Editor,
Conservatives have got some nerve to blame the recent drops in Wall Street to President Obama's proposed tax hikes on the wealthy.
These tax increases are very modest, raising the highest income tax rate from 35 to 39 percent, raising the taxes on dividends and capital gains from to 15 to 20 percent, and lowering the top deduction rates from 35 to 28 percent. Conservatives seem to forget that one of the greatest expansions in the U.S. economy and the American middle class occurred between 1945 and 1975 when the highest income tax rate was between 70 to 94 percent. Corporate taxes were around 45 to 54 percent during those years, compared to 34 percent in the President Reagan years. The top income tax rate remained at 70 percent until Reagan dropped it to below 35 percent.
Reducing the taxes on the rich during the Reagan and then again during the Bush years did not result in an economic expansion similar to the one seen in the early post-World War II years. On the contrary, the main expansion in our economy since the mid-1980s has been in the form of speculative bubbles.
The media have given much attention on how the real-estate bubble has contributed to the current economic crisis. However, let's not forget that we never fully recovered from the stock market bubble of the 1980s and 1990s. When the stock market bubble began to burst in 2001, the Bush Administration eagerly supported the creation of a real estate bubble to get us out of the stock market mess.
The expanding real estate bubble temporarily saved the economy and Wall Street from a very long downturn, but the so-called Bush economic recovery was one of the most anemic ever seen. It was the first economic recovery where the number of manufacturing jobs continued to decline. Incomes near or below the median household income failed to keep up with inflation. The trade deficit and consumer/government debt soared to dangerous levels. The only group who truly prospered from the Bush years was the richest few percent of the population who saw their incomes stay well ahead of inflation.
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It was only toward the end of the Bush years that we learned how unsustainable and cataclysmic the real estate bubble would be. Without the housing bubble to prop up Wall Street, the impact of the earlier stock market bubble has re-emerged, but conservatives want to blame the Wall Street plunge on Obama's relatively modest tax hikes on the rich.
Please. Let's get real. Our country is in trouble because it has an economy that for a long time bought more than it sold. In addition to that, our lifestyle is ecologically unsustainable. As the rest of the world tries to live like us, more serious trouble lies ahead. Our troubles from mounting debt, speculation and dwindling resources have developed over many decades. To try to blame our pain on Obama is to be terribly ignorant of our history.
Lou Nicholas
UNM alumnus
