May 22, 2011

A more reasonable faith

We don't have a tax problem; we have a spending problem.
—Paul Ryan, John Boehner, Eric Cantor et al

Today's ultra-conservative Republicans believe taxes are of the devil. This is an article of faith, undoubted and unchallenged. It was not always thus.

During the post-WWII consensus, Republicans as well as Democrats regarded taxes as the price for civilization — and progressive taxation as the best way to pay for the civilization the public wanted.

For seven of Eisenhower's eight years in the White House, the top marginal tax rate was 91% on income over $3 million in today's money (the first year, 92%). When Nixon took office, the top rate was 77% on income over $1.2 million. The last year of Ford's term, it was 70% on income over $750,000.

But by 1980, the post-WWII consensus was out of gas. Stagflation, the Iran hostage crisis, the oil crisis and Carter's apparent ineptitude to solve any of these big problems contributed to a public bad mood. Enter the Reagan Revolution.

With clarity, relevance and evangelistic fervor, Reagan and his acolytes preached a popularized supply-side economics to a public thirsty for a new faith. Focus on those who produce, not "welfare queens" who merely consume. Cut taxes and remove regulations from businesses. The supply of goods and services will explode, lowering prices. The ensuing economic activity will create jobs and increase federal tax revenues. All gain, no pain.

Fast forward 30 years. Like the post-WWII consensus before it, supply-side doctrine is out of gas. It can no longer explain on its own terms its real-world effects: massive deficits, crushing federal debt and business malfeasance that pumps oil into the Gulf of Mexico, nearly destroys an entire world's economy and kills 29 miners.

But received dogmas die hard. Those reared in the Reaganite supply-side faith are loathe to express doubt even in the face of devastating counter-evidence. Thus the truly nonsensical and oft-heard sermon that federal deficits and debt stem merely from over-spending and not also from under-taxing.

Yes, we have a spending problem. And yes, we have a tax problem. If we are to fix our problems, we'll have to reject supply-side dogma for a more reasonable faith: one that balances free enterprise, fair play and fiscal realism. One that pays for the civilization we want and envisions a civilization we can pay for.

Rings true to me. And you?

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