Imagine going over to your grandparents to rake leaves. Once done with your chore, grandma gives you $10. Upon returning home, however, your parents take seven of your 10 dollars as a “tax” for living in their home. That was my answer when one of the students at Ronald Reagan Elementary School years ago asked me about taxes.
The original question was about what I liked about President Reagan. I said his optimism, a renewed sense of patriotism and his tax cuts. That prompted the follow-up question about why I liked his tax cuts. So I gave a response geared toward fifth graders.
After hearing my explanation, one student proclaimed, “that’s not fair.” Another said, “why would I work so hard for just three dollars?” Amazingly, even the kids understood the disincentive for work and fundamental unfairness of tax rates 70% and higher.
When Jimmy Carter was president, 70% was the top tax rate. At the time, more than a few people wondered why they should work so hard when the government would take so much from them. The United States was a mess.
Many of us remember the oil embargo, high fuel prices and lines for gasoline. There was conflict in the Middle East and Americans were held hostage in Iran for 444 days. The country was in a malaise.
Ronald Reagan famously said on the campaign trail that “Recession is when your neighbor loses his job. Depression is when you lose your job. And recovery is when Jimmy Carter loses his.” In many ways, the Biden administration is shaping up to be a repeat of the Carter years.
New job numbers released last week showed a disappointing increase of only 266,00 jobs last month — well off of the increase of 1 million jobs predicted by most economists. The numbers were so bleak that Joe Biden was forced to address them on Monday. Even then, he failed to fully acknowledge what is slowing economic growth.
Without a doubt, enhanced unemployment benefits — that pay people more than they received when they were working — are a key factor. I warned about this early in 2020. Someone who made $400 per week, but now makes $800, is not going to rush back to work. Restaurants and taverns who were already hard hit by the pandemic are finding it difficult, if not impossible, to reopen their establishments.
My solution then, and now, is to make people whole. If the government shut down their business, temporarily cover their wages. But don’t pay them more than they made prior to the pandemic.
States should be encouraged to adopt the strategy I had as governor of Wisconsin. We pushed to require able-bodied, working-age adults to work or receive job training if they were going to get unemployment compensation. As the economy continues to open, we should require the same from people all across America.
Public assistance should be a trampoline, not a hammock. The economy can’t bounce back if too many people are stuck in the hammock.
Returning to the era of big government and high taxes is also clearly having a negative impact on the pace of economic growth. Joe Biden is proposing $2.1 trillion worth of “revenue” increases over the next decade. And according to the Wall Street Journal, he is proposing another $4.5 trillion in new spending — in addition to the $1.9 trillion spent on the “COVID relief” bill.
In contrast, President Reagan took aggressive action to help the job creators of America. On Aug. 13, 1981, he signed the Economic Recovery Tax Act of 1981 at his Rancho del Cielo. Back then, it was the largest tax cut in American history. The tax cuts, along with another round in 1986, helped spur an economic recovery that carried well into the 1990s.
In Wisconsin, we reduced the tax burden on the hard-working people by more than $13 billion since 2011. During my time in office, more people were working than ever before in the history of the state, unemployment hit an all-time low of below 3 percent, while wages and household income dramatically increased across the state.
Sound fiscal and economic policy makes a difference. Big government and high tax states are losing out to limited government and low tax states. It is why people are fleeing New York and California while states like Florida and Texas are seeing massive amounts of growth.
Joe Biden and other officials in Washington, D.C. would be wise to pursue policies that reward work, not punish it; reduce the size and scope of government, and lower the burden on the hard-working taxpayers of America. Our country also needs to open our schools. We need to get children back in the classroom so they can learn and their parents can go back to work. These are the policies that will get the people of our country working again.
• Scott Walker was the 45th governor of Wisconsin. You can contact him at firstname.lastname@example.org or follow him @ScottWalker.