Tuesday, November 13, 2012

A Lesson About Deficits and the Top Tax Rate

Suppose you were President and faced with a growing deficit.  Suppose you chose to increase the top tax rate on the top earners by 6.6 percent to raise revenues to pay down that  deficit.  Suppose you did this even though Republican critics warned that such a tax increase would wreck the economy and be a job killer.  What would happen?

Well, that is exactly what Clinton did in 1993.  The chart below shows what happened.  Deficits turned to surpluses and the economy grew at an excellent average annual rate of 4 percent.  There is a lesson here for the Obama administration and the rest of us.

See the chart below or here: http://www.offthechartsblog.org/

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