The Party of the Rich

Dec 14, 2011

“The Party of the Rich” by Tim Dickinson appeared in Rolling Stone’s November 24, 2011 issue. The article is about how, since 1997, the Republican party feverishly cut taxes on the wealthiest portion of the population. The article starts by quoting one of Ronald Reagan’s speech’s about closing tax loopholes that allow millionaires to pay less in taxes than bus drivers. Although Reagan is viewed as the father of supply side economics, he also understood that taxes are necessary to cure deficits. Reagan raised taxes when he saw appropriate. In 1983 he approved of tax hikes because “he believed that, at some point, you have to pay the bills.” Reagan ended up raising taxes eight times in 11 years. Despite creating a great economy, the George H.W. Bush tax raise cost him his election. Clinton’s tax raises lost him the house and senate even though he created a surplus.
When Newt Gingrich seized control of Congress in 1994 he moved to eliminate taxes on investment income, and abolish the inheritance tax. Capital gains taxes were also cut. David Johnston said that “the capital gains cut alone gave the top 400 taxpayers a bigger cut than ll the bush tax cuts combined.”
After only few months of taking office George Bush delivered his first form of tax breaks, by killing tax harmonization. Tax harmonization was a project by the world’s developed countries to stop offshore tax havens, like the Cayman Islands. In 2001 the economy began showing signs of recession. The Bush administration saw this as an opportunity to lower taxes even more. There idea was either tax cut or recession. The economy did improve but more to credit of the Federal Reserve for defeating inflation.
Vice President Dick Cheney was one of the leaders for the tax cuts. He refused to implement a “trigger mechanism” for his proposed cuts in case of failure. He lowered taxes multiple times that were favored extremely toward the rich. Republicans stated that these cuts would give the bottom fifth about $744 extra. Meanwhile, the top one percent would receive more than $340,000. After the bursting of the dot-com bubble and September 11, the economy was heading into another recession. At that point Cheney wanted to pass even more tax cuts. After being presented a 20 page econometric analysis provided by the Federal chair, saying how more cuts would sink long term growth, Cheney hired his own deputy to draft a memo disputing the report, and calling the Fed’s senior economist “completely wrong.” In 2002, with the economy already improving, the Bush administration continued pushing cuts, despite warnings that this would create unnecessary boost leading to bubbles.
The article explains that the Bush years exposes the bankruptcy behind the trickle down theory. The GOP handouts during this era coincided with the lowest amounts of growth since World War II. The trickle down tax cuts only create bubble and balloon deficits. Instead of investing in new business opportunities, the wealthy have a better chance of enriching their fortunes by investing in Washington. Many companies who received the biggest tax breaks actually slashed jobs, instead of creating the 500,000 promised by the Republican party. According the the National Bureau of Economic Research, up to 92 percent of the “job-creation” money had been sent out to top executives and shareholders.
When Barack Obama was elected to office republicans took an aggressive stance against any tax increases for spending. Obamacare enraged the party, especially because the largest source of it’s funds comes from tax increases on the rich. Republicans in control of congress extended the Bush tax cuts and blocked the Democrat’s attempts to get rid of any cuts. The article talks about the Republican party claiming you don’t dare raise taxes during a weak economy, but Reagan did it three times. The party of today equates raising taxes with theft. Many of the people who fought on Reagan’s side say that they no longer recognize the traditional GOP values in the new party.