American Consequences - August 2020

did not work in the sense that it was levied to pay for the Vietnam War, and that was a war we lost. The surtax may also have damaged the U.S. economy although there were other economic problems current at the time, and it’s hard to sort out all the individual causes for the general economic stagnation of the 1970s. However, when the surtax went into effect in 1968, annual GDP growth was 4.8%, and by 1970, when the surtax ended, GDP growth had declined to .02%. Re: The Chasm Grows Deeper and Wider It amazes me that so many people and publications act surprised that the wealth gap gets bigger. Isn’t it logical? The wealthy have money left over at the end of the month, which they can invest. These investments then make more money. And this continues year after year. The poor do not have money left over, and they even max out credit cards and pay ridiculous interest rates, which reverses the compounding effect that the wealthy are enjoying. – Stephen C. Steven Longenecker comment: We are sympathetic to this argument, Stephen, but only to a point. It is always possible for an individual in America to get ahead, to save money, and to better themselves – no matter their starting point. Excuses for it being impossible are just that – excuses. And of course the secret behind the journey from less to more is not a secret at all... It requires hard work, an ability to delay gratification, and a strong character. These are old-fashioned virtues, of course... but they have stood the test of time for a reason.

sentiments that the class gap is widening rapidly. And wrongly. And dangerously. During the VietnamWar, the U.S. added a 10% income surtax to everyone earning above the poverty level. I’d be good with instating a similar surtax until unemployment drops below a meaningful level. 5%? 7.5%? I don’t know, but the assertion that Covid-19 has decimated the working class and yet is largely an inconvenience to white collar workers is painfully obvious. The original justification for paycheck support was to cushion workers from a disaster that was in every sense outside their making or control. Is that not still true? – James J. P.J. O’Rourke comment: James, I agree with you that workers are suffering from a disaster “outside their making or control.” And I agree that workers should – indeed must – be protected from penury. Unfortunately, I’m not a good enough economist or a wise enough author of political policy to tell you how this should be done. A surtax is one possibility. When LBJ tried it, the surtax both did and didn’t work. The Revenue and Expenditure Control Act of 1968 (passed by large bipartisan majorities in the House and Senate) added a 10% surtax to corporate income taxes and to the income taxes of individuals making more than $5,000 a year (about $35,000 in modern money). The surtax lasted from 1968 until 1969 and was renewed at a 5% rate through the middle of 1970. It did work in the sense that it raised about $101 billion (in 2020 dollars) in federal revenues and led to a federal budget surplus in 1969 – the last budget surplus we would have until 1998. It



American Consequences


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