Myth Busting #9 – We Must Lower Income Taxes For The Wealthy In Order To Create Jobs!

Traditionally, conservative meant that there had to be logical and empirical evidence for something. For example, the late Tom Landry, the first coach of the Dallas Cowboys, can be described as conservative-evangelical Christian whom demanded respect for authority and operated based on said principles. If any player or assistant came to him with any suggestions or wrinkles, they had to prove that it would have the intended effect and show on a blackboard or notepad, how such a scheme would work in principle and then how would it work versus various opposing formations and schemes. Why? Because he needed to know if he added it to his plan, it was actually going to work as conceived. Mike Ditka reportedly suggested using what is now known as the shotgun offense. Landry had him go through various formations and then how it would work against a standard 4-3 defense, with single coverage, against zone defenses, if a defense shifted from a 4-3 to a 3-4 and over the middle passing routes. Landry was a strategist and tactician that planned for various scenarios and contingencies.

That is why traditional conservatives of yesteryear such as Ike, Nixon, Rockefeller, Connelly, Dirksen and Dole were not prone to schemes like supply side economics. There had never been any empirical evidence that it would work.

Yet, today’s so-called conservatives hate empirical evidence. When pointed out that the Bush tax cuts only created 3 million jobs in 8 years, as opposed to the 23 million jobs under Clinton with higher top marginal rates and higher capital gains rates, they avoid the subject or deflect, saying Clinton got lucky with defense spending cuts and the dot-com bubble. But, never anything resembling evidence showing any correlation. One guy told me to read Paul Zane Pilzer for correlation. I looked him up but found no articles discussing the specific correlation between tax rates and employment and also, Pilzer’s principles of economic alchemy are a tad shaky. Certain goods or items are scarce such as oil, gas, gold and silver, which is why the command high dollar amounts.

Furthermore, supply side economics is not a recognized economic discipline. It was coined by a Wall Street Journal business editor named Jude Wanniski. It is like Scientology or Objectivism or numerous other esoteric subjects: very popular with adherents but is not a serious discipline within any school or university. I myself am fascinated by Anton LaVey’s ideas but his concept of Satanism was never anything more than hedonism with a black cape, a touch of horror film symbology and a backlash against hippie culture; believing hedonism needed to be enjoyed sober and drugs took away from the true indulgent experience. Basically sex and rock music without the drugs. Hence, no literature, philosophy or theology department recognizes Satanism.

If there is a correlation, how come job growth has not taken off? The recession began in late 2007 and the cuts have remained in place. The excuse now is uncertainty: employers are uncertain about the healthcare law or about Obama’s proposals to let the cuts for the top tier expire. Modern Republicans are a disgrace to conservatism, which also advocates personal responsibility. The cuts remained in place even after the 2006 Democratic sweep and they never campaigned on repealing the cuts and were not even able to get much done on their core issue at the time, Iraq. Yet, they just keep blaming Democrats, specifically Pelosi, Dodd and Frank.

According to various economists, the growth of the Reagan era is not so much tax cuts but other factors. The tax cuts were passed in 1981 but unemployment increased. It only went down as the Fed under Paul Volker began to ease interest rates and as OPEC, dominated by Saudi Arabia at the time, began to drop oil prices as a result of both the oil glut and to undercut Soviet oil gains as a way to get the Red Army out of Afghanistan, thereby resulting in lower gas prices, which motivated consumer spending. Add in a 35% increase in defense spending, which by the end of his presidency reportedly was 43% higher than defense spending at the peak of Vietnam. So, it can be argued government spending juiced the economy more than tax cuts. Also, there was a lot of mergers and equity buyouts during the period, resulting in growth in the finance and real estate sectors and while brokers are paid on commission, analysts, managers and administrative support personnel are salaried and while figures are hard to pin down, there has been speculation much of the 1980s growth was an illusion, driven by heavily leveraged buyouts and mergers and asset speculation. By the end of the decade, the nation was over $2 trillion in debt, had a budget deficit of $150 billion and counting, a financial crisis called S&L and several insider trading scandals. Both George Bush Sr and Bill Clinton had to raise taxes, cut spending and Bush Sr signed PAYGO. The 1980s was simply a drug and alcohol factory that ran out of drugs and booze and everyone had a nasty hangover and severe withdrawal symptoms. The Republicans tried to defy economic orthodoxy which says the economy is driven more by demand than supply and demand is a byproduct of income. If people do not have income, they will cut back on spending. Rather than find ways to increase people’s actual hard cash income, they went for buying on credit cards and other such gimmicks. However, what happens when peoples’ credit cards are maxed out and they are eyeballs deep in debt? The GOP argues that raising incomes is communism or wealth redistribution but never have any logical counter-argument that all their policies do is create booms, which result in busts at some point and that society cannot operate on loose credit alone; people must have real income in hand to buy, which then fuels expansion.