I’m sort of out of commission at the moment, and thus amendments must wait a day. But this writing is relevant, as one of the largest economic problems we face is the burden of a huge debt, now on its way to $18 trillion.
Can we pay down that debt?
The assumption is constant: No real federal spending reductions can be made. But this is simply not true — and we’ve succeeded before.
Much can be gained from the approach taken in 1921-1924, when Woodrow Wilson finally left office (almost two years after being disabled by a stroke), and Harding and Coolidge (who replaced Harding at his death) did an excellent job, cutting federal spending in half and tax rates by more than that. From Wikipedia:
The 1920s was a decade of increased consumer spending and economic growth fed by supply side economic policy. The post war saw three consecutive Republican administrations in the U.S. All three took the conservative position of forging a close relationship between those in government and big business. When President Warren Harding took office in 1921, the national economy was in the depths of a depression with an unemployment rate of 20% and runaway inflation. Harding signed the Emergency Tariff of 1921 and the Fordney–McCumber Tariff of 1922. Harding proposed to reduce the national debt, reduce taxes, protect farming interests, and cut back on immigration. Harding did not live to see it, but most of his agenda was passed by the Congress. These policies led to the “boom” of the Coolidge years.
One of the main initiatives of both the Harding and Coolidge administrations was the rolling back of income taxes on the wealthy which had been raised during World War I. It was believed that a heavy tax burden on the rich would slow the economy, and actually reduce tax revenues. This tax cut was achieved under President Calvin Coolidge’s administration. Furthermore, Coolidge consistently blocked any attempts at government intrusion into private business. Harding and Coolidge’s managerial approach sustained economic growth throughout most of the decade. However, the overconfidence of these years contributed to the speculative bubble that sparked the stock market crash and the Great Depression. The government’s role as an arbiter rather than an active entity continued under President Herbert Hoover. Hoover worked to get businessmen to respond to the crisis by calling them into conferences and urging them to cooperate. Hoover’s vigorous attempts to get business to end the depression failed.
When the income tax was established in 1913, the highest marginal tax rate was 7 percent; it was increased to 77 percent in 1916 to help finance World War I. The top rate was reduced to as low as 25 percent in 1925.
It CAN be done (and was fought against at the time, of course). We didn’t just reduce the deficit, we paid down the debt!
But now we live with an administration whose articulates that its grandest fiscal goal is to reduce the rate at which we are going further into debt. And this in the richest country and strongest economy in the world, though we’re about to lose both titles.
===|============== Keith DeHavelle