From 1933 to 1980 we averaged 2.7% growth per year and our National debt ended where it started at 30% of GDP. Since 1981 total GDP growth is 105%. But the National debt has grown from 30% to 105% of GDP, a 75% increase. Subtract the 75% debt growth from the 105% output growth and our actual wealth as a country only increased about 1.4% of GDP per year.
The difference between 47 years of growing wealthier by 2.7% per year and 37 years where we have grown wealthier by 1.4%? Trickle down economics.
From 1933 to 1980 the highest income tax rate averaged around 80%. Since 1981 the highest tax rate has averaged under 40%. The robust debt free growth from 1933 to 1980 flies in the face of the notion taxing the rich hurts the economy. In fact it appears high tax rates changed rich folks behavior - they kept more money in productive activity instead of pulling it out to stash in safe wealth storage. The result was from 1933 to 1980 the rich got richer even as the middle class experienced a growth in income that today contrasts with the stagnant incomes of their children.
If we want to turn our economy around and enjoy real growth rather than just piling up debt this coming election should be about major structural change to our tax laws. Who can best accomplish that goal?
Probably no Republican. Tax cuts for the rich have always come from Republicans and have been the primary Republican accomplishment over the last 37 years.
So that leaves the Democrats.
So far, though, the Democratic candidates seem stuck in 20th century Capitalism v. Socialism thinking. Thinking the solution to stagnant middle class incomes is in using the law to extract money from wealthy folk without giving any thought to economic efficiency or the impact on productivity and growth. 21st century thinking should be bringing more carrots into the tax code instead of relying on regulatory sticks. Incentivizing productive activity and discouraging speculation and exploitation. But no Democratic candidate seems to care about what happened from 1933 to 1980.
Joe doesn't even seem interested in major structural change. He seems like he just wants to captain the ship, making slight changes in course. Amy also seems to be in the Joe mold. Don't rock the boat.
Bernie promotes structural change, but his touchstone seems to be a modified form of Socialism, heavily reliant on the 20th century regulatory sticks oblivious to market forces. He does not seem flexible enough to start thinking about carrots.
Elizabeth also seems stuck in the 20 century, but does seem to be a more flexible problem solver. However since she has taken regulatory stick based positions (wealth tax for example) during the campaign she may be reluctant to give her detractors ammunition by changing her mind.
Pete? Kamala? It's not clear either of them have any economic plan, nor is it clear they perceive any need for structural change.
I think voters are going to have to figure this out first and start asking why we can't have the consistent 2.7% debt free growth that spread wealth all though the economy that characterized US life between 1933 to 1980.
For data spreadsheets about the data cited above link to
For a broader discussion of historical economic performance see the volume "Curious Correlations: Party Politics and Economics" available at Amazon books.
