There are but a limited number of ways to govern, traditional Democratic policy is to grow the economy through public spending. FDR's TVA built hydroelectric dams, which created cheap electricity. Cheap electricity in turn created growth potential just as floodplains turned to lakes created recreational property. Truman's GI Bill used government revenue to educate millions of returning veterans. This softened the blow to the workplace of millions of returning men from WWII. Educated workers pay more in income tax over their lives so the GI bill was revenue positive over the long run.
This is how Democratic policy is supposed to operate. Kennedy's space program spent $24 billion dollars over ten years to put a man on the moon. This direct government investment in high technology is responsible for modern computers, the Internet, the cell phone, the camcorder and thousands of other products. At its zenith the space program was responsible for creating 400,000 jobs. The lunar rover was an electric car built by GM in 1971.
Lyndon Johnson's Great Society Elementary and Secondary education act of 1965 gave $1 billion in direct federal assistance to public schools. It established Head Start with the idea that it is better to spend money now than to try and correct a problem later. The Urban Mass Transit act devoted today's equivalent of $3 billion dollars for mass transit. The number of American's living in poverty during the Great Society dropped from 22.2 percent when Johnson took office to 12.6 percent in 1970. Those people became taxpayers and it was the largest decline in poverty in the twentieth century. That is liberalism, the government spends money to try and grow the economy and to help its people to achieve a higher standard of living.
The Republicans have an entirely different philosophy they believe that the least government is the best government and so they've fought against Social Security and Medicare. They fought the Clean Air act and the fought the Child Safety Act of 1966 which prohibited any chemical so dangerous that no warning can make it safe. The Republicans even fought the Flammable Fabrics Act of 1967 to set safety standards for children's sleepwear. The Republicans believe the government should stay out of the free market place because they equate your freedom to the free markets freedom as a corporate citizen to sell unsafe products.
In 1980 a Republican was elected President that changed all the fortunes for the Republicans. Their administration changed the Great Societies student lunch program, which required serving children a meat and two vegetables to allow ketchup to be considered a vegetable. They saved you money an added to your freedom on the backs of school children's stomachs.
Their center piece of good government were tax cuts, in 1981 Reagan cut taxes across the board by 25 percent lowering the top rate from 70 percent to 50 percent. They reduced the windfall profits tax, raised the estate tax exemption from $175,000 to 600,000. In 1986 Reagan cut taxes again lowering the top rate to 28 percent, lowered corporate income taxes, revised the corporate minimum tax and repealed the sales tax deduction for people like you and me.
Instead of investing in students or space programs or advanced technologies they doubled the pentagon budget by bringing WWII battleships out of mothballs. They built plastic airplanes that have to be kept in air-conditioned hangers to keep their wings from melting. These bombers fly a hundred miles an hour slower than a commercial jet airliner they were the modern equivalent of the Kaiser's dreadnoughts of the German grand fleet too expensive to risk in battle.
So to help offset the cost of these tax cuts the Republicans raised taxes on working people. They raised the FICA deduction and raised the gas tax; they limited the deduction for nonbusiness interest. They taxed the tips of waiters and waitresses who earned less than the minimum wage. They repealed the second earner deduction and established the two- percent floor limiting itemized tax deductions by working people. The net result was the slowest actual growth rate since the end of WWII. Wages for working people fell to near the lowest level since 1958.
In 2001 George W. Bush cut taxes by phasing in the lowering of income tax rates yet again. He raised the estate tax exemption yet again and increased the IRA contribution limit. In 2002 he cut taxes for business creating a 30 percent indexing for capital expenditures. It allowed business to deduct interest on loans and business to deduct losses going back five years. In 2003 came their masterpiece, Bush cut taxes again lowering the top tax bracket, cutting capital gains taxes. Cutting taxes for dividends and accelerated the 2001 tax cuts. The net result was a growth rate lower than Reagan's growth rate. For working people it was a disaster and for the wealthy a windfall proving once and for all there is no such thing as a free lunch!
Only one Democratic President in nearly a century has proposed tax cuts though in 1945 and 1948 Truman repealed taxes that had been imposed for the duration of WWII. John Kennedy cut the top tax rate from 91 percent to 70 percent and the total cost of Kennedy's tax cut was $110 billion dollars over ten years while the total cost of Reagan's tax cut was $380 billion dollars over ten years. The Bush tax cut will cost the treasury $3 trillion over ten years and Obama's proposed continuation of the Bush tax cuts will cost $2.2 trillion.
These are the two competing philosophies of American governance, one side believes in government investing in long term projects to grow the economy and to improve the health, safety and lives of it's people. The other side believes in tax cuts they believe the government shouldn't invest in anything. They believe cutting taxes creates a vibrant economy, cutting taxes makes the economy hum, cutting taxes stimulates investment.
This is why the Obama administration is so strident in their condemnation of progressives. Progressives just don't understand that Obama's stimulus package was 35 percent tax cuts. Cash for clunkers offered tax cuts, Obama's jobs bill offers more tax cuts. The healthcare legislation includes $460 billion in tax cuts over ten years but for insurance companies it offers thirty five million new customers who will pay premiums to the most profitable corporations on earth subsidized by tax cuts!
The day after Obama proposed ending the Bush tax cuts for the wealthiest 3 percent of Americans he proposes 100 percent instant depreciation on capital expenditures. Do you know what that is? It's a tax cut! It means the income taxes for chairman of Goldman Sachs may go up $100,000 but he can now deduct 100 percent of the new four million-dollar corporate jet he just bought or that Picasso painting he wanted for over his desk.
After the OPEC oil shock in 1977 the Carter administration aggressively pushed pilot projects for solar power and coal gasification in 1981 the Reagan administration cut the Department of Energy's budget from $130 million dollars to just $30 million and used the money to pay for tax cuts. In 1979 the Carter administration guaranteed $1.5 billion in loans to the ailing Chrysler Corporation. Republicans led by economist John Kenneth Galbraith argued the taxpayers should hold an equity stake position in the company. By 1983 Chrysler had doubled their fleet fuel economy and paid off the loans leaving the treasury $350 million dollars to the good.
During the recent GM / Chrysler bailout it was Republicans in Congress that pushed for bankruptcy and Democrats in Congress who resisted those calls. The Democrats understood that bankruptcy would have a ripple effect across their states. The Obama administration came down on the side of the Republicans and pushed for bankruptcy and not only that but the administration also asked for an equity stake in the company. The Federal government traded its more powerful role as lender for that of a stockholder.
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