Barack Obama‘s high-tax, big-spending blueprint for American government is strictly retrograde, scarily reminiscent of the Johnson-Nixon-Carter axis of failure that nearly ruined America long before many of his youthful supporters were born.
Between 1964 and 1981, government growth exceeded economic growth by a wide margin. Personal income tax rates went all the way to 70 percent. Federal tax collections grew 17.5 percent faster than gross domestic product - but revenues still could not keep up with federal spending, which grew 28.5 percent faster than GDP.
Government debt trebled. Deficits skyrocketed. So did inflation, finally hitting 14.6 percent in 1980. Wages rose but so did prices, often by more. And unemployment was especially high during the Carter years, averaging 6.5 percent, never less than 5.6 percent and usually closer to the 7.8 percent peak.
Like today, grain and oil prices reached new highs. Shortages occurred. Gas was often not available at any price. Business capital investment nearly dried up. In 1971, the government engineered a decline in the dollar and went off the gold standard. In 1973, in the ultimate expression of bipartisan failure and incompetence, government instituted wage and price controls while the Fed was inflating the money supply to offset oil supply shocks.
Inflation and unemployment were so chronic that the sum of the two became known as the Misery Index, a handy way of expressing the degree of harm being inflicted by government through the combination of high taxes, loose monetary policy and, from 1965 onward, excessive spending associated with the creation and rise of the welfare state.
By 1980, at the end of the Carter administration, the Misery Index had topped out at an astronomical 21.9 percent. America was in the grip of “stagflation,” a potentially fatal economic condition when prices go up while output and employment are declining in a self-perpetuating spiral.
To get a perspective on how bad things were, compare Jimmy Carter‘s 21.9 percent Misery Index score with a score of only 9 percent in the depths of the 2000-03 recession and the current 10.4 percent in an economy beset by numerous woes and about to dip into recession territory again.
Hard times would be even harder if Mr. Obama’s wish list were ever enacted. For starters, he has proposed at least $850 billion of additional taxes, at least another $3 trillion of spending, and so many new subsidies and entitlements that a large portion of the U.S. population (plus millions more around the world) would soon be federal “welfare clients.” Then he wants more regulatory mandates and trade restrictions, which would further increase costs and reduce efficiency in the economy.
Just imagine the disaster if the burden of all that additional “government” were laid on a U.S. economy already suffering from the results of government errors and omissions, including a credit crisis, inflation and high commodity prices. The Obama tax increase in combination with the Fed’s existing loose monetary policy would - all by itself - probably be enough to push the economy into a 1970s-style stagflation.
The last thing America needs in Washington is another gang of meddlers experimenting on the economy. What America does need - desperately so, in fact - is a president who will break the mold in Washington by cutting spending and cutting taxes in a big way, kicking out the congressional porkers, the economic planners and the K Street parasites and telling the people the truth. Government is inefficient, costs too much, usually breaks more than it fixes - and we don’t need much of it.
Ernest S. Christian, a lawyer, was a deputy assistant secretary of the Treasury in the Ford administration. Gary A. Robbins, an economist, served at the Treasury Department in the Reagan administration.