A person well known in conservative economic circles sent me an e-mail today making these observations:
During the 8 Reagan years, when marginal rates were sharply cut (but deficits were substantial), equities on the NYSE and the S & P 500 about doubled.
During the 4 Bush 41 years, when the top MTR was increased (only slightly), equities rose about 50%.
During the 8 Clinton Years, when MTRs were substantially increased, equities tripled, deficits turned into large surpluses (as far as the eye could see, leading some to fear that the Fed would be unable to conduct monetary policy if the public debt was redeemed).
The market today is roughly where it was (a bit higher) when Bush 43 took over, who cut MTRs, but ballooned the deficit.
So, Bush 41 and Clinton raised MTRs without tanking the economy, and Clinton left Bush 43 with a fabulous fiscal situation.
So much for the Republican argument that reducing MTRs is the nirvana of tax/economic policy and raising MTRs its death knell.
What is curious to me is that this person asked that I not use his or her name if I used this information even though there is nothing remarkable about it and is based on easily available public data. I can only assume that this person does not want the aggravation of disputing the conservative orthodoxy, which holds that tax cuts are the be-all and end-all of economic policy and that all tax increases bring economic disaster.
It’s sad that this person feels that he or she can’t simply state these facts openly. But I also sympathize. I know better than anyone the price that is paid for dissenting from a political position widely held among one’s friends. Almost daily I hear from one of them that it’s so sad what has happened to me and how painful my betrayal is to them.
Those with skins less thick than mine can be forgiven for wanting to keep good relations with their friends and live their lives in peace. But if everyone takes this position the result is disaster when politicians assume a consensus view on some public policy issue among those on their side who are considered experts. That is what happened in the George W. Bush years. Gross incompetence and tragic errors were aided and abetted by the silence of those who knew better but said nothing.
Sadly, the silence continues. That is why I say many of the things I say in the ways that I say them. I’m not just speaking for myself, but for others who fear retaliation or alienation if they were to publicly agree with me. That’s okay. The truth is the only ally I need.