Friday, March 28, 2014

America Invented The New World And Progressive Taxation

Paul Krugman tells us that as America approached the "Gilded Age" prior to the Great Depression, Teddy Roosevelt made a speech in favor of the New World that motivated the formation of America.  The New World was in stark contrast with the Old Europe and its aristocracy.  He called for a more progressive tax system that would keep the New World from becoming the Old Europe.  A speech by one of America's leading economists made the case for using the tax system to reverse the pattern of rising inequality.  In other words, the notion of America as the exemplar of the New World, and the use of progressive taxation to achieve that end, has a long tradition in our country.  That tradition, of course was not popular with the plutocracy.  Teddy Roosevelt was a member of that class and he was called a traitor to his class.  Apparently, most of his peers preferred the Old Europe to the New World.  It took the Great Depression, and the New Deal that followed in its footsteps, to deflate the plutocracy. FDR became the traitor to his class.

The New Deal and the progressive tax system have been under attack since the Reagan era.  There is a reason why the plutocracy has anointed Reagan with sainthood.  He was a great salesman.  Conservative economists told Reagan that cutting taxes on the rich would stimulate the economy, and that tax revenues would actually increase as the economy expanded.  Reagan sold that message to the public.  Reagan's message was welcomed by libertarians who believed that taxation was theft.  Some economists agreed with George HW Bush who called that idea "Voodoo Economics". Greg Mankiw, for example, ridiculed Reagan's new economic theory in one of his early textbooks.  He removed that critique, however, from later editions of his popular textbook.  Mankiw went on to become the Chair of Harvard's economics department, and an economic adviser to George W. Bush.  He was also an economic adviser to Mitt Romney during his presidential campaign, and he has written articles in defense of America's rising plutocracy.  Mankiw is not unique in this respect.  Economists who advocate for the plutocracy do very well financially and professionally. 

It appears that we at a crossroad.  We can continue on our current path, and America can lead the rest of the world in the direction of the Old Europe.  We have the option, however, to go back to our roots as the leader of the New World.  Societies and economic systems are created by human beings.  We have to decide what kind of America we want and what kind of world we want to create.  We have two major problems that we have to solve.  We have to solve the problem of rising income inequality and we have to save out planet from global warming. We are capable of doing both.   

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