The 1920s and the 1980s are the best examples of how capitalism pure and simple works to better society both socially and economically. They are examples of how if the government steps aside, people prosper.
While the 1920s were perhaps the best example of how capitalism works, the 1980s might just be the best second example. And this was all lead by the conservative Ronald Reagan.
The following is the evidence that the 1980s was a perfect example of what happens when conservatism-capitalism is set free. This is a perfect example of what happens when taxes and regulations are reduced, and government has a limited role on the lives of Americans.
It pretty much goes according to Say's Law, which states that supply creates its own demand. As taxes go down, this gives businesses an incentive to spend and invest, and this results in more job creation. More supply of workers paying more taxes results not just in a decreased unemployment, but also more revenue to the government.
If you get government out of the way, supply will therefore increase because people have more of an incentive to save and invest, and the economy will grow.
Consider that when Reagan took office the top marginal tax rate was 70%, and when he left office it was 28%.
Here are the stats of the 1980s. Less government results in:
1. Government revenue nearly doubled: The 70% tax rate when he entered office generated about $500 billion in revenue to the federal government. When Reagan left office in 1989, the top marginal rate was 28%, and the take, the revenue to the Treasury had nearly doubled, to almost $1 trillion.
2. More charitable givings. According to National Review, "charitable donations by individuals rose from $64.7 billion (1990 dollars) in 1980 to $102 billion in 1989, an increase of 57.7 percent. Moreover, after declining relative to national income during the seventies, charitable donations rose from 2.1 percent of income in 1979 to a record 2.7 percent in 1989.
3. Productivity tripled: A study performed and reported by the New York Times that the rate of manufacturing productivity growth had tripled during the 1980s. Likewise, the jobs created were not just hamburger flipping jobs, but jobs of the higher skill categories.
4. The poor and rich got richer: In the period of 1983 to 1989, the poorest 20 percent of the population saw their income rise 12%, and the richest 5th of the population also saw their income rise 12%.
5. Inflation was low: Inflation was low during the 1980s, as low as 5% even though economic growth was sustained during most of the 1980s. This happened despite the theory that inflation could not go down at the same time unemployment went down.
6. Despite tax cuts, tax revenue increased: Reagan cut taxes in 1983 from 70-50% on the top wage earners, and tax revenue, according to the Heritage Foundation (I wrote about this here), rose 99.4% during the 1980s, and by 1989 tax revenues increased by 54%. In fact, during the 1980s federal revenue rose from $550 billion to $991 billion.
7. The rich did not get richer at the expense of the poor: In fact, the share of total tax revenues which was paid by those making $40,000 or more increased from 45.1 percent to 48 percent. The tax burden of those making less than $40,000 dropped by the equivalent percentage.
8. Job creation: About 20 million jobs were created during the 1980s and 82% of those jobs were higher-skilled and better paying jobs.
9. Economic growth: From 1982 to 1990 the United States experienced 96 continuous months of economic growth, the longest peacetime economic expansion in history up to that time.
10. Stock market: Nearly tripled in value during the 1980s
11. Average real family income grew by well over 15% from 1982 to 1989, according to the U.S. Bureau of the Census
12. For the poorest 5th of Americans, real income grew almost 12%
13. Families earning more than $50l000 (in 1990 dollars) went from less than 25% of families in 1980 to 31% in 1991.
14. The percentage of families earning less than $15,0000 dropped.
15. According to the U.S. Treasury's Office of Tax Analysis, of those who were in the bottom-5th income bracket in 1979, 65% jumped at least two income brackets during the 1980s. More made it to the top and stayed than made it to the bottom.
16. Incomes rose: Federal Reserve data show that families with incomes between $10,000 adn $50,000 a year experienced a higher percentage of growth in net dollars than those in the top one one-fifth income group. Households were five times more likely to have their incomes rise than have them fall.
17. The rich paid more taxes: The top 1% paid more than 25% of all federal income taxes in 1990, a 40% increase over 1980, according to the Congressional Budget Office. The bottom 60% paid 11% of federal taxes in 1990, 20% less than in 1980. Plus, all income groups paid less taxes, with the poor receiving the most relief, and the rich receiving the least relief. Yet the rich actually paid a greater share of the income tax in relation to their income.
18. Blacks made more money: The black middle class grew rapidly from 2.6 million households with incomes of $25,000 or more in 1979 to 3.9 million in 1989. In fact, while between 1979 and 1982 poor blacks rose by more than 2 million, between 1982 and 1989 the number of poor blacks fell by 400,000.
19. Fewer in poverty: Between 1983 and 1989 the total population under the poverty line decreased by 3 million people, with an unprecedented number of poor entering the work force.
20. Federal spending increased: Federal spending on poor for income, food, health care, housing, education, training, and social services increased.
21. Charitable givings increased: Charitable givings by corporations and individuals increased to record levels during the 1980s. In fact, during the 1980s charitable givings was 55% higher in the 1980s than in the previous 20 years. In 1992 Americans gave 2.01% of their income to charity, the highest rate since 1971. Donations totaled $124.31 billion, up 6.4% after inflation. Individuals gave $104.98 billion, representing the greatest percentage of total family income given to charity since 1963. This was a result of the government taking less allows people to earn more, which resulted in providing Americans with greater freedom of which to decide how to spend their money. When the government decides how to spend your money, people give less. When the government takes too much out of people's checks, they tend to hoard the money they do have. They go on vacation in sunny Bermuda until the market is more suitable to their business.
22. Everyone got richer: During the Carter years only the incomes of the top 1% grew. During the Reagan years, the incomes, and this income rose by 160% more than during the Reagan years. During the Reagan years, the incomes of every income bracket rose.
23. After tax income rose: Between 1982 and 1989, real after tax income per person rose by 15.5%, and real median income of families, before taxes, went up 12.5%
24. Federal spending increased: Federal spending on poverty programs in 1991 dollars increased from $140 billion 1n 1982 to $180 billion in 1991, an annual growth of 3%.
25. The federal deficit Rose, but it didn't have to: The deficit rose to $230 billion in 1985. Yet every one of Reagan's spending cuts was rejected by a democrat congress. Yet even with no spending cuts, in 1987 the Federal Deficit was reduced to $150 billion. It fell because even while taxes were cut, more jobs and more taxpayers were created. Plus those making lots of money didn't need to hide money they were making, as they usually do when taxes are high.
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