The Eclectic One

…Because labels are a poor substitute for thinking

Don’t cut taxes, fix healthcare

Posted by Bill Nance on October 1, 2008

I’ve written before that Reaganomics didn’t work in the 1980s, as demonstrated by the tripling of the national debt during Reagan’s administration and the serious recession which resulted.

The one economic policy Reagan got right was to lower confiscatory tax rates. But that was well over 20 years ago. Americans at or near the top have not been over-taxed in nearly a generation. In fact the only group which is over-taxed in this country are those in the middle. That is, people making under $200,000 a year or so.

This group gets socked with federal income tax, state income tax, property tax, gas tax, sales tax, excise tax etc. It has received little in tax relief under Republican administrations which seem to be married to the concept of “trickle-down” economics. Or as George Bush the Elder put it: “Voodoo Economics.”

Trickle down works (to an extent) when tax rates at the top are confiscatory, as they were in 1980, when the top marginal rate hovered around 70%. (I must add that no rich person ever paid anything like this rate because of massive tax loopholes and shelters which existed at the time).

But the Bush tax cuts have done nothing whatever to “stimulate” the economy. Nor have the two bribes in the form of stimulus checks, beyond the very short term.

If nothing else results from this latest economic crisis, I hope that the lasting lesson is that tax cuts are not a magic formula for economic growth. You cannot reduce revenue while increasing spending. If you really want to stimulate the economy, you make sure tax rates are not so high that they ACTUALLY discourage investment, while making sure your spending matches revenue and addresses actual needs of the people, not miscellaneous subsidies to the Defense Department, agri-business, giant corporations and the like.

An idea for actually stimulating the economy? Fix healthcare.

Ask any small business owner: They cannot afford ever-increasing insurance premiums. Either implement something like Mitt Romney’s Massachusetts plan or something akin to Canada’s. (Canada pays about 1/2 of what we do and provides vastly better care for the majority of it’s people. Anyone saying otherwise is either ignorant or a liar).

Free up small business’ money; not with tax cuts but with business expense cuts in the form of health insurance premiums for their employees. In the end, it’s a lot more money into the pockets of everyone, because it allows small business, which employs 85% of Americans, to expand and grow.

We’re already paying double what the Canadians pay. So the idea that this would mean massive tax increases is frankly a fraud. It’s a matter of making what are now voluntary payments into mandatory ones, and distributing those costs evenly across the spectrum. We could provide substantially better care than we provide now, at less cost, and cover everyone. This isn’t rocket science, it’s healthcare company lobbying and ideology bereft of intellectual honesty that’s kept it form happening to date.

Americans must learn to think beyond the ends of their noses. Growth and prosperity don’t come from above. They come from below. And short-term growth for some at the expense of long term economic health for the many is a bad trade-off.

American large business and the wealthy are not over-taxed. Quite the opposite. Trickle down wish-thinking and tax cuts for the sake of tax cuts was a lousy policy in the 1980s and it’s a lousy policy now.


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