Responding to charges that they offer no alternatives to President Obama’s budget proposals, Republican leaders have produced a slick 19-page brochure (see photo at right) outlining the broad concepts by which they would guide the country’s economy. It would be heartening if this were just a bad joke.
Devoid of any numbers to support their plan, the Republicans claim that they can reduce the deficit while drastically cutting taxes paid by the richest Americans. Under the Republican plan, the top marginal tax rate would be slashed from 35 to 25 percent. Anyone making more than $100,000 a year would pay the top rate; the rest of us would pay 10 percent.
You have probably heard the argument: Lowering taxes for the rich would leave them with more money to invest in production, thus creating jobs. Conservative economists insist there is logic in that argument. They point out that when Calvin Coolidge cut the top tax rate from 73 percent to 24 percent, the economy expanded 59 percent, and federal revenues grew from $719 million in 1921 to more than $1.1 billion 1929. Of course, we all know what happened in 1929 but conservative economists don’t mention that; they choose to quit while they’re ahead.
Fast forward to the past decade. Under George W. Bush, the top tax rate was reduced from 40 percent to 35 percent. And the United States economy completely collapsed. Millions were laid off. The annual deficit soared to more than a trillion dollars. Where was Calvin Coolidge when we needed him?
Obviously it was not the reduction of the top tax rate that precipitated economic disaster. The world is a lot more complicated than that. And just as obviously it was not just Coolidge’s tax cut that expanded the American economy back in the 1920s. It is a common fallacy to attribute some result to some unconnected event preceding it.
In today’s global economy slashing the taxes paid by the rich in one country does not necessarily trigger more investment (and create more jobs) in that country. Big corporations now operate all over the globe, and the money they save from taxes in the United States is likely to be spent in India, China, Taiwan or Bangladesh. Luxury goods bought by the rich would not necessarily be produced in America. John McCain’s $500 shoes, for example, were imported from Italy. Money invested in stocks would be just as likely to end up in Asia as in the U.S.
The likely result of the Republicans’ proposed tax cut is a sharp decline in government revenues. And when you add their lust for war and their commitment to increase military spending, the chances of them reducing the deficit are remote – unless they drastically reduce spending. They don’t spell this out in their proposal but I suspect they would decimate social programs to compensate for the lost revenue.
Goodbye health care reform, goodbye early childhood education, goodbye investments in alternative energy… And hello to soaring unemployment, widespread poverty, an uneducated workforce, polluted air and water, devastated landscapes, deadly climate change… Hello also to another age of the super-rich, a resurgence of the excesses for which the financial community has become notorious, and an ever-widening chasm between the rich and poor.
I don’t believe the Republicans are as stupid as they seem. I believe they are deliberately dishonest and evil. They are bought and paid for by those who would exploit the poor and loot the world’s resources. And they think the rest of us are so stupid that we can’t see what they’re really up to.