Wednesday, November 17, 2010

It's time to tax the rich: Clinton did it and the economy took off

It's time to tax the rich
Contrary to the Republican mantra, Clinton did it and the economy took off.
LA Times
By Moshe Adler
November 17, 2010

The final two years of the George H.W. Bush presidency brought a creeping recession, with an unemployment rate that increased from 5.6% in 1990 to 7.5% in 1992. In June 1992, just five months before the elections, the rate reached 7.8%, and Bush lost his reelection bid ("It's the economy, stupid").

What did the new president do about the economy? President Clinton in 1993 proposed to raise the highest marginal tax rate immediately from 31% to 39.6%. In a Wall Street Journal article, Martin Feldstein, the former chief economic advisor to President Reagan and then as well as now a professor of economics at Harvard, opined that "Mr. Clinton's proposal to raise the marginal tax rates of high-income individuals would hurt incentives, weaken the economy and waste investment dollars."

This was, of course, a reincarnation of the GOP's trickle-down theory — tax cuts for the rich would eventually benefit the middle and lower classes. But Republicans did not let the fact that the Reagan tax cuts had decimated government services and created huge deficits stand in their way. Claiming that it was wrong to raise taxes on the rich in the middle of a recession, every one of them, in both houses, voted against it. Forty-one Democratic representatives and six Democratic senators joined them. The tax increase passed by only the narrowest of margins. In the House the vote was 218 to 216, while in the Senate the increase passed with a tie-breaking vote by Vice President Al Gore.

And what were the consequences? In the seven years that followed, the unemployment rate decreased steadily, every single year, until it reached 4% in 2000...

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