Monday, November 10, 2008
Mao, Hoover, and Obama
It is ironic that the Communist Chinese are more pro growth and pro business than the Democrats. This is nothing new for the Communists, Mao himself reduced taxes from 33% to 25% to increase production on small farms. China just announced plans to reduce taxes on businesses to stimulate their economy. In the UK, the Labour party announced plans to seek tax cuts to stimulate their economy. Around the world, governments are recognizing that lower taxes increase growth. Meanwhile, Obama wants the 2001 tax rates to expire, resulting in increases in income taxes, cap gains, and dividend taxes. In addition, he wants to increase those taxes even more, but only on 'the rich'. The last President that increased taxes on 'the rich' during a severe economic slowdown was Hoover. That worked out well. Obama seems intent on following in his footsteps.
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I won't defend Mao except to say that he certainly didn't cut taxes for the rich...he put the rich out on farms for "re-education" or worse...any tax cuts he made were for the poor (there wasn't much of a middle class in China then)
It's tough for me to defend conservative Republican Herbert Hoover except to say that his decision to raise taxes to levels far lower than those offered by Reagan, Bush, etc. in the face of a massive peacetime federal deficit may not have been altogether unreasonable and there is much debate outside of supply-side circles as to the effect that tax increase actually had (if any) on the depression that was already underway. Many fairly objective sources feel he got a bad rap (http://www.gvsu.edu/hauenstein/index.cfm?id=EAB7447A-C440-43CF-A8E43BCE5BDE05B2). If you dislike HH for his impact on the depression, you must be a big fan of FDR.
Given the tremendous (and sadly predictable) failure of supply-side economics over the last 30 years, why do you think pursuing it even further would be a good idea? Lowering taxes on the wealthy and massively increasing personal, corporate, and government debt to fund growth has resulted in exactly what one would expect: the wealthy got wealthier, society got into massive debt, and that debt increased until it became unsustainable at which point the system came crashing down.
Perhaps it is time to return to fundamentals: encourage healthy growth through productivity (e.g. emphasize dividends not capital gains), invest in physical and human infrastructure, build a strong middle class, lead by example, and continue to attract the best and the brightest from around the world rather than making our country an arrogant and impotent pariah.
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