Buzz and I spent part of the Labor Day listening to historical speeches on the POTUS radio channel. I won a 2 year subscription in a WNBA trivia contest (no purchase necessary.) We listened to a 1987 speech by President Ronald Reagan. Reagan was touting 59 months of economic prosperity, so we decided to look back at some of the economic policies in place back in 1987 as compared to 2012.
From 1982 to 1986, the highest marginal tax rate was 50 percent and 38.5 percent in 1987. The capital gains tax rate was 20 percent from 1982 to 1985 and 28 percent from 1985 to 1990.
Republicans have fought tooth and nail to extend the Bush income tax cuts, especially when it came to the highest marginal rate. They even went as far as voting against a bill in the United States Senate that extended all the tax cuts except the cut on the highest marginal rate. (Bush's tax cuts reduced the highest marginal rate from 38.6 percent to 35.0 percent.)
The current highest marginal tax rate stands at 35.0 percent, and the capital gains tax rate is 15 percent and has not been about 16 percent since 2003.
Perhaps Republicans who worship everything Reagan should consider returning to the Reagan tax rates, particularly the capital gains rate, since after all, that's the tax that the job creators pay.
Reagan famously spoke of the "welfare queen." He said, "(S)he has eighty names, thirty addresses, twelve Social Security cards and
is collecting veteran's benefits on four non-existing deceased
husbands. And she is collecting Social Security on her cards. She's got Medicaid, getting food stamps, and she is collecting welfare under each of her names. Her tax-free cash income is over $150,000."
The welfare queen never really existed, a product of Reagan's speech writer's imagination, but welfare or public assistance was quite different in the Reagan years. There was no work requirement, and there were no limits on the time a person could collect welfare.
All of this changed with the Welfare Reform Personal Responsibility and Work Opportunity Reconciliation Act of 1996. As Bill Clinton said the act "ended welfare as we know it."
The new law required persons to work after receiving two years of benefits and placed a five year lifetime limit on welfare benefits. Despite Romney claims that President Barack Obama has gutted the work requirement, he hasn't. So welfare today does have those restrictions from 1996.
Maybe nostalgic Republicans would like to go back to the Reagan era welfare for life with no work requirement.
Until 1999, there was a clear dividing line between what banks could and couldn't do when it came to investments. As a result of the excesses of the 1920, the federal government passed the Glass-Steagall Act of 1933. This Act prohibited depository banks from gambling on investments in the stock market.
Glass-Steagall survived until 1999, when Congress decided there was no need to separate these banking practices. Republican Senator Phil Gramm (TX) and Republican Representatives Jim Leach (IA) and Thomas Bliley (VA) sponsored legislation that tore down the barrier. There was no longer a distinction between depository and investment banks.
Depository banks could now play the market, and play the market they did. After 8 years of the Gramm-Leach-Bliley law, banks had invested in so many toxic and risky investments that they almost brought the world to economic disaster. The situation was so dire that even President George W. Bush, a self-professed free market lover, pushed for an $800 billion bailout of the Wall Street banks.
Most of the economic woes we are still experiencing in 2012 can be traced back to the banking debacle of 2008. Even Ronald Reagan realized that banks gambling in the stock market was not a good idea.
Back to the Future
So the next time someone tells you about the glory years of Ronald Reagan and his great economic recovery, tell them you agree that it was a great time --- higher taxes, particularly on investments, no limits on welfare, and highly regulated banks.
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