Opinion: Daily Journal

Tax reform and the Left’s favorite fables

Government intervention in the economy has failed time and again, notwithstanding the narrative of the Left

The ink is dry, but the howling from the Left continues. The 2017 tax reform law is in place and working as advertised — lower personal and corporate taxes, more money in the pockets of Americans, repatriation of billions of dollars of corporate profit, and an economy that will be robust. Still, the Left’s version of taxes and economics continues to be the dominant narrative of our nation’s 20th century history. Wrong as it is, it seems impervious to correction; a hydra-headed monster that does not die. “History,” says the eminent historian Peter Geyl, “is an argument without end.”

Many articles have recounted the following litany of liberal touchpoints in American history: early 20th century Progressives rescued America from the “economic injustices” of 19th century free-market capitalism; the 1920s saw “wages remain stagnant as profits grew”; the Great Depression was the result of too much capitalism; the New Deal saved the country from collapse; World War II spending restored prosperity; high post-war tax rates brought on “the affluent society”; the War on Poverty “diminished the percentage of Americans living beneath the poverty line.” The narrative concludes that we’ve seen a reversal of all this “progress” as tax rates were lowered under presidents Reagan, Bush, and now Trump. Wringing his hands, one writer sees the U. S. “quickly returning to the chaos of the 1920s.” For his summation, he cites a poverty expert from the United Nations, who proclaims America is “becoming the world champion of extreme inequality.”

While some historians would like to pretend that these liberal perspectives are beyond question, there is a very different view held by prominent, modern historians such as Paul Johnson, Amity Shlaes, Marvin Olasky, Niall Ferguson, Arthur Herman, and others. These historians would agree with Reagan’s assessment, “It isn’t that liberals are ignorant. It’s just that they know so much that isn’t so.”

Fact is, the economic growth of the 19th century was truly remarkable. Olasky has chronicled the commensurate progress made in fighting poverty through private charity during that century. In contrast, Olasky, Charles Murray and others have documented the devastating results of well-intentioned government welfare programs in the 20th century, which have created a vast underclass of dependency.

As for the supposed “chaos” of the 1920s, America actually experienced widespread prosperity. Reduced taxes and limited government interference fostered unprecedented economic growth through this decade. Gross National Product grew at an astounding annual rate of 4.7 percent, while unemployment declined from 6.7 percent to 3.2 percent and consumer prices remained stable.

People across all tax brackets benefited. Between 1922 and 1928, the number of taxpayers earning more than $100,000 quadrupled, and the average income in this group rose 15 percent. Similarly, the number of taxpayers in the $10,000-to-$100,000 bracket increased 84 percent. In the lowest bracket, those earning below $10,000 actually declined. Historian Thomas Silver notes the tax reforms championed by President Calvin Coolidge alleviated 98 percent of Americans — the working class and the poor — from paying any income tax.

The still-popular liberal tenet that the New Deal saved America has been contested by a number of modern historians. Most notably, Shlaes, in The Forgotten Man, has ably chronicled how government intervention — first by President Herbert Hoover, somewhat timidly, and then by President Franklin Roosevelt, very aggressively transformed a sharp recession into a 10-year depression. As FDR’s own treasury secretary, Henry Morgenthau, lamented in 1940, “We have tried spending money. We are spending more than we have ever spent and it does not work. We have never made good on our promises.”

Herman has documented the change of perspective that the reality of World War II produced. Roosevelt rejected calls to nationalize the economy and relied on the free market — a decision that was critical to winning the war. U.S. production far outstripped our enemies and our allies. It also left America well positioned to dominate the post-war economic world.

Lyndon Johnson’s War on Poverty is the poster child for liberal policy failure. The heralded 1966 expansion of government entitlement spending was designed not only to reduce the rate of poverty but also to eradicate the root causes of poverty. It failed on both counts. After over 50 years and trillions of dollars in expenditures, the overall rate of poverty in the U.S. remains essentially unchanged. More tragically, millions of Americans are consigned to permanent underclass status and trapped in dependency on entitlements.

Given the ample evidence of government’s intervention results, how can liberals call for more of the same?

The “argument without end” will continue, but conservatives should be confident the facts are on our side. For Americans who know their history, the productive path forward is clear. The Tax Reform Bill of 2017 is a step in the right direction. We should reject the Left’s age-old fables, no matter how many times they are told.

Garland S. Tucker III, retired chairman/CEO of Triangle Capital Corporation, is author of Conservative Heroes: Fourteen Leaders Who Changed America — Jefferson to Reagan, and a senior fellow at the John Locke Foundation.



  • ProudlyUnaffiliated

    I completely disagree. Whenever the left successful alters any economic policy it is always a smashing success. The success is for the left and its quest for more power over the people and the economy. Motivation and perspective are the key here.