http://www.huffingtonpost.com/paul-abrams/winning-the-economic-argu_b_167301.html
OK, I don't read the Huffington Post ever, but there's a first time for everything and I'm up for it.
This article, by Paul Abrams, attempts to defend the policy of spending our way out of a recession. Mr. Abrams makes some empirical references to FDR's New Deal and asks critics to explain the following chart (reposted here without permission):
He argues that if the New Deal was such a bad policy, why did GDP grow so rapidly during the 1930s?
I bet in high school, Mr. Abrams was taught (as was I) that FDR's New Deal saved the country from the brink of financial ruin. Now surely there were some nationwide benefits under this program. I don't think anyone could deny that the massive increases in government spending had a positive effect on GDP. Further, the nation saw an increase in the number of job opportunites and the unemployment rate shrank from 25% to 14%.
Unfortunately, when the government commits to huge spending increases, it has to raise taxes in order to pay off the debts it incurs. I believe this is where the criticisms kick in. Theoretically, it then becomes every American's burden to foot the bill for the spending spree. I say "theoretically", because today the lowest 40% of wage earners don't really pay Federal income tax after deductions.
You might have heard conservatives complain that with this new round of Obama/Pelosi/Reed legislation, "we are spending our children's and grandchildren's money". Well, they aren't saying this willy-nilly; they are making this remark based on historical facts and empirical evidence.
And now, let me step into the pissing contest. Have a look at this chart.
The data for this chart comes from the link below.
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_progressivity_in_federal_income_tax
Notice the Federal income tax rates in the post New Deal era (after 1939). As you pan from left to right, from World War II to modern day, note that the country's lowest marginal tax rate has NEVER recovered from FDR's tax hikes.
So I say to Mr. Abrams: while GDP increased, so did our marginal tax rates. It has been nearly 70 years and they have never returned to normal. Therein lies the chief complaint.
It is truly sad, because our generation is part of an era where tax obligation is a birthright; it is commonly accepted that a significant portion of our hard-earned dollars goes to the government. It wasn't always like this as you can see from the chart.
There are a few takeaways from this, but I think the biggest one is this: Once you commit to big government spending, there is effectively no way out of it. Once you're in, you're in permanently.
So with that in mind, what do you think will be the impact of the latest stimulus legislation? My guess: take a look at your Federal withholdings on your pay stub. I would venture that it is likely to double in the next four years.
And what of Obama's campaign promise of a tax cut to 95% of Americans? Answer: I just don't see it ever really materializing. Not with the kind of spending that's going on right now.
