Economy: A look at pocketbook issues influencing presidential politics over the past several decades and the light that sheds on the current candidates’ proposals.
The debate about political involvement in the U.S. economy is decades old. In a country based on individual rights, it’s a constant discussion of how to best unleash the magic of the free market, without letting too many people fall through the cracks. One of the earliest calls for less government came during Warren Harding’s campaign for President in 1920.
Warren Harding: “The World needs to be reminded that all human ills are not curable by legislation.”
World War One had just ended, and after a decade in which personal income taxes had soared on a progressive Democratic platform, Harding and his outspoken running mate Calvin Coolidge campaigned on a Republican promise to shrink government and cut taxes.
Calvin Coolidge: “I want the people of America to be able to work less for the government and more for themselves
Coolidge helped Harding win the election – and himself went on to become President four years later. Together, they implemented the first major Republican tax cuts – starting with the Revenue Act of 1921. Business boomed, the stock market soared – and then it collapsed in the great crash of 1929.
Enter Franklin D. Roosevelt – a president both revered and reviled – for the New Deal programs he created in response to the Great Depression. With unemployment soaring to levels hard to comprehend today – one in four people out of work – he won on a Democratic ticket promising a massive job creation scheme, the famous Works Progress Administration.
Reporter's Notebook
Bellamy Pailthorp
As a business reporter covering the greater Puget Sound region, I hear a lot about the entrepreneurial spirit of locals. But it surprised me to find that sentiment pervading the discussion among the group of voters I talked to for this story. Whether in a specific sense relating to tax cuts and how they affect businesses, or in the more general sense of wanting more self-reliance and initiative coming from individuals, no one liked the idea of government handouts or too much government spending. They liked the reminder from Warren Harding campaigning in 1920 that “all human ills are not curable by legislation, and that quantity of statutory enactment and excess of government offer no substitute for quality of citizenship.” And even committed Democrats in the room were skeptical of Obama’s ideas for government programs to create jobs and stimulate the economy.
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Franklin D. Roosevelt: “Spending like this is not waste – it would spell future waste if we did not spend for such things now.
But expert opinions are divided on whether it was the New Deal programs, or World War Two - or both - that pulled America out of the Great Depression.
Three decades later, tax rates had soared to as much as 91% on the richest Americans and 52 percent on corporations. Unemployment was mounting and tax cuts were again seen as the best remedy – but this time the plea came from a popular Democrat.
In his 1963 address to the American people on the state of the National Economy, John F. Kennedy spelled out how he planned to “get America moving again.”
John F. Kennedy: “This nation needs a tax cut now, not a tax cut if and when, but a tax cut now and for the future that will benefit every family, every business, in every part of the nation.”
To this day, JFK’s tax cut is held up by conservatives as evidence of the bi-partisan appeal of such measures. But it was not the economic cure-all he promised. Coupled with increased government spending in his term and in that of Lyndon B. Johnson after him, it led to runaway inflation, which spurred a Republican to take the next dramatic step – in the opposite direction, toward regulating the economy. In 1971, Richard Nixon imposed wage and price controls.
Richard Nixon: “Everybody just assumes that the only direction of prices is to go up. The time has come for some price reduction psychology. Let’s see some prices go down.”
But after Nixon’s post-Watergate resignation, inflation soared. Economic woes plagued the nation throughout the Ford and Carter administrations.
In 1981, Ronald Reagan won the presidency with the famous campaign question, “are you better off now than you were four years ago?” His trickle-down economics ushered in another round of radical tax cuts.
Ronald Reagan: “ Raising taxes will slow economic growth and destroy future jobs, making it more difficult for those without jobs to find them and more likely that those who now have jobs could lose them. So, I will not ask you to try to balance the budget on the backs of the American taxpayers.”
Reaganomics inspired generations of Republicans after him.
In 2001 and 2003, George W Bush pushed the next major tax breaks through Congress. Whether to make them permanent has become a central issue in the current campaign. John McCain says it’s critical.
John McCain: “As president, I intend to act quickly and decisively to promote growth and opportunity. I intend to keep the current low income and investment tax rate. I intend to keep them, not repeal them.”
He also wants to cut taxes for American companies.
He says the corporate tax rate here is the second highest in the world.
John McCain: “Serious reform is needed to help American companies compete in international markets.”
Barack Obama’s economic strategy is to re-distribute wealth. He would keep some of the Bush tax cuts – but not for families earning more than 250-thousand dollars a year. They’d pay more. He’d also raise taxes on investments and corporations. The net effect is a tax cut for the country as a whole. And for every new program or tax cut created, he says an old one that isn’t working would be eliminated.
Barack Obama: “I told you I wanna provide tax cuts for middle class Americans, a thousand dollars per family per year, offsetting your payroll tax, to help deal with rising gas prices, which are critical. But I’m gonna pay for it, because we’re gonna close corporate tax havens and corporate tax loopholes that currently aren’t doing anything to improve our economy.”
Obama says the recent turmoil on Wall Street shows that government needs to invest in things like job creation. He says ending the war in Iraq will free up funds for such programs.
McCain says the economy is still basically sound. He’d pay for his tax cuts by eliminating pork barrel spending, and by freezing programs not related to defense.
To get perspective on economic history and on the current candidates’ proposals, we brought a diverse group of voters into our studios. Many saw parallels in the past to the current day.
Martin Reyes, a first generation immigrant from Mexico who owns a restaurant in Renton, says Obama’s promise to put more of the tax burden on the rich appeals to him.
Martin Reyes: “You know the economic situation is a lot better for the very rich people. But for the middle class it’s not good, it’s bad.”
He hopes Obama’s economic program will spread the wealth more equitably. But Nick Bogden, owner of a small manufacturing business in Redmond, fears it would make things worse.
Nick Bogden: “I’ve never been given a job by a poor person – ever (…) the rich and the entrepreneurs are the ones that give me the jobs
Bogden says he remembers hearing his father’s stories of the Great Depression and how working for the WPA saved their family.
But it was the small government philosophy of Ronald Reagan that inspired Bogden to become the successful businessman he is today – and that keeps him committed to voting for McCain.
Nick Bogden: “We need to get back to less government, more individual responsibility. We can do it individually, we can do it collectively, but it’s individually that we have to make the grass-roots start.”
Tiffany Moran, a financial advisor from Kent, says even though some of Obama’s ideas sound appealing, she’s supporting McCain because of his pledge to cut taxes and keep spending in check.
Tiffany Moran: “I have to work until middle of May every single year, just to pay the government. I don’t think that’s right.”
Kathy Charlton owns a small winery on the Olympic Peninsula and says she’s feeling the effects of the weak economy every day. Having voted Republican in the past, she’s now leaning toward Obama because of the way he seems to inspire people to get involved in their communities. She feels whoever wins the election needs to see the government as she does - really just another big business.
Kathy Charlton: “They’re a corporation, and they should be run like a business and they should be held accountable, the same way we’re running our businesses and individually, as citizens, we’re shareholders.”
How Charlton and other cross-over voters ultimately decide will determine the outcome of this year’s election – and which economic plan – Obama’s or McCain’s – takes us into the next decade.
Bellamy Pailthorp, KPLU News, Seattle.
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