Republicans walked out of the budget talks yesterday saying they would not agree to any deficit reduction plan that included tax increases because tax increases would be job killers and hurt the economy. Cantor said “There is not support in the House for a tax increase, and I don’t believe now is the time to raise taxes in light of our current economic situation.” Speaker of the House John Boehner (R-OH), added “raising taxes is going to destroy jobs. If you raise taxes on the people that we need to grow our economy and to hire new workers, guess what: they’re not going to do it if they have to pay higher taxes to the federal government.”
Pat Garofalo at Think Progress points out that the Republicans need to check the facts and their own party’s history. As Garofalo notes, Reagan raised taxes during seven of his eight years in office in order to reduce the deficit. Republicans at the time opposed the tax increases claiming, like they are this time, that tax increases would result in all kinds of bad things for the economy and jobs. Guess what? The economy grew, inflation stayed low, and the unemployment rate fell. Bruce Bartlett, an economic advisor to both Reagan and George H.W. Bush, said:
“It would be hard to find an economic forecast that was more wrong in every respect“:
Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983 – both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.
The 1982 tax increase is the largest peacetime tax increase in U.S. history. And the same thing happened around President Bill Clinton’s 1993 tax increase: dire warnings from Republicans about economic Armageddon, followed by a booming economy.
Additionally, when the Center for American Progress compared top marginal rates with economic growth over the last 50 years, they found that lower top tax rates have coincided with weaker growth, while the strongest growth was during periods when the top tax rate was high.
So Republicans were wrong about the impact of tax increases on the economy during the Reagan years and they are wrong now. But, you can’t tell Republicans anything. They are convinced tax increases are always bad in spite of all of the evidence to the contrary. The sad thing is that Republicans are so locked into this Tea Party tax dogma that they are willing to allow the U.S. to go into default and suffer the terrible consequences of doing so that I outlined in previous posts.
See the Think Progress article here: http://thinkprogress.org/economy/2011/06/24/253569/reagan-1982-flashback-economy-boomed/