Skynet
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- Jun 8, 2011
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The modern phenomenon of chronic deficit spending began with Nixon in 1969, when the deficits began to reach the tens of billions, and it really took off during the Reagan years when the deficits first began to reach the hundreds of billions annually. Before Nixon, there had been sporadic deficits, but never in the hundreds of billions and not on the sustained, year-after-year basis of increasing deficits that we have been living under for the past 30 years since the Reagan tax cuts. That trend was reversed, with significant surpluses during the Clinton administration, along with low unemployment after he raised the top marginal tax rate to just under 40 percent.
Beginning with the Truman administration in 1948, and continuing through the Eisenhower years, we saw high taxes on the wealthy, with the top marginal rates over 80 and 90 percent, combined with low to moderate unemployment. In 1952, for example, the top marginal tax rate was 92 percent, while unemployment was only at 2.0 percent. These were years which also saw many balanced budgets, as shown by data from the U..S. Gov't. Printing Office, based on the wealthiest Americans paying their fair progressive share of taxes as opposed to budgets based on borrowing.
In 1969, Nixon started with a modest surplus of $3.24 billion, combined with a top marginal tax rate of 77 percent. Unemployment was at a low 3.5 percent, and he was following a decade where our Gross Domestic Product had increased by 4.65 percent during the Kennedy years and a whopping 5.5 percent under LBJ. Nixon began by lowering the top marginal tax rate, first to 71.75 percent in 1970, as the unemployment rate increased to 5 percent, and then to 70 percent in 1971, as unemployment jumped up to 5.9 percent. Talk about those "job killing taxes," huh?
During the Nixon and Ford administrations, the top marginal tax rate remained at 70 percent, while unemployment fluctuated from a low of 4.8 percent in 1973 to end at 7.7 percent in 1976. Meanwhile, the combined on-budget and off-budget deficit, i.e. the amount of money borrowed to pay for governmental operations in addition to tax revenues, jumped from $2.842 billion in 1970, the beginning of modern day deficit spending, to $73.73 billion in 1976 under Ford. Meanwhile, the growth in GDP had slowed to a meager 2.6 percent.
This trend continued throughout the 20th Century and into the 21st. Jimmy Carter maintained the top marginal tax as reduced to 70 percent, continuing with combined deficits between $40.7 billion and $73.8 billion, while unemployment continued to hover between 6 and 7 percent. He did manage to increase the rate of growth in GDP to +3.25 percent. After Carter, deficit spending combined with low taxes really skyrocketed under Reagan, with no real improvement in the 6 to 7 percent rate of unemployment he inherited from Carter.
Reagan began in 1981 with a top marginal tax rate of 69.125 percent, and unemployment at 7.6 percent. He reduced the top marginal tax to 50 percent in 1982, and unemployment soared to 9.7 percent, despite the fact that he increased the combined deficit to $127.977 billion, an increase of $54 billion over Carter's highest deficit. Unemployment increased to 9.6 percent in 1983, despite the lower 50 percent top tax rate, and Reagan increased the deficit to $207.802 billion, almost three times the top Carter deficit.
Over the remainder of Reagan's administration, unemployment began to come down again, into the 6 to 7 percent range between 1984 and 1987, and then 5.5 percent in 1988. Meanwhile, the growth in GDP under Reagan was just +3.4 percent, marginally better than Carter's despite the significantly lower tax rate and significantly higher combined deficits. Things did not improve under G.H.W. Bush.
The top marginal tax rate under Bush senior began at Reagan's low 28 percent, with the rate of unemployment holding at over 5 percent in 1989 and 1990. The tax rate increased to 31 percent in 1991, and unemployment increased to 6.8 percent and then 7.5 percent by the end of Bush's term in 1992. Meanwhile, under Bush senior, the combined deficit had soared from $152.6 billion to $290.3 billion, while the GDP growth rate dropped to 21.7 percent. That was the situation that Clinton inherited in 1993.
Clinton began by increasing the top marginal tax rate to 39.6 percent, and reducing the combined deficit to $255 billion in 1993, with 6.9 percent unemployment. During his first term, while the top marginal tax rate remained up at almost 40 percent, both unemployment and the combined deficit steadily declined. Then, in 1998, with unemployment still declining, chronic, increasing deficits that began under Nixon were erased and there was a modest $21.9 billion surplus.
During Clinton's second term, while the top marginal tax remaining at nearly 40 percent, that surplus increased to $236.1 billion by the year 2000, while unemployment plummeted to 3.9 percent in 2000, the lowest it had been since Nixon took office and began cutting taxes while increasing deficits. When Clinton left office, the GDP growth rate had increased to +3.88 percent, better than Reagan with his lower taxes, higher unemployment and record setting deficits, and the highest it had been since LBJ.
