James Crotty, Guest Blogger
That the Republican Party undertook a vigorous campaign in the recent election to suppress voting in those states and localities in which it had effective control of government is widely understood. Pictures of long lines at polling places and reports of long hours waiting to vote in neighborhoods largely populated by African American and Hispanic voters provide clear evidence of this. But to be fully effective, the democratic process must not only make it easy to vote, it must also make it easy for voters to be well-informed about the effects of the policy positions taken by contestants for office and by the Parties they represent.
The Republican Party has been waging a war against both foundations of the democratic process. Along with voter suppression, it has been constructing the infrastructure required to support oligarchy – control of the political process by large corporations and wealthy individuals. The movement toward oligarchy is evidenced by the recent Citizen’s United ruling by our ultra-conservative Supreme Court that allows corporations and the rich to spend without limit to influence elections.
Fascinating evidence of the right-wing war against the “facts” recently emerged with press reports that an important study by the non-partisan Congressional Research Service (CRS) was literally suppressed by congressional Republicans. The report assessed the empirical validity of conservative claims that lower marginal income tax rates on the very rich and lower tax rates on capital gains that flow disproportionately to the very rich lead to higher rates of saving and investment, and therefore to higher growth rates of income and productivity. These claims are the foundation of supply-side or “trickle-down” economic theories used to justify the regressive economic policies espoused by Mitt Romney and Paul Ryan. They have been the foundation of Republican Party economic policy since Ronald Reagan, and have helped justify the enormous rise in inequality in this era. An objective assessment of the validity of these supply-side policies would seem to be an important precondition for the public to be able to vote intelligently in its own self-interest.
The report was issued on September 12 of this year. It first reviewed the simple facts about changes in tax rates on the rich over time and how these change correlate with various indices of economic growth. For example, the report summary states that: “Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%: today it is 35%. Additionally, the top capital gains rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%.” The average tax rate actually paid by the top 0.01% of income recipients fell from about 60% in the late 1940s to about 20% in 2005.”(p 3) The Summary then notes that indices of economic performance deteriorated as tax rates on the rich plummeted, but this is not conclusive evidence of that lower tax rates on the rich caused the decline in performance. Using statistical techniques designed to get more reliable estimates of causality led to following conclusion: “the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rates appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of US families increased from 4.2 % in 1945 to 12.3% in 2007,before falling to 9.2% due to the 2007-2009 recession.”
In other words, the CRS report concluded that the economic policies heavily based on tax cuts for the richest Americans implemented since 1980 have at best failed to improve economic performance while they caused a tripling of the income share of the richest households by 2007. No wonder Republican Party leaders wanted the report suppressed in the midst of a presidential election campaign in which their candidates called for more extreme versions of trickle-down tax policies.
In fact, these empirical results are not surprising. The reasons why conservative economists believe that cuts in tax rates on the rich will cause an improvement in economic performance make little theoretical or empirical sense. For example, cuts in the capital gains tax are assumed to increase the rate of growth of capital investment by increasing the funds that can be raised by the issuance of stocks. However, in the modern U.S. economy, firms on balance buy stock to raise the value of manager’s stock options, they don’t sell stock to finance capital investment. Moreover, income from capital gains goes disproportionately to rich household who use it to speculate in financial markets, causing booms and crashes, the latest of which almost destroyed the global economy.
How did Republicans manage to get the CRS to suppress the report? Forbes reported that “Republicans in the United States Senate successfully pressured the Congressional research Service to withdraw the report shortly after it was released. The withdrawal came over the objection of the CRS economic team and the author of the study.”
The top Democratic tax expert in the House, Rep. Sander Levin, said he was “deeply disturbed” that the report was “taken down [from the CRS website] in response to political pressures from Congressional Republicans who had ideological objections to the report’s findings and conclusions.” Senate Democrats reposted the report.
The CRS report suppression was not, of course, the only example of right wingers trying to suppress the truth. Their denial of human contributions to climate change is well known. Other recent examples include accusing the Bureau of Labor Statistics of manipulating unemployment statistics when they turned in President Obama’s favor, and, as the New York Times reported their attempts to “… to discredit the private Tax Policy Center ever since the research organization declared that Mitt Romney’s proposal to cut tax rates by 20 percent while protecting the middle class and not increasing the deficit was mathematically impossible.”
Those who want to defend democracy and oppose political rule by the rich and powerful need to continue to fight back against the right wing’s wars against voting rights, the right to be well informed about the meaning of one’s vote, and against arithmetic.
James R. Crotty is a Professor Emeritus of Economics and Sheridan Scholar at University of Massachusetts. His writings have appeared in such diverse journals as the American Economic Review, the Quarterly Journal of Economics, the Cambridge Journal of Economics, the Review of Radical Economics, Monthly Review, the Journal of Post Keynesian Economics, and the Journal of Economic Issues.
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“The reasons why conservative economists believe that cuts in tax rates on the rich will cause an improvement in economic performance make little theoretical or empirical sense.”
Most of what the mainstream claims to believe has little empirical support. The field is heavily infected with political ideology masked as scientific inquiry.
Here is one thing can not figure out. These “1%” have had the tax break for the last 12 years since Bush put them into effect. That means they have had the extra money to create jobs. Then why is the country in the shape it is. This is just smoke to blow in front of their backers to make filling their own pocket justified.
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