Subject: [big campaign] New Huff Post from Creamer- History Shows Tax Cuts for Rich Hurt Economy
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To: [email-masked], [email-masked], [email-masked]
Date: Sun, 21 Nov 2010 23:44:49 -0500 (EST)
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Economic History Shows Clearly that Tax Cuts for Rich Hurt the  Economy 

Right-wing politicians  and pundits carry on repeatedly about how wrong it 
would be to raise taxes on  the rich in a time of economic downturn. Wrong. 
Just because you  repeat something over and over doesn’t make it true.  In 
fact there is a body of empirical,  historical evidence that proves clearly 
that tax cuts for the rich not only do  nothing to spur economic growth – 
they actually do substantial damage to the  prospects for economic growth.  
First let’s look at  the proposition that high taxes on the wealthy stifle 
economic growth. In the  last century, marginal tax rates on the rich were 
their highest during World War  II – when the wealthy were called upon to 
help finance the war effort. During  World War II, the tax bite on wealthy 
Americans was close to punitive (the  highest bracket was 91%).  But that  didn’
t hurt the economy; far from it.  By war’s end, Americans were rolling in 
cash.  The average weekly pay rose 83% between  1940 and 1945.  Many families 
had  their first discretionary income. 
In fact, this period –  and the expansionary fiscal policy that helped 
finance the war – led to the  longest sustained period of growth in American 
history and created the American  middle class.  
Or we can turn  to the tax policy of the Clinton Administration.  In 1993, 
President Bill Clinton proposed  a budget that raised taxes on the rich.  
Republicans predicted that its passage would lead to economic doom.  They 
argued that the Clinton tax increase on  the rich would lead to economic 
stagnation and unemployment.  Instead, of course, the Clinton  Administration 
created 22.5 million jobs, of which 20.7 million – or 92% -- were  in the private 
sector.  His economic  policy eliminated the Federal deficit and left his 
successor – George Bush –  with budget surpluses projected as far as the eye 
could see. 
So history tells  us pretty clearly that increased taxes for the rich don’t 
hinder economic  growth.  Now let’s look at  historical evidence that the 
opposite proposition is true – whether tax cuts for  the rich actually 
promote economic growth.   
To see the fallacy in  that argument all you have to do is go back to the 
Bush Administration.  For eight years, George Bush and the  Republicans 
lowered taxes for the wealthy and cut back the regulation of big  corporations 
and Wall Street – all based on the premise that these two policies  would 
benefit the economy.   
The results are there  for everyone to see.   
The New York Times  reported last year that, “For the first time since the 
Depression, the American  economy has added virtually no jobs in the private 
sector over a 10-year  period.  The total number of jobs  has grown a bit, 
but that is only because of government hiring.”   
In fact, in the eight  years when George Bush and the Republicans in 
Congress passed two massive tax  cuts, we saw a massive, secular decline in the 
creation of private  sector jobs.  
Of course it won’t  surprise anyone that this decline was led by the 
reduction of American  manufacturing jobs.  There was a  decline of 3.7% in 
overall manufacturing jobs in the United States  over the last decade ending in 
2009.   
Remember that we’re talking  here about no increase whatsoever in private 
sector jobs – zero increase in  actual jobs -- even as the population of the 
United States  has grown.  Economists tell us that  the economy must create 
150,000 new jobs each month just to stay even with  population growth.   
In fact, there is  absolutely no evidence in the economic history of the 
last century that tax cuts  for the rich increase economic growth.  But there 
is evidence that they actually hurt prospects for economic  growth – both in 
the short and long run.  
Tax cuts for the wealthy function to reduce  economic growth in two 
specific ways:  
First,  they amplify the tendency of income and wealth to concentrate in a 
small segment  of the population.   
Throughout the  entire period of Republican rule, all  of the economic 
growth was siphoned off to the top two percent.  Real wages stagnated, and 
continued  growth in the Gross Domestic Product was fueled – for a time -- by an 
expanding  credit bubble that ultimately burst.    
The problem is that to  be sustained over time, economic growth must be 
widely shared.  Otherwise, demand for new products and  services stagnates; 
there is no incentive for businesses to invest, and economic  growth itself 
stalls.   
Fundamentally,  economic growth is about the development of processes and 
technologies that  increase productivity.  But these do  not occur when 
wealth is concentrated and labor prices are cheap.  They occur when new growth is 
shared and  wages are high. 
A high-wage  economy leads to major long-term economic dividends because: 
·       It incentivizes  companies to invest in higher-productivity 
technologies that increase overall  productivity and provide real economic growth. 
·       It creates customers  with spending power to drive economic growth. 
 There is a natural tendency of market  economies to use low-cost labor and 
increase profits.  That’s good for each company’s bottom  line, but it 
kills off the goose that lays the golden egg by reducing the buying  power of 
its ultimate customers – the people who work for all the companies in  the 
economy combined. 
Cutting taxes for the wealthy simply transfers more and more wealth into  
the hands of fewer and fewer people and helps fuel an economic imbalance that 
 causes an economy to stall.  
Second, tax cuts for the rich starve the  public sector of funds that are 
necessary to assure long-term growth.  Tax cut activist Grover Norquist was  
quite explicit when he championed the Bush tax cuts, that he intended to 
deprive  government of resources so it could be “drowned in a bathtub.” 
Historically, tax cuts for the rich have been used – quite intentionally  –
 to create deficits that make it politically difficult for government to do 
 three things that are critical to sustaining growth over the long  run: 
* Tax cuts for the rich  shortchange investments in education that are the 
major engine of most long-term  increases in productivity, and hence real 
economic growth.  Education is the major factor that makes  the workforce more 
productive.  It  underlies all of the scientific discoveries and 
technological advancement that  boost productivity. America’s commitment to universal  
public education is responsible – more than any other single factor – for 
our  economic success over the last century. And more than any other factor, 
the  massive growth of the Chinese economy is rooted in the exponential 
increased  level of its people’s education. The Chinese are turning out more 
graduate  engineers each year than the rest of the industrial world combined. 
Starving our  schools and universities will do more damage to our long-term 
economic prospects  than anything else we could do.  Yet  it is a direct 
consequence of tax cuts for the rich. 
* Tax cuts for the rich restrict  government’s ability to invest in new 
public infrastructure that is another  major factor in assuring long-term 
growth.  Roads, rail lines, airports, sewer and  water systems, sanitation, 
public health – all of these are critical foundations  for economic success.  Yet 
over the  Bush years, all of them were starved for cash – both by Bush’s 
wars and by his  tax cuts for the rich. 
* The deficits created by tax  cuts for the rich make it politically 
difficult for the Government to engage in  precisely the kind of economic fiscal 
stimulus that is necessary to offset the  reduced levels of economic demand 
that occur during recessions.  When Barack Obama became President he  was 
confronted with a three trillion dollar deficit in economic demand that left  
massive portions of our plant and equipment – and millions of workers idle – 
 producing nothing to contribute to our gross domestic product. 
Unfortunately, he  also inherited a budget deficit that had been exploded by eight 
years of tax  cuts for the rich – and ultimately by the recession itself. 
Obama convinced  Congress to pass a $730 billion stimulus package that 
saved 3.5 million  jobs.  What was needed to seriously  jumpstart private sector 
economic growth was more than twice that amount. But  Republicans were able 
to use the deficit -- that had resulted from eight years  of tax cuts for 
the rich and two wars -- as a reason to limit the size of that  stimulus.  
That turned out to be  good politics for the Republicans, since it helped keep 
millions of people  unemployed, who then blamed the Democrats for failing 
to put them back to  work.  But it was terrible for the  economy and for our 
collective well-being as a nation. 
And just in case you hear someone say that a dollar spent on tax cuts to  
the rich is a good way to stimulate the economy, here’s a fact from Mark 
Zandi,  Chief Economist for Moody’s.com, who was also an economic adviser to 
John  McCain: 
For every dollar  spent on making the Bush tax cuts permanent, you get $.29 
of increase in the  GDP.  For every dollar spent to  extend unemployment 
benefits you get $1.64 increase in the GDP.   In other words, a dollar spent 
on  unemployment compensation gets 5.6 times more boost to the GDP than a tax 
cut  for the rich.  
The reason is simple.  When  you’re in a recession, the problem is that 
demand is too low, so spending that  increases demand really boosts the 
economy, since it creates demand that entices  businesses to hire people who then 
spend more money and create more jobs -- and  so on. 
But when you give tax breaks to the rich, they don’t spend most of those  
breaks like a family that needs unemployment.  They save and invest a 
substantial  portion.  But in a recession you  don’t need more savings or 
investment, you need more demand. 
* Finally, the deficits caused by tax cuts  for the rich not only prevent 
the government from doing what’s necessary in  times of recession to restart 
economic growth.  In times of prosperity, they cause  deficits that put 
pressure on interest rates and choke off private sector  investment. In other 
words, they tend to damage the economy at pretty much any  time in the 
economic cycle. 
Of course tax  cuts for the rich are particularly outrageous right now – 
when middle class  incomes have stagnated for decades and the percentage of 
wealth controlled by  the top two percent of the population is higher than 
anytime since  pre-depression 1928.  
But that’s  exactly what those “deficit hawks” in the Republican Party are 
proposing.  After running around the country for  months campaigning about “
runaway deficits” they propose to borrow $700 billion  additional dollars 
to finance more tax cuts for the rich. And at the same time,  last week the 
Republicans voted in the House to block extension of unemployment  benefits 
that really would boost economic growth.  They are happy to borrow more money 
to  make their rich patrons richer – but they refuse to borrow any money to 
provide  unemployment benefits that not only allow middle class families 
who have lost  their jobs through no fault of their own to keep their heads 
above water, but  actually do turbocharged the economy.  
The Republican proposal to make the rich richer is just plain wrong.  If 
they succeed, the price will be paid  by our children, who must pay the debt.  
But it will also be paid by all of us today in the form of lost goods and  
services that will never be created because so many people who are willing 
and  able to work, can’t find jobs. 
Robert Creamer is  a long-time political organizer and strategist, and 
author of the  book: Stand Up Straight: How  Progressives Can Win, available on 
_Amazon.com._ 
(http://www.amazon.com/Listen-Your-Mother-Straight-Progressives/dp/0979585295/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1213241439&sr=8-1)  

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