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A Virus Killed the Republic

March 28, 2020

Raymond Keating,  chief economist with the Small Business & Entrepreneurship Council, wrote this for his course on Supply-side economics at Yorktown University:

Progressive President Woodrow Wilson and his fellow Democrats in Congress were more than willing to impose an income tax, and didn’t waste much time. Wilson signed the personal income tax into law in October 1913 with rates ranging from 1 percent to 7 percent. The top rate was increased to 15 percent in 1916, and with U.S. entrance into World War I, the top rate was pushed up to 67 percent in 1917 and 77 percent in 1918. The top rate was dropped slightly to 73 percent in 1919.

The corporate income tax also was increased, with the rate moving from 1 percent to 2 percent in 1916, 6 percent in 1917, 12 percent in 1918, and back to 10 percent in 1919.

As for the economy during this period, real GNP barely grew in 1913 (0.9 percent), and then declined in 1914 and 1915 (-4.4 percent and -0.9 percent, respectively). After the war (with fighting ending at the end of 1918), the U.S. economy went into a depression, with real GNP declining by 3.6 percent in 1919, 4.4 percent in 1920, and 8.7 percent in 1921.

That is, when he exited the Oval Office in March 1921, Woodrow Wilson left behind one of the worst economies on record.

The historical parallel between yesterday’s $2.2 trillion emergency aid package, and economic policies of President Woodrow Wilson are striking.  President Wilson raised taxes to pay for America’s entry into World War I. And President Trump has blown a hole in the economics of American government that will solidify the administrative “State” that begins with Woodrow Wilson, grows teeth during the Roosevelt Administration and then grew without restraint from every Presidential Administration thereafter.

After the first $2.2 trillion expenditure to sustain the economy and avert a depression, Donald Trump’s successors will do what Woodrow Wilson did–spend more and raise taxes.

Unlike 1920, however, when Warren Harding and Calvin Coolidge attacked Wilson’s economic policies with deep cuts in personal and corporate tax rates, at the end of Trump’s second term, the 2028 election will not elect a President who is a tax cutter. He’ll impose personal and corporate income taxes of 80% or more and average Americans will live from government check to government check.

America’s response to the Coronavirus will more deeply embed our lives in the “State.” And future generations of our young will do what youngsters always do–rebel–and this time they will look for lampposts where politicians who sustained our imperial order may be dragged out from retirement in gated communities and strung up. Statues of President Roosevelt and Donald Trump will be knocked down as were statutes of Stalin in 1991.

Between now and then, the administrative “Deep State” will grow its claws and its teeth will become fangs that drag free citizens into servitude to an American Empire.

 

 

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