JFK went on to make the case for an “across-the-board, top-to-bottom cut in personal and corporate income taxes,” while eliminating loopholes in the tax code in order to stimulate economic growth, put Americans back to work, and ultimately generate more tax revenue. The law when passed in 1964 reduced the top marginal income tax rate from 90 percent to 70 percent and lowered other tax brackets as well. The economy experienced over 5 percent GDP growth per year during the next four years and unemployment fell to 3.9 percent. Meanwhile, revenues doubled during the 1960s, and the federal government experienced a budget surplus by the end of the decade.
Ronald Reagan pointed to Kennedy’s example when it came time to get the economy moving again in the early 1980s. With the Democrats enjoying a significant majority in the House, and Republicans holding a slight one in the Senate, Congress passed his tax reforms taking the top tax rate from 70 percent to 50 percent in 1981 and later during Reagan’s second term to 28 percent. The economy took off growing an average 5 percent a year, and unemployment fell in half to just under 5 percent. Once again revenues to the federal treasury nearly doubled.
President Bill Clinton took a bi-partisan tack following the Republican Revolution of 1994, when the GOP took both houses of Congress for the first time in 40 years. After raising taxes during his first two years in office, he worked with Republicans to cut the capital gains tax rate, created a $500 child tax credit, among other tax cutting measures. During the last four years of Clinton’s Presidency, the annual GDP growth rate averaged 4.5 percent versus 3.3 percent during the first and unemployment dropped to 4 percent. Even with the more modest tax reforms, revenues increased from just under $1.5 trillion in 1996 to over $2.0 trillion in just five years, leading to budget surpluses.
Our times are crying out for such a bi-partisan approach to solving our nation’s fiscal and economic challenges. Six years after the recession began unemployment still lingers at 7.7 percent, which is slightly higher than it was when President Obama took office. Despite four straight years of record levels of spending and trillion dollar plus deficits, economic growth during the last quarter was 0.1 percent and under 2 percent for the entire year. Meanwhile, revenues still have not reached the level they were when President Bush left office.
What is needed is not more taxing and spending, as proposed by the Democrats. What is needed is what Paul Ryan and the Republicans are offering: lower tax rates and controlled spending. Barack Obama can remain a strict ideologue and stymie the country’s growth and potential for another four years. Or, he can put country above party and take the steps necessary to restore the American dream.
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