It’s 2014, Barack Obama is president, Ronald Reagan is dead, but for 33 years we have continued to live in an era of Reaganomics.
In every meaningful way, Reaganomics is alive and well, and still controlling our economy.
But what has 33 years of failed Reaganomics brought us?
It’s brought us record levels of financial instability. It’s brought us trade policies that have destroyed the working class, and union policies that have destroyed labor in America.
But most importantly, it’s brought us tax policies that have exacerbated inequality, wrecked our economy, and put us at the mercy of boom and bust cycles.
When Ronald Reagan stepped foot inside the White House, the top marginal tax rate was at 74 percent, and a third of the federal government’s income came from corporations.
Today, the top tax rate is sitting at 39%, most rich people pay a maximum of 20%, and corporations are only paying around 11% of the total cost of running the federal government.
Thanks to 33 years of failed Reaganomics, many Americans have bought the lie that tax cuts are a cure all for a struggling economy.
But in reality, despite what Conservatives might tell you, it’s these tax cuts are one of the major factors keeping our economy in the gutter.
As Larry Beinhart points out over at The Huffington Post, “the truth is that tax cuts cause crashes.”
More specifically, when top marginal tax rates are below 50%, they cause cycles of boom, bubble, and bust.
America has witnessed four of these cycles, and the common denominator for all of them were tax cuts.
As Beinart notes, “coming out of World War One we had a top marginal tax rate over 70%.”
But between 1921 and 1925, the top marginal tax rate was slashed down to 25%. And as we all know, what followed was the stock market crash of 1929 and the Great Depression.
Now, fast-forward to 1981, when Ronald Reagan came to Washington.
In 1981, the top marginal tax rate stood at 70%.
But then came the Reagan tax cuts.
In 1982, the top marginal tax rate was at 50%. In 1987 it was at 38.5%. And in 1988 it was at 28%.
Just two years later, in 1990, our economy went into another recession.
In 1997, Republicans in Congress forced President Clinton into slashing the capital gains tax from 28% to 20%.
That tax cut coincided with the famous dot.com boom, bubble and ultimate bust in 2000.
Finally, George W. Bush lowered the top marginal tax rate and capital gains rate when he was in office.
Those cuts helped lead America to the crash of 2007.
But as Beinart points out, while tax cuts may lead to cycles of boom, bubble, and bust, tax increases can help improve our economy.
Responding to the Great Depression and crash of 1929, Herbert Hoover raised taxes in 1932, and by 1933, the economy had begun to improve.
In 1991, George H.W. Bush raised taxes in response to the mess left by Reagan. Not surprisingly, the economy improved.
And when Clinton raised taxes during his presidency, the economy thrived, with record levels of employment and growth.
If we want to pull our economy out of the gutter, and restart America’s economic engine, it’s pretty clear what needs to happen.
While the very mention of a “tax hike” is enough to make a Conservative go crazy, history shows us that tax increases help the American economy.
It’s time to roll back the Reagan tax cuts, declare an end to 33 years of failed Reaganomics, and start practicing sensible economics that will improve the lives of all Americans, and not just the wealthy elite.