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Earlier this afternoon, I saw this tweet from Eric Pusey:

Ruh Roh – Lowering taxes doesn’t create jobs? http://ow.ly/5taK1 Say it ain’t so

I knew it had to be an extreme stretch so I read the post. Here’s the basis for their opinion:

In fact, as Center for American Progress Director of Tax and Budget Policy Michael Linden found, “in the past 60 years, job growth has actually been greater in years when the top income tax rate was much higher than it is now”:

For instance, in years when the top marginal rate was more than 90 percent, the average annual growth in total payroll employment was 2 percent. In years when the top marginal rate was 35 percent or less, which it is now, employment grew by an average of just 0.4 percent.

And there’s no cherry-picking here. Pick any threshold. When the marginal tax rate was 50 percent or above, annual employment growth averaged 2.3 percent, and when the rate was under 50, growth was half that.

In fact, if you ranked each year since 1950 by overall job growth, the top five years would all boast marginal tax rates at 70 percent or higher. The top 10 years would share marginal tax rates at 50 percent or higher. The two worst years, on the other hand, were 2008 and 2009, when the top marginal tax rate was 35 percent. In the 13 years that the top marginal tax rate has been at its current level or lower, only one year even cracks the top 20 in overall job creation.

I’d say that that’s a flimsy argument if I didn’t want to offend flimsy arguments. The argument is pathetic for a bunch of reasons.

First, economic conditions in the 1950s were dramatically different than we’re facing today. We were building factories at a significantly faster pace than they’re being built today. The baby boom generation was being born so new home construction was skyrocketing. We were building the interstate highway system, an infrastructure project that dramatically improved our competitiveness and productivity.

Let’s also consider that there wasn’t a global economy during the 1950s. With capital and labor essentially having unlimited mobility, and with other countries envious of our standard of living, it would stupid to think that tax rates don’t matter in today’s world.

Therein lies the problem. Like Mark Dayton, today’s Democrats think of the world in 1970s (or earlier) terms. Those were the good old days. In their thinking, returning to those glory days simply means doing what they did half a century ago.

Some things work like that. Give people a reason to be productive and it’s likely that they’ll be productive. Confiscating 70+ percent of an entrepreneur’s income isn’t giving an entrepreneur much incentive to be productive.
It’s time that Democrats stopped living in the past. It’s time that they understand that capitalism will succeed because free market capitalism is based on human nature taking its course.
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2 Responses to “Democrats: The Living in the Past Party”

  • nerdbert says:

    I think you underestimate the differences. In the 50s the US was the only major country with a fully functional infrastructure that hadn’t been razed by WWII. We were exporting the machines to rebuild Europe and Asia to countries that couldn’t supply themselves even the basics. We could AFFORD to have high taxes and inefficiencies.

    These days? Not so much. We’ve been hamstrung by those years of high living into thinking that we’ll always be the only supplier of capital goods to the world and that’s not the case. We have to adjust our standard of living and especially of spending to account for that.

  • j.l. says:

    Another thing not mentioned in the article is that when the marginal rates were so high, there were a lot more tax loopholes that could, and would effect how much tax was paid. Another way to look at is- in the 1950′s when the top rate at one point was 91%, did federal agencies have enough money or did they consistently ask for more? Were there still the poor and the disadvantaged? Answers to both, of course, yes.

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