Hot Air » Blog Archive » Fed predicts unemployment rate of 7.5% in … 2012

Why did we experience a growth rate of over 7% in 1982? Ronald Reagan cut taxes and reduced regulation. He lowered the capital gains tax rate to encourage investment. Reagan and a Democratic Congress also pushed through tax reforms on retirement accounts that created a broad investor class of Americans, allowing much more capital to flow into the market in the 1980s for investment and technological innovation. Reagan also encouraged energy exploration and production by eliminating self-defeating tax treatments for new resources.

Why won’t we get it now? Obama wants to hike capital-gains tax rates. He also wants to increase tax burdens on multinational corporations based in the US, although he had to put that aside for a while. Obama and the Democrats also want to escalate energy prices with an ill-advised attack on carbon emissions. Obama’s skyrocketing deficits portend higher inflation, higher interest rates, or both in the next few years. All of the price signals on taxes sent thus far by the White House and Congress have investors clinging to their liquidity.

If we’re going to have trillion dollar deficits as far as the eye can see, then let’s create them from the tax side rather than the spend side.

Do away with the capital gains tax, the corporate income tax, and the death tax. Hold the line on government spending where it is today.

We might still have some big deficits, but I’d bet that the explosion of capital investment following the end of those taxes would not only end this recession on a dime, it would erase those shortfalls pretty damned quick, too.

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