or for that matter on how many millions of people are left to struggle along without jobs. His policies emulate those of the McKinley Administration wherein only the uber wealthy matter.
The genius of the American democratic Republic system of capitalism is that it enabled the greatest numbers of people have their say on issues that directly affected their lives and their beliefs. Because of the social safety net we now enjoy, many do not see the harm that our grandparents endured as a result of the same kind of speculation that caused the ’08 financial collapse. Without that safety net, for which we must give thanks to progressive administrations from TR through LBJ, millions of families would be ruined. The Great Depression would have been replayed en toto.
Surely, the US can do better and should do better…as this nation has done in the past to save both capitalism from its worst practices and to assist workers’ aspirations for better lives. Current dogmatic GOP policies (supply side economics which have never worked and only led to greater human suffering and death since first put into practice during the Great Famine in Ireland) only lead to more domestic economic harm. As a result of GOP dogma on preventing even modest and economically competitive tax increases on the most wealthy, this nation will likely return to another recession that will affect every average family and cause the loss of not just the millions of jobs but an increased loss of average middle and working income family wealth again.
I understand that many will denigrate me and proclaim me a vile, evil “liberal”. But to them I answer that history provides us many lessons, amongst which are economics and moral, religious integrity. History is a great teacher for future policy decisions…at the very least, well beyond me, that is what our founders, from the Pilgrims to those who participated in the Constitutional Convention, believed. As a free, democratic republic, we do need to relearn our historic economic lessons to prevent the disasters of the past. And we as a people do need to rise up, as our forefathers did, to seek better justice and economic viability.
In September, the Library of Congress’ Congressional Research Service released a study to Congress which showed there was little discernible growth affects from low taxes. Mitch McConnell and the GOP objected to the report and, for reasons yet unknown, the report was removed from the non-partisan CRS website. (Report pdf)
The study, though, is important as the nation continues to discuss tax rates and how they affect growth.
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.
There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.
However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.
Timothy Noah, of The New Republic, adds this to the discussion:
The New York Times reports that on September 28 the Library of Congress’s nonpartisan Congressional Research Service withdrew, under pressure from Senate Majority Leader Mitch McConnell, R.-Ky., and other Senate Republicans, a widely-circulated study concluding that since 1945 tax cuts have had no measurable impact on economic growth. […]
Please note that Hungerford’s study didn’t say there is no relationship between tax cuts and economic growth. It said there is no discernible relationship. He is hardly the first academic researcher to make this observation. The conservative economist Martin Feldstein went fishing for such a relationship in a 1989 paper about economic growth under Ronald Reagan. Feldstein’s paper, coauthored by Douglas Elmendorf, current director of the Congressional Budget Office, reached pretty much the same conclusion (though Feldstein and Elmendorf did suggest that tax cuts could effect the “composition” of economic growth). “We really don’t have any evidence that [personal income tax rates have] any effect on growth,” Berkeley economist Alan Auerbach told Business Week in September. “A lot of the research showing otherwise is based on theoretical calculations.” There isn’t even any discernible evidence that capital gains rates affect economic growth. Hungerford made that observation in a 2010 CRS report, but others have said so, too.
If you can’t find any evidence that tax cuts foster economic growth, then any belief that they do must be based purely on faith. The CRS report’s true offense is to question the religion that favors tax cuts to cure any and all problems. For any congressional agency to venture an opinion about such doctrine violates the Constitutional separation between church and state.
Senate Democrats have demanded a hearing to learn why the report was taken down at the behest of McConnell and other GOP senators. As a nation locked in discussions over effective marginal tax rates and national debt, this information from the CRS would affect the discussion. The public needed this information in order to make an informed decision about the country’s future. McConnell was wrong to demand that it be pulled from the CRS website.
Romney has been touting a 2006 tax plan that he says proves his plan will work, according to a report in Roll Call.
According to the study (pdf), tax reform that eliminates deductions and loopholes and reduces income tax rates will slightly increase economic growth over a decade. But the study assumes that nearly all middle class tax breaks — including those for children, mortgages, and employer contributions for health care — are repealed in their entirety:
Under the proposal, all personal exemptions, itemized deductions, personal credits except for the earned income credit, and all above-the-line adjustments to income except for retirement savings deductions and the deduction for self employment taxes would be repealed. The largest categories of deductions repealed are present-law deductions for home mortgage interest expenses, State and local taxes, and charitable contributions. In addition, the exclusions for certain employee fringe benefits, such as employer contributions for health and life insurance, would be repealed. The standard deduction would remain.
The study also found that such a plan would result in the “redistribution” of income tax liability from high-income earners to the middle class. In other words, the tax liability of high income earners would go down while middle income earners tax liability would go up, thus causing a greater transfer of wealth to high income earners. In addition, the promised job growth is only between 1 and 2 percent over ten years (one to two million jobs), while Romney promises that his tax plan will create seven million jobs over four years.
Personally, I still haven’t figured out how he (or the GOP) plans to deal with the following issues when they want to reduce tax rates and maintain revenue neutrality at 20% of GDP:
1) Over the next 10 years the Boomer generation will retire, requiring the federal government to expend up to 24% of GDP and causing either more borrowing or an increase in revenues;
2) We have a huge deficit and debt that needs to be paid down requiring even more revenues than currently exists or the average historic 20% of GDP;
3) Although Romney has not said as much, it’s not an impossible assumption that he agrees with the House GOP that most government functions and programs should be eliminated and dramatically reduced, including product, financial, food and consumer safety; criminal enforcement and policing; transportation and transport safety; health and health research; education; weather prediction, and basic research. The only way for Romney to accomplish revenue neutrality at 20% is to reduce government spending by approximately $5 trillion over ten years. Doing so means eliminating or dramatically cutting back most everyday services we all rely upon that most people don’t even realize are a result of government spending.
Certainly, no one wants to pay more in taxes, but we do have serious fiscal issues with which to deal…and lowering revenues with more tax breaks won’t solve those fiscal issues.
Nevertheless, remember is quote from the legendary political philosopher Adam Smith, in 1776: “The subjects of every state ought to contribute towards the support of the government, as nearly a possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” – The Wealth of Nations, Adam Smith, 1776.
If you, as Dems and Independents, care about our country and our people as a whole, then you need to vote in this election. Don’t let this election be bought and don’t let it be given away to special interests because of your apathy. VOTE your ethics and moral beliefs.
The American Enterprise Institute’s James Pethokoukis has put forth an article arguing against Bruce Bartlett’s claim that increasing the highest margin tax rate will not harm economic growth. Of course, Bartlett has history on his side, while the GOP and their funded think tanks have dogma. The nexus of the argument surrounds the Clinton era tax rates and the dynamic growth that ensued throughout the ’90s.
I’m still not sure what caused the “Clinton Boom.” Democrat economist Dean Baker says Clinton got lucky (coincidence) that the internet boom occurred under this administration. However, since VC capital boomed under those years, I wonder if tax policy – slightly higher rates – didn’t drive more capital into VCs to avoid those higher rates on AGI. When I ran a small (very small) business during the Clinton Administration, I looked for ways to decrease my tax bill. The best way, I discovered, was to invest more money into my business. The result of increased capital investments was lowering my AGI and thus my tax bill.
When you own a business, you consider two things: do I have the customers to sustain my business to make it profitable (demand) and will my taxes (AGI) allow me to make a profit on my business. Under Clinton my income rose, regardless of the higher rates, while under Bush my income declined. Under Clinton my retirement accounts grew; under Bush, they declined steadily year over year.
Of course, we’re in a completely different situation now with globalization where multi-nationals can locate anywhere in the world to avoid paying US taxes and obtain the cheapest labor possible. As a result of this dramatic change, I’ve come to agree with Bruce Bartlett on the need to reduce the nation’s fiscal needs on labor taxation towards more to consumption: a Value Added Tax (VAT). If properly designed – and given Congress’s penchant towards rewarding donors and special interests doing so would be extremely difficult without significant campaign finance and redistricting changes – a VAT could be progressive and moral.
The nation, obviously, needs to three things: 1) increased revenues to pay down the debt/deficit which will signal to the markets that the nation the government is serious about its debt problem; 2) a long term plan to control the costs of health care (bend the cost curve which will reduce costs not just to the federal government but to all health care consumers thereby releasing billions for the nation’s other needs; and 3) a major overhaul of the federal government to bring it fully into the realities and needs of the 21st century rather than maintaining a structure more suitable to the 19th or 20th centuries.
One of the mantras in business during the last two decades was “lean and mean.” What that mantra really meant was reorganizing to create efficiency by reducing duplication, collapsing departments to eliminate roadblocks, and streamline processes towards faster approvals as well as lower costs. Government could take a lesson from the private sector here, but will Congress allow such as change when so many Committee heads gain their power from more rather than fewer committees?
The truly wealthy (those in the 1%) will not be harmed by having their tax rates increase by 3.9% to Clinton rates. They’ll still have more money than they need or can use to create demand; however, if the rates increase on income and short term cap gains, those with enormous incomes will find that investments, in VC or longer held investments, are more profitable than cashing out for lower tax rates. Plus, since the tax system is in part used to to encourage behaviors we like and want, such as marriage and having child, and investments we desire, such as technology, research and design, then why not use the tax system to short term investments and lack of investments rather in favor of lower taxes?
Lastly, it is important to note that the GOP notion of extremely low marginal taxes is relatively new. For example, when JFK advocated reducing the top marginal rate from 90% to 65%, Republicans revolted.They said that reducing the rate would increase the deficit…and since they were deficit hawks, anything that would increase the deficit was anathema. Of course, we know now that the enacted decrease, under Johnson, did not harm the deficit nearly as much as those Republicans claimed it might. On the other hand, we know from the eight years’ experience under the Bush Administration, that rates can be too low – as they are now – which most definitely increases the deficit. The extremely low rates did not unleash the animal spirits of capital. Instead they created a bubble just as Treasury Secretary O’Neill said they would when arguing against Cheney’s push for the 2003 tax cuts. Thus, the happy medium may be about 50% as Bartlett mentioned some years ago in an article for Forbes.
When Cheney argued for the ’03 tax cuts, he said we won the election so we can can do what we want (reward ourselves and our friends). Obviously, Cheney did not care about the deficit or long term health of the nation. Whether his acolytes on Capital HIll have taken up his dogma or are simply opposed to doing anything which may help President Obama, as Republican Congressional leaders stated, in that Capital HIll steakhouse, on the night of Obama’s inauguration, is unknown. Perhaps both.
Nevertheless, what we do know from the Clinton era is that raising the highest marginal rate of taxes by a modest amount, such as the 3.9%, does not harm the economy as the GOP and its funded think tanks proclaim. In fact, raising those rates might be beneficial…especially if combined with long term deficit reduction plan, particularly with regards to bending the cost curve of health care spending for the entire economy (i.e, businesses, families, and government) and reorganization of the federal government as Obama advocated in his last State of the Union address. Nevertheless, the entire tax code must be rewritten at some point in the very near future, not only to clean it up, but to insure the revenues needed for the future. As Bartlett has stated a VAT may well be the way to go.
The Washington Post’s Ezra Klein posted a revised tax comparison chart, created by Naomi Robbins of Forbes. According to Klein, the result is that the two candidate’s tax plans come through much more clearly.
Romney’s plan is a large tax cut for the top 60 percent, a huge tax cut for the top few percent, and a significant tax increase for the bottom few percent, as he permits a few temporary tax breaks that benefit low-income folks to expire. Obama’s plan keeps the current tax rates for almost everyone but the top few percent, who face a very large tax increase.
It’s also worth noting that these numbers only tell half the story: Romney has promised to offset the cost of most of his tax plan through spending cuts and tax reforms, and so any analysis of who pays is incomplete without those policies. But that information is impossible to graph, as Romney hasn’t released it yet. All we can say is that since Romney has promised to increase spending on defense and honor Medicare and Social Security’s scheduled benefits for the next decade, it’s hard to see how he makes good on that promise without cutting deep into programs for the poor and tax preferences that benefit the middle class, and if that’s right, then the poor and middle class are paying much more than you can tell from the graph above.
Contrary to pundit analysis, the first half of Obama’s speech today in Cleveland reminded me of his old inspiring self. While the second half of his speech delved down into the weeds of policy differences between the current GOP and Democrats that became somewhat boring, even though completely true.
The first half of Obama’s speech clearly laid out his vision for the future of America. I might add, it’s a vision with which I completely agree, the essence of which is increased global competitiveness in every sector of the economy and greater economic rewards for labor – or actual work.
Nevertheless, the two visions of America going forward in this election replay the visions of Coolidge and of TR and his distant cousin, FDR.
Yes, it does seem strange that we’re even discussing the visions of presidents from a hundred or more years ago; yet, we are discussing the same essential policy visions again today.
While Coolidge, according to Wikipedia, had an essentially laissez-faire, hands off attitude towards business, believed that few regulations were needed and taxes should remain as low as possible, TR and FDR had another view based on their experiences with the so-called free market.
During the early 1900s when TR became President, the renowned Robber Barons dominated industry. Numerous books and magazine articles were written decrying the poor and often deadly state of American worker conditions under the heavy hand of corporate ownership: the high rate of deaths and physical dismembership among employees; the high rate of deaths in coal mines; and the overall low wages which prevented workers from rising above stark poverty and barely managed to provide roofs over their heads. Cold water flats, as cheap housing accommodations were known in the late 1800s, were not only common among workers but were miserly at best, providing only cold water and no heat except when the renter provided the coal to heat water and for cooking.
Yet, corporate businesses and Wall St boomed. Commodore Vanderbilt’s family regularly gave extraordinarily gaudy and lavish week-long parties. Wall St. magnates and other corporate leaders sought to compete in extravagance with the Vanderbilt’s.
In response to this disparity of wealth and opportunity, workers revolted. Street corner advocates called for massive worker revolutions against the corporate system. Unions formed. Workers struck, effectively shutting down businesses.
Businesses fought back with strike breakers and hired private police and army forces. Socialism and even Communism were on the rise amongst workers who saw the capitalistic system as supremely unfair and failing to live up to the promise of real democracy.
Violence was common…and threatened the country.
Into this era of violence, poverty and excess stepped Teddy Roosevelt. A rich kid from upper New York, TR quickly realized that to save capitalism he had to initiate reforms to save it from its worst excesses. That broadly spread economic benefits not only enabled the country to grow but maintained domestic order.
Thus, the GOP-created progressive era began as a consequence of unbridled free market capitalism that destroyed millions of families and businesses throughout the 1800s into the early 1900s.
TR realized that only the government could pull up on the reins of capitalism to prevent its largest horses from crushing underfoot the opportunities of millions of other citizens. He realized that if he and Congress did not put limits upon how trusts and other companies behaved, the likelihood of free market capitalism surviving was slim or, at the very least would fail to prevent revolution amongst the millions of American workers. After all, workers’ unions were the direct result of corporate management’s failure to address the wage, health and safety needs of workers.
FDR sought additional worker and consumer protections as well as for Social Security to lighten the burden on workers while enabling companies to grow. He understood that without a healthy, thriving middle class, real capitalism was doomed.
In 1936, GDP growth had reached a steady 45% degree angle upward throughout FDR’s Administration; yet, unemployment remained very high – even though accurate figures were not available. (The Fed. government did not begin keeping accurate unemployment data until the ’50s.) In 1937, the Fed. Government reined in its spending to balance the budget, thinking the economy had sufficiently healed. Those austerity policies sent the nation back into depression, increasing unemployment and federal deficits. Only the extraordinarily massive Federal spending for WWII, pulled the nation completely out of the Depression.
Oh, I know, some say that if FDR had not intervened the Depression would have ended much sooner. To them I say, read Rogoff and Reinhart’s book covering a century of global financial crises in which they report that financially caused recession takes up to 10 years before the economy returns to normal. Moreover, I would ask them to research what happened following each banking crash throughout the 1800s. What were the results for working Americans? How many working families lost everything? How many small business died? How much did the overall economy suffer as a result of banking crashes every 10 years. There is a reason why bankers asked for the Fed and the FDIC.
In between TR and FDR was Calvin Coolidge. His basic philosophy was hands off. He believed in light regulation, an almost unencumbered free market, and very low taxes. Business boomed under his administration during the 1920s. Unfortunately, his hands off approach led to massive speculation very similar to what occurred in the last decade. Hoover followed Coolidge’s economic philosophy and became the inheritor of a policy legacy that led to the worst depression in modern American history. When FDR was elected, the estimated unemployment rate was over 25%. Millions of businesses had shuttered. Millions more had lost their homes.
When FDR was elected the first time, he won all but 59 electoral college votes. In the 1936 election, he lost only 8 electoral college votes.
It’s that knowledge of history, including economic history, that informs my politics. You cannot have a thriving, broad-based economy without a thriving middle class who shares in the economic benefits of commerce. This nation has not had that sharing for at least the last 12 years – actually it’s been declining for 30 years as even Reagan acknowledged in the ’80s.
Right now, I think we’re once again caught up in a fight between the vision of Calvin Coolidge and TR/FDR. These are two very disparate visions of America. For myself, I fall on the side of a modernized version of TR/FDR because I believe their visions work better for America on the whole. And, indeed, because the TR/FDR model relies upon a muscular – even a Hamiltonian model – of a strong central government and the tax revenues need to meet the costs of government we need and over the last 100 years have chosen.