How Tax Cuts Really Impact The Economy

In the rare case that my Republican friends talk politics with me these days, the conversation always end up with discussions about tax cuts.  I hear about how rich job creators are the reason any of us have jobs, and that if we raise their taxes, we’ll all be jobless and homeless. Get government’s hand out of the wealthy’s pockets, and the economy will soar.  High taxes is a jobs killer, they opine, usually with a hint of condensation towards anyone who doesn’t automatically agree.

As someone who rarely just “automatically” agrees on anything, I thought I’d take a look at the history and data, and see if my unwillingness to just agree tax cuts help the economy is due to a liberal bias that keeps me from thinking clearly.

Usually, when I ask my conservative buddies to give me an example where a tax cut helped the economy, the go-to response is Ronald Reagan.  So let’s look at his tenure and analyze the data.

Reagan’s 1981 Tax Cuts

In 1981, Congress passed, and President Reagan signed The Economic Recovery Tax Act of 1981.  Over 3 years, the bill aimed to cut taxes for the wealthiest among us at the time from 70% to 50%.  It cut less and less as you fell down the economic ladder, all the way down to the lowest income earners, who saw their tax rates drop from 14 to 11%.

A 20% tax rate cut for job creators should, using conservative logic, be a boon for the economy, right?  Unemployment should go to near 0, the stock market should reach new highs and interest rates.

  • The unemployment rate jumped from 7.4% in August of 1981, when the bill was signed to 10.8% in November of 1982. – Source
  • In 1982, the government had to bail out 42 banks, the highest number since the great depression – Source
  • In 1981, the debt was $789.4 billion, by 1983 it had jumped to 1.13 trillion – Source


I’m no economist, but it seems to me like a 32% increase in unemployment, record bank failures and a nearly 70% balooning of the debt is bad for the economy.  In fact, Reagan thought it was bad too. So bad that he signed several laws that increased income taxes and used other government intervention to help bail-out banks.  The debt continued to soar, however, standing at $2.1 billion in 1989, when he left office.

So I say to my conservative friends, give me an example of when tax cuts helped the economy.  Not one that WILL happen, but one that actually happened.

Sometimes I hear this: “What about George W. Bush’s tax cuts?”

Bush’s 2001 Tax Cuts

The Economic Growth and Tax Relief Reconciliation Act of 2001,  the 39.6% tax bracket was be lowered to 35% ,  The law was signed in June 2001

In pushing the tax cut in, the Heritage Foundation said this –

The Bush plan would decrease Federal debt to the lowest possible level at which it could be redeemed–$818 billion in FY 2011 – Source

  • In 2008, the Federal Debt was $10,024,724,896,912.49, which is nearly 10 billion more than the esteemed Heritage predicted – Source
  • In June 2001, the unemployment rate was 4.5%.  In  June 2003, the rate was 6.3% – Source
  • From 2001-2004, there were 11 bank failures.

We all know what happened in 2008 with bank failures, but I pin that more on bank deregulation than on tax cuts.

The Kennedy Tax Cuts

The so-called Kennedy Tax cuts were tax cuts that were signed into law in 1964 by President Johnson.  They cut the rate by 20% across the board. – Source

  • In 1964 the Federal debt was $3.11, and in 1966 it was 3.19% – Source
  • Unemployment in 1964 was 5.3% and in 1966 it was 3.8% – Source
  • Bank Failure data was unavailable for this time period.

I’m always astonished this never gets mentioned.  On it’s face, it looks like the tax cuts of 1964 actually helped the economy. I’m waiting for one of my Republican friends to bring this up so I can respond with this

The tax cuts of 1964 were  signed on the eve of The Great Society program. That’s right, just after signing tax cuts, President Johnson began the Great Society, which created programs like Medicare, Medicaid, a 7% increase in Social Security, food stamps, National Foundation on the Arts and Humanities Act, Public Broadcasting, meat inspection, motor vehicle act, The Housing and Urban Development Act, generous increases in the minimum wage, and that’s just the start. – Source

I would argue that government programs and spending, not tax cuts were the cause of a very good economy in the mid-to-late 1960s.  Despite all these programs, the economy improved at a steady level, but it wasn’t the kind of growth we’ve seen in administrations that raised taxes, like Presidents Roosevelt, and Clinton.  I’d venture to guess that if it weren’t for the tax cuts in 1964, the economy would have done better considering the additional spending and government programs that helped middle and lower class Americans

Tax cuts are great for the wealthy, nobody will argue that. The middle and lower class, however, always seems to pay the price for the monetary windfalls pulled in by the wealthiest among us.  That’s why I’ve come to the conclusion that Tax cuts do not help, but rather hinder the economy.  Mixed with a whole lot of spending (almost New Deal level spending), the damage can be remediated, but don’t let anyone tell you tax cuts help everyday hard-working Americans; There is no evidence to back that statement up, and boat-loads of data that shows the opposite is true.

So the next time one of your conservative friends tell you tax cuts will light the economy on fire, ask them to prove it.  They won’t, because they can’t.  Tax cuts alone have never helped the economy, and there’s no reason to believe that they ever will.



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Medicare For All – A Southern Redneck’s Perspective

With all this talk of skinny repeals and the Conservative American Health Care Act, or as I call it CAHCA (say it out loud), I thought it would be a good time to explain to my conservative friends why the only real solution to our health care woes is to develop a new system that works for everybody.  No system is perfect, but the one we have now is ridiculous, and it’s been that way for decades.  The ACA, or Obama Care isn’t perfect, and I know rates have gone up, and some people couldn’t keep their Doctor.

My more progressive friends will say that a lot of people got coverage from the ACA that didn’t have it before, and that’s true.  Coverage is up, but that was only part of the problem.  The real problem is cost.  The cost to treat illness, and more importantly the cost to prevent it.  Passing the ACA without a public option, and the Supreme Court ruling that tore out the heart of the medicare expansion in places that needed it the most, was not the answer either.

I know too many people who still don’t have health insurance, which means they go to the emergency room to get medical care.  When they can’t pay, people who do have insurance see their premiums rise. When my conservative friends start talking about “Socialized Medicine”, I like to point out that Republican icon Ronald Reagan is responsible for establishing universal medical care, with the Emergency Medical Treatment and Active Labor Act .

So what we have now is a system where if you don’t have insurance, you get emergency medical care for free, in a hospital emergency room, the most expensive delivery method for medical care anywhere. No matter what the republicans do with their CAHCA, the EMTALA (signed by President Ronald Reagan), will make sure that prices continue to rise.

If many of these uninsured people showing up for medical care at emergency rooms had health coverage, their care would be cheaper.  If I’m having to pay for someone’s medical care, I want to get the best deal I can.  The current system does not meet my criteria.

I try to be a problem solver, and the first thing I do when I want to solve a problem is seek out similar problems and find the solutions that have worked.  Well guess what; the jury is in and the the data is indisputable.  The system that gives the best results for the lowest cost is single payer.

Here comes the data.

Nations with the best healthcare results

  1. France
  2. Italy
  3. San Marino
  4. Andorra
  5. Malta

Spain, Austria, Japan, Norway, United Kingdom, Germany, Australia and 26 other countries have more efficient systems.  The US is in 37th place in healthcare efficiency  – (Source)

All these nations,   have one form of single-payer or universal healthcare systems, and they ALL cost less than the US system, while providing better results. – (Source)

A Healthcare Solution Right In Front Of Our Eyes

We already have a single payer system that enjoys 77% approval in the United States; it’s Medicare.  It’s the most efficient health insurance in the world, and although it isn’t perfect, it’s the best plan that is already being used in our country.

Medicare’s operating costs of between 1-6% are more efficient than France, Germany, Japan, Norway, Australia and the United Kingdom and pretty much every other system in the world.  Considering our private based system now costs us around 17% in overhead costs, that’s a huge savings in just the administration of the healthcare system alone.

That’s right, Medicare is extraordinarily popular, and one of, if not the most efficient healthcare delivery system in the world.

It’s so embedded into our national psyche that I don’t even have to explain what it does, you already know.   So, why can’t we extend it to all of our citizens?  Why not have Medicare for all?

The answer, as it usually is, is politics.  The Republicans need money from big insurance to fund campaigns that lie about single payer health insurance.  Sure, you’ll hear Republicans talk about a regulation free market-based system that will give people unlimited choices and cost less than it does now. When I ask my Republican brethren to give me an example of where it’s worked, I hear crickets… then this “Tell me when a single payer system has worked, then?”

I reply that I can give them a list of 36 examples with documentation, that are more efficient and effective than what we have now.  When they refuse the offer for evidence, I ask them how they (or their parents) like their medicare?

Many of my friends have developed their on ways of changing the subject when I throw logic back at them.  They always employ that technique here.


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Vintage Bernie Sanders Explains Why Poor People Vote For Republicans

Here’s a great video of then Rep Bernie Sanders speaking to School Without Walls Sr High School in Washington DC way back in 2003.  Seems to me, not a lot has changed.  President Trump is a lot more out front about it than most, but he’s just taken the Republican play book to the next level, that’s all.  Bernie was right then, and it still true today.

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New Yorker’s Lizza Talks Scaramucci Interview

Ryan Lizza talks to CNN about his interview with Anthony Scaramucci in this video.  He named the recording file “Insane Scaramucci File”, and said it was the craziest interview he’d ever had with a government official.

Read the New Yorker Article

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Welcome To Redneck Democrat

It’s been a while, and a lot has happened since I took the official Redneck Democrat blog down a few years ago, so I thought it was a great time to  bring it back.

I’m a country boy who loves to fish, hunt, grew up on a dirt road and oh yeah, I’m a liberal Democrat.

On this website I hope to write from a different perspective. I know there are more Redneck Democrats out there, and I think it’s high time to get our thoughts together and start offering another choice to voters, especially in the Republican dominated South.  It’s going to be a tough job, but if anybody can help bring this country back into a more stable equilibrium, it’s going to start with the rednecks.

So make sure to subcribe to the mailing list, follow Redneck Democrat on social media, and spread the word.  It’s time for the Rednecks to step up and step out.

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