President Joe Biden is promising the most significant expansion of the welfare state since Lyndon Johnson’s Great Society of the 1960s, as he reportedly eyes the largest tax increases since the early ’90s.
Biden drew the LBJ comparison in remarks from the White House on Friday, celebrating the passage of the American Rescue Plan Act.
“This is the first time we’ve been able to — since the Johnson administration, maybe even before that — to begin to change the paradigm,” the president said, referring to the tax cut model of free market-driven growth employed under Reagan in the 1980s and former President Donald Trump during the last administration.
“All it’s done is make those at the top richer in the past and everyone else falling behind,” he added. “This time, it’s time that we build an economy that grows from the bottom up and the middle out.”
“This law is not the end of our efforts though. I view it as only beginning.”
The president promised to make the wealthy pay their “fair share,” arguing that “folks living on the edge, they’re paying.”
President Biden on the American Rescue Plan: “You saw what trickle-down [economics] does … This is the first time we’ve been able, since the Johnson administration … to begin to change the paradigm.”pic.twitter.com/B5u9ZzSeyM
— The Recount (@therecount) March 12, 2021
Actually, according to the nonpartisan National Taxpayers Union Foundation, the top 1 percent of earners in America paid over 40 percent of all federal income taxes in 2018, versus 19 percent in 1980 prior to the Reagan Revolution.
The top 50 percent of income earners paid approximately 97 percent of all federal income taxes in 2018, while the bottom 50 percent paid the remaining less than 3 percent — thanks to the high standard deduction, child tax credit, earned income credit and other credits and deductions.
Those credits and deductions were increased under the Tax Cuts and Jobs Act of 2017 enacted under Trump.
Biden also proudly touted that he was “given the dubious distinction of having to implement the [American Recovery and Reinvestment Act of 2009] back when we came into office, Barack and I.”
But CNN reported the Obama/Biden administration oversaw the slowest economic recovery since World War II.
By contrast, Reagan oversaw the longest peacetime expansion economy since the war, despite starting in a recession that arguably was worse than the Great Recession (unemployment peaked at 10.8 percent at the beginning of the Reagan presidency versus 10 percent amid the Great Recession).
During Reagan’s time in office, over 18 million new jobs were created, according to CNN.
Beyond cutting taxes, Reagan also slashed regulations on businesses and negotiated favorable trade deals. In other words, he did pretty much the exact opposite of what the Obama-Biden administration did in 2009 during the Great Recession.
During Obama’s two terms, a net of just 11.6 million jobs were created, according to FactCheck.org, though there were approximately 80 million more people living in the country when Obama’s presidency ended than when Reagan’s did.
Trump followed the Reagan formula after taking office in 2017.
Prior to the COVID-19 shutdown, the United States was experiencing some of its best economic numbers in a long time, including a 3.5 percent unemployment rate — a half-century low.
Further, African-Americans, Hispanic-Americans and Asian-Americans were enjoying the lowest unemployment rates ever recorded.
With Trump’s policies still in place, the economy rebounded strongly — with unemployment back down to 6.2 percent in February from a peak of 14.8 percent in April 2020.
Citing unnamed sources, Bloomberg reported the Biden administration wants to effectively repeal portions of the Trump tax cuts. Proposals that have reportedly been floated include raising the corporate tax rate from 21 percent to 28 percent, increasing the income tax rate on those earning over $400,000 and hiking the capital gains tax to the rate individuals pay on the rest of their income.
The current capital gains tax rate is 15 percent for those earning $80,000 or more in taxable income, and 20 percent for those earning roughly $441,000 or more.
The top marginal income tax rate is 37 percent.
“There seems to a be a real drive to tax investment of capital gains at marginal income rates,” said Rep. Kevin Brady of Texas, the ranking Republican on the House Ways and Means Committee, according to Bloomberg.
And that would be a “terrible economic mistake,” he added.
Capital gains taxes are those paid on investments, so Biden’s policy would be a disincentive to invest. Investments are what launch businesses and allow them to grow and to create jobs.
Biden’s planned return to the Great Society should be viewed with great concern.
Reagan’s election in 1980 really was a direct response to the failed big-government welfare policies of the ’60s, which had resulted in a disincentive to work for both the wealthy and the poor.
Those making significant amounts of money were taxed at such a high marginal rate that taking financial risks and growing businesses made less economic sense, while those on the lower end of the income scale were often better off living on government benefits like food stamps, Medicaid, welfare payments and federal housing than taking a job.
Reagan changed the paradigm, enacting across-the-board tax cuts, which led to a booming economy, with 3.5 million new jobs created in 1983 and 3.9 million the following year.
The New York Times reported the poverty rate dropped by its largest percentage in over a decade in 1984, with nearly 2 million people leaving the ranks of the poor that year alone.
“There was a reason Reagan called his [’84 re-election] advertising campaign ‘Morning in America’ because in the ‘70s and the early ‘80s it didn’t feel as though we were in morning in America. There was kind of a purgatorial, afternoon feel to the country,” Amity Shlaes, the author of “Great Society: A New History,” told The Western Journal in an interview last year.
“An emphasis on redistribution instead of [economic] growth, an emphasis on result instead of opportunity, a misguided sentimental poverty policy that reduced effectively … the way that we emerged from poverty” are what characterized the Great Society programs, Shlaes said.
The old maxim goes: “Those who do not remember the past are destined to repeat it.”
Here’s hoping there are enough members of Congress who don’t support taking us back to policies that have a proven record of failure.