Thursday on Bloomberg, Burt Folsom fell in with Amity Shlaes with regard to the effort of the right wing to deny the benefits of the New Deal and ignore what really prolonged the Depression in the US.
Sounds kinda dry and boring, but considering what’s going on now, it’s hyper relevant.
Burt’s prescription for the US? Cut income and capital gains taxes which will do only one thing… depress economic activity AND concentrate wealth in this country. For the bottom 97% of the people in this country, there is no benefit. There are a few reasons…
1) Tax rates are, even without the Bush tax cuts which dramatically increased the deficit, on the left side of the Laffer Curve which means that additional cuts reduce government revenues AND don’t produce additional economic activity because if taxes are lower, people don’t need to do as much to keep income at a steady or slightly increasing level.
2) The policies Burt proposes will end up concentrating wealth at the top since it’s basically a reduction on the taxes levied against capital, not labor, without making any demands on that capital to be put to productive use. It’s like the positive tax benefit of an IRA, you get to continuously reinvest your earnings without paying taxes, concentrating your earning power. Note that you’re not really creating jobs or real GDP. Another example, take the case of banks today… they can plant money in Treasuries at 3-4% while they pay depositors 1% or less. It’s a risk free trade for them and it doesn’t require them to extend credit to anyone in the US which might actually help the economy. It does, of course, make the banks a lot of money since they don’t need to reserve for losses.
And Burt the Bore even reused the tired old Republican talking point about revenues increasing with tax cuts which even David Stockman of Reagan Administration fame admitted years ago wasn’t at all valid since the increase in revenues was temporary due to tax planning (people deferred income and capital gains until the tax rate changed, then took the charge. If you’re an idiot like Burt Folsom, you draw the erroneous conclusion that lower taxes equal higher revenues which isn’t the truth at all. This is one of those times when you just can’t listen to stupid people like Burt Folsom).
Now back to the Depression… Amity and Burt both think that the New Deal had little to do with economic recovery out of the Depression. They say it was World War 2 that really did the trick and they’re right. However, they’re ignoring the massive GDP growth during the post-New Deal 30’s up until the 1937-38 recession which was driven by the disastrous budget cuts demanded by conservatives at the time. They’re also ignoring that unemployment had been cut basically in half when new workers are factored in. In short, they ignore the very real success of the New Deal and Keynesian economics in a deflationary environment.
But don’t take my word for it, here’s a really good take on Amity’s shitty work that could be repeated, almost word for word, in a review of Burt Folsom’s crap-o book.
Burt finished up talking about the Bush tax cuts which produced anemic growth in GDP but actually caused losses in real wage growth because they were targeted at (wait for it) THE RICH. He then went on to assert that after World War 2, the Republican Congress cut taxes and we had an economic boom. The top tax rate, even in the 50’s, was 91%, far higher than now (35%) and higher even than the rate during the 30’s under Roosevelt and the Democrats. It wasn’t a tax cut that created an economic boom in the 50s.
But don’t tell Burt Folsom… he wouldn’t want to hear it anyway.
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