From the 2005 book ‘Greenspan’s Fraud‘ by Professor of Economics (SMU, Dallas) Ravi Batra:
The verdict of history is that ethics works, and deception designed to foster the interests of the few does not. Ethical policies start out with direct benefits to the poor and the middle class, whereas deceptive policies directly favor the affluent in the name of benefiting the poor and the middle class. Ethical actions generate a trickle-up of prosperity, whereas deceptive actions offer a trickle-down. Trickle-up means that the poor benefit the most, followed by the middle class and the affluent. Trickle-down, by contrast, signifies that the wealthy reap maximum reward, possibly followed by the middle class and the destitute.
Ethical prescriptions keep the tax burden low on the poor and those in the middle, while unethical policies transfer the tax burden from the wealthy to the poor and the middle class. Ethical ideas keep aggregate demand high through high wages stemming from free enterprise, whereas deceptive practices try to revive demand in the name of free enterprise by generating debt. Ethical measures work for the benefit of all, while unethical measures benefit the few and torment the most.
Let’s take another look at the 1950s and the 1960s, when high economic growth coexisted with confiscatory income tax rates, as high as 90 percent on top incomes, but never below 70 percent. Those were the halcyon days of ethical economic policy. The sales tax rate hovered around 2 percent, whereas the Social Security tax for an individual worker barely averaged 3 percent on the first $5,000 of wages.
The tax system was ultra-progressive in the 1950s and the 1960s. In addition, the minimum wage in the period averaged $1.25, which is about $8 in 2004 prices. The economic policy was highly ethical; it was designed to provide a living wage to the unskilled and minimize the burden on those who can least afford to pay taxes. It produced vast benefits for society. Growth averaged 4 percent in the 1950s and 4.4 percent in the 1960s even without the bonanza of the computer evolution; real waged soared for all, at the average rate of 2.5 percent per year; consumer, corporate, and government debt was extremely low. Unemployment fell to as low as 3.5 percent in 1969.
Now let’s see what unethical policies, such as Greenomics, have accomplished. Between 1981 and 1983, the tax system became ultra-regressive, and has remained so to this day. Today the payroll tax is 6.2 percent on a wage base of $87,900, along with a Medicare tax of 1.45 percent. Overall, the Social Security tax burden is now much higher than in the 1950s and the 1960s. You can see what an enormous weight these levies place on the poor and middle-income groups. The top-bracket income tax rate is now just 35 percent, with capital gains and dividends barely facing taxation. The ultra-regressive system is going to be even more regressive in the future, because just as tax rates fall at the federal level, those enacted by states are expected to rise to make up for lost federal aid.
What did Greenomics have to show for itself in 2004? A trade deficit exceeding $600 billion a year? A federal budget deficit in excess of $400 billion? A federal debt over $6 trillion, compared to just $366 billion in 1969? An overall debt level that is twice the level of GDP? Net foreign debt in excess of $3 trillion, compared to a surplus in 1969? An after-tax production wage, earned by 80 percent of working Americans, that is just three-fourths of its level in the 1960s? And, of course, a CEO wage that is several hundred times the production wage, compared to just 40 times during the 1960s. It is abundantly clear that the CEO club now owns the government and economic policy.
The fall in the after-tax minimum wage is really unbelievable. In 1968, the hourly minimum was $1.60 per hour. Since the cost of living has risen by a factor of five, the equivalent minimum wage in today’s prices is $8, compared to the actual level of $5.15. This amounts to a wage decline of 36 percent. Furthermore, the Social Security tax rate in 1968 was just 4.4 percent, compared to 6.2 percent today. So after the payroll tax deduction, the minimum-wage drop approximates 40 percent.