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Posted by on Mar 25, 2016

Power & Politics: Why Old Ideas Won’t Solve New Problems

Power & Politics: Why Old Ideas Won’t Solve New Problems

A favorite lines on the stump involves likening himself to a revered Republican president: “I’m not much of a socialist compared to Eisenhower”. Sanders is trying to make the point that tax rates were much higher during Dwight Eisenhower’s presidency than they are now, and that that ought somehow to make his proposed massive tax rises palatable to the American public. The Sanders thesis is that America prospered back then, and the quality of life of ordinary citizens improved massively, in this era of high taxes.

Yet this conclusion collapses under examination. Sure, it’s true that taxes were high in the 1950s. But that’s largely because the industrial base of the rest of the Western world had been eviscerated by the violence of World War II, which left the US with an unprecedented level of economic power. Thus it could actually afford these absurd taxes, because where else would the businesses go? Today, they could settle in any country in the OECD countries and prosper just fine.

In the 1950s, the rest of the free world also had taxes comparable to those in the US, but also far more direct government regulation and intervention in the markets. America also benefited from far less heavily regulated capital and securities markets, which allowed what money wasn’t gobbled up by Uncle Sam to be deployed far more efficiently than it could be in other market economies.

Not only have barriers to movement and commerce fallen around the globe, but the rest of the world has also caught up to, and even surpassed, the US in cutting taxes on income, corporations, and capital gains. In fact, the US now has the highest topline corporate tax rate, and second highest effective rate, in the OECD club of rich countries, which includes many of the “democratic socialist” countries that Sanders claims to emulate.

The simple point is that allowing our country to fight these old battles and make itself even less competitive in the global market will not help the businesses and workers Sanders claims to care about. Only making ourselves competitive again can do that.

John Engle

John Engle

John Engle is a merchant banker and author living in the Chicago area. His work has been featured by the Heartland Institute and the American Thinker. His first book, Trinity Student Pranks: A History of Mischief and Mayhem, was published in September 2013. John is a graduate of Trinity College Dublin, Ireland and the University of Oxford.

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