Letter to the Editor

Deeper look at cuts

Friday, August 11, 2017

The Aug. 6, 2017 Southeast Missourian printed an Op-Ed column by former Senator Phil Gramm and Michael Solon.

They advocated reducing taxes as a pathway to economic growth and increased federal revenue. To support their contentions they cited the record of Ronald Reagan. During his presidency, the top marginal tax rate was reduced from 70 to 28 percent. (Subsequently, this top marginal rate was increased to 39 percent.) They state that the U.S. economy grew 3.4 percent from the time of Reagan's reductions in taxes until the beginning of the 2007 recession.

A review of the pertinent numbers shows that following Reagan's tax reductions the U.S. economy grew annually during his term by 4.6 percent. However, federal income declined. During the Carter Administration it had averaged 18.3 percent annually of the Gross Domestic Product (GDP). But during Reagan's presidency, it fell to an annual average of 17.4 percent. Consequently, under Reagan, the national debt rose from 27.9 to 39.3 percent of the GDP.

Tax cuts were again enacted during the presidency of the second George Bush. Even though the top marginal rate was reduced to 35 percent, GDP only averaged an annual growth rate of 2.1 percent and federal income declined to 16.5 percent of the nation's GDP.

These figures show that the tax cuts by themselves are not a solution to the problems of a country whose rate of growth is now less than 3 percent and whose national debt has risen to 76.5 percent of the GDP.

John Piepho, Cape Girardeau