An Interesting Correlation


The conservative movement rally cry in recent years has been two-fold: lower taxes and decrease the debt.  They argue taxes are too high and government spending is too much. The combination of the two, they claim, is crippling the economy, sky rocketing our debt and preventing job creators from doing their job.

Their thinking is flawed on a few levels.  First, there is no doubt the economy is ailing.  Therefore, the national debt should not be a first concern. The number one concern needs to be the unemployment rate. Republicans should be worried about decreasing that rate not the national debt. In a recession government spending is necessary in order to boost aggregate demand which will in turn boost the economy.

Second, it seems odd to be so worried about the national debt and at the same time want to continue lowering taxes.  Common sense would say to decease the national debt the government needs to raise more funds and they do that by collecting taxes.  So raising taxes seems in line with the Republican view point. By merely ending the Bush-era tax cuts the debt would be reduced by 680 billion dollars in 10 years.  Although that does not come close to solving the problem it still reduces the debt with minimal consequences.

Republicans counter this logic by saying lowering taxes promotes job growth and consumption. The increased consumption will result in increased tax revenues therefore offsetting the tax revenue lost from the lower taxes.  Historically that logic just doesn’t work.

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Here we see since 1980 the national debt has been constantly on the rise. Now what is interesting is the corresponding top marginal tax rate during this time.

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Since 1980 the top marginal tax rate (job creators) has been decreasing.  So the Republican platform to lower taxes in order to tackle the debt doesn’t seem to make sense.  Now I understand these two graphs do not solve the debate but it is an interesting correlation.

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