- The federal government consumed less than four percent of GDP in 1930, 9.8 percent in 1940, and 16.2 percent in 1948. By 1965, the number had climbed to 25 percent of GDP, and it hit 30 percent in 2000 (compared with the average among members of the Organization for Cooperation and Development of 37 percent).
- The modern Democratic Party has shifted from one that cast 56 Senate votes for the 1964 Kennedy-Johnson tax cut and 33 Senate votes for the 1986 Reagan tax reform into a high-tax ideological party that cast no votes for the 2001 income tax cut, under President George W. Bush, and only one vote for the capital gains and dividends tax cut of 2003 (and that voter is set to retire this year).
- The “Buffett rule,” which would raise rates on earnings of more than $1 million a year would, according to the Congressional Budget Office, take in only $47 billion over a decade, less than one-half of one percent of the $11 trillion in debt that Obama’s planned spending would produce.
- Today, the left, as typified by Campbell, has shifted from talking about reducing poverty to pushing for “the reduction of inequality” -- a result of the failure of decades of welfare spending to accomplish its stated goal. One can succeed in reducing inequality simply by damaging the highest-earning citizens -- and without helping the lowest-income earners at all. Recessions and sluggish growth both would accomplish this end.
- Politicians and pundits who promise to tax the rich have not finished the sentence. They plan to tax the rich first -- and then everyone else. This pattern has been demonstrated throughout history: most new taxes are first imposed on the rich. The Spanish-American War was paid for by a tax on the rich, namely, those who made long-distance phone calls. But that telephone tax lasted more than 100 years and soon hit everyone in the country. Similarly, the personal income tax was imposed in 1913 at seven percent on those earning more than $11.5 million in today’s dollars. Today, more than half of Americans are hit with the tax.
- Economic growth does more to increase government revenues, create jobs, and reduce poverty than do forcible transfers of income and wealth. If the U.S. economy grew at three percent a year rather than two percent for a single decade, federal revenues alone would increase by $2.5 trillion. Four percent growth rather than two percent for one decade would bring in $5 trillion, enough to erase the debt Obama has run up to date.
Grover Norquist is right on one count: taxes that are too high strangle economic growth. But so do taxes that are too low. And the United States is much closer to the latter situation than the former. Government spending in a variety of areas -- education, infrastructure, scientific research, job training -- is crucial for a robust economy. Sure, Americans have low taxes. But they are eating their seed corn. The lack of investment is eroding the very bases of future productivity.
Turning to the higher education front, the percentage of Americans with a college degree reached a new high earlier this year, up to 30.4 percent of those over the age of 25 up from 26.2 percent a decade earlier. The percentage with graduate degrees has risen from 8.7 percent to 10.9 percent. Again, this is inconsistent with the notion too little money is being spent in this area.
With regard to job training, meanwhile, government spending on such programs is dwarfed by that of the private sector -- an indication this is not a government responsibility -- and the GAO has noted that "little is known about the effectiveness" of federal job retraining efforts.
Evidence that federal spending on scientific research provides an economic boost is similarly unclear, with a 2007 review of literature on the subject from a Bureau of Labor Statistics economist concluding:
“The overall rate of return to R&D is very large…. However, these returns apply only to privately financed R&D in industry. Returns to many forms of publicly financed R&D are near zero.”
The United States spends just 1.7 percent of GDP on transportation infrastructure, compared with Canada’s four percent and China’s nine percent, and less in real, inflation-adjusted terms than it did in 1968, as a 2011 report of the bipartisan coalition Building America’s Future has noted. As a result, the United States ranks 25th in the world for infrastructure quality, according to a 2012-13 World Economic Forum study.
Average commute times are longer in the United States than in many peer nations; the rail system is an international joke. Why? Because these systems are starved for revenue. The Highway Trust Fund is perpetually underfunded by a federal gas tax that has not been raised since 1993; a 2008 congressional commission found that current transportation spending is only 40 percent of the amount needed to keep the system in good repair and to make necessary upgrades.
Canada, meanwhile, beats both the US and China with just over $2,000 per capita on transport infrastructure spending, but A) this is not entirely unexpected given the country's vast distances and far lower population density (fewer people to spread the costs) and B) Campbell does not explain why Canada represents an optimal spending level.
Norquist maintains that Americans support low taxes, even on the affluent, because of the possibilities for economic mobility. Yet numerous studies show that economic-mobility rates are quite modest in the United States: the likelihood that an individual worker will move from the bottom 40 percent of the income distribution to the top 40 percent over a year’s span is less than four percent, and the likelihood of moving from the bottom 40 percent to the top 20 percent after 20 years is still less than ten percent, as the economists Wojciech Kopczuk, Emmanuel Saez, and Jae Song have shown. There is less intergenerational mobility in the United States than in peer nations, as Alan Krueger and Miles Corak, also economists, have pointed out.
And polls reveal that lower- and middle-income people know that the economic deck is stacked against them. A July 2012 poll conducted by The New York Times and CBS News asked respondents whether it was still possible to start poor and become rich in this country. Over 80 percent of those with incomes above $100,000 said yes; more than 94 percent with incomes over $250,000 said yes. Among those with incomes below $15,000 -- the actual poor -- only 50 percent agreed.
Tax debates ultimately come down to values: What kind of country do Americans want? A republic in which only the affluent prosper while lower- and middle-income groups remain mired in stagnant-wage jobs, face greater insecurity in retirement, and fear for their children languishing in poorly resourced schools? Or a nation in which all hard-working people have opportunities to capitalize on their talents and, later on, retire with confidence and dignity, all along secure in the knowledge that their well-educated children will have even better lives? That latter option is called the American dream.