Larry Kudlow, on last night’s CNBC show, remarked that I had e‑mailed him comparing John McCain to President Eisenhower. One guest, Jerry Bower, realized this was not necessarily a compliment. He noted that Eisenhower Republicans kept tax rates extremely high on both individuals and business, viewing that as the “fiscally responsible” way to finance a big defense budget. The economy was in recession almost as often as not in those days – in 1953–54, 1957–58 and 1960. John F. Kennedy, Bower rightly noted, campaigned on slashing [Republican] tax rates to get the economy moving again. When tax rates were finally cut in 1964, it worked (as always).
The two parties switched sides recently, with Republicans adopting JFK’s approach by cutting the most destructive tax rates in 1981–86, and Democrats sounding and acting more like Ike since 1993. Similarly, FDR ran against Hoover’s protectionism in 1932, but Republicans and Democrats have taken turns being the most protectionist in recent years (the word “populist” in both parties often means advocating tariffs on necessities to further impoverish the poor).
The Eisenhower-Nixon years defined the phrase “fiscal conservative.” If Democrats spent too much, a “fiscal conservative” would regard it as his duty to do the honorable thing and raise tax rates as much and as often as required, if only to protect the military budget.
My quick e‑mail to Kudlow is reproduced below, warts and all. It is obviously more opinionated and political than my public writing, yet not really partisan:
Read the rest of this post →Larry,
McCain would be eager and enthusiastic to join with past co-authors — Kennedy, Edwards, Lieberman and Feingold — to raise tax rates on high incomes, capital gains, dividends and estates.
McCain could surely be persuaded to remove the cap on the Social Security tax. That move, added to a state-local marginal rate above 45%, would make the top tax in the U.S. much higher than in any other civilized country, including Sweden (which has the least progressive tax system of them all). Many European countries allow the payroll tax to be deducted from the income tax, but it’s a nasty add-on for us. It’s loosely tied to benefits, but Social Security would become a pure redistribution scheme if they uncapped the tax.