by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Speaking in Galesburg, Ill., this summer, however, Obama served up a convenient historical fairy tale: “In the period after World War II,” he said, “a growing middle class was the engine of our prosperity.” Presumably he was thinking of a time when high taxes on the rich and industrial-union rule had the middle class soaring. The trouble is, Obama’s history is wrong.
From 1944 to 1960, with a top tax rate of 91 percent, the U.S. economy expanded at an anemic 2.1 percent annual pace, according to economic historian Brian Domitrovic. And during the Eisenhower years, the economy grew at a subpar 2.4 percent yearly rate, including three recessions, which Domitrovic says made for “the worst growth of any postwar president until George W. Bush and Barack Obama came along.”
So much for postwar prosperity.
But then came the 1960s, the decade liberals love to hate. Why? Because the path-breaking supply-side tax cuts of John F. Kennedy generated one of the greatest booms in economic history.
Actually, according to Domitrovic, it was two big tax cuts. The first was a business tax cut put in place in 1962, and the second was an across-the-board personal tax cut that began in early 1964.
The result? Domitrovic reminds us that the eight-year expansion from 1961 to 1969 saw growth of 48 percent — a third more in an eight-year period than in the 16 years ending in 1960. So the postwar prosperity of 1944 to 1969 did exist at roughly 3 percent per year. But only because the 1960s lifted everything up. Kennedy cut the top tax rate from 91 percent to 70 percent, but all other tax rates were also reduced for top-to-bottom income earners.
Conveniently, John Kennedy’s powerful tax-cut slashing on business, individuals and investors doesn’t exist in the left’s postwar, economic narrative. It’s been rubbed out of history, replaced by a liberal vision of powerful unions and high tax rates on the rich, which is supposed to create growth. And expectedly, Obama and the Left never make the connection between the Kennedy tax cuts and the Reagan tax cuts 20 years later, which essentially copied the JFK model.