Sacrifice: Economies, Taxes and Wars, Then and Now

Many on the right like to use comparisons between Word War II and our present situation in Iraq. Namely, they like to say that we didn't "cut and run" then and we shouldn't now. However, I think the following should be considered when using comparisons to WWII and the sacrifices we made then and what we are doing now.

From labor journalist Sam Pizzigati:

"During World War II, there was 94 percent marginal income tax rate. And what's more, the president had originally proposed a 100 percent tax rate. In those days, everyone made contributions for the war, and the wealthy made the biggest ones..... this shared sacrifice from the top down helped define the "Greatest Generation" and pulled the country—including the elites—together in wartime."

"The 16.1 million Americans in uniform who fought—and won—World War II didn't win the war alone, the new monument's creators remind us. They had help from the home front. Housewives pounded rivets. Kids collected aluminum. Families went without staples at the dinner table. During World War II, everyone seemed to be making contributions. Everyone, at some level, seemed to be making sacrifices.

Even the rich. All Americans were asked to pay more in taxes during World War II, and the wealthy were asked to pay the most of all, more in taxes than any Americans had ever before paid. In 1943, America's most affluent households faced a 93 percent tax rate on all their income over $200,000. The next year, 1944, the nation's top tax rate would rise even higher, to 94 percent on income over $200,000—the highest rate in American history.

A 94 percent tax? We scan this figure today with no small measure of disbelief. We who live in an era where politicos routinely equate taxes with tyranny cannot imagine a Congress of the United States ever imposing a tax rate so lofty. But here's the truly incredible part. Back during World War II, many Americans, including the president of the United States, wanted our nation's top tax rate to rise even higher.

How high? In 1942, only a few months after Pearl Harbor, President Franklin D. Roosevelt proposed a 100 percent top marginal tax rate. At a time of "grave national danger," the president advised that April, "no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year. Roosevelt was proposing, in effect, what amounted to a maximum wage—at an income level that would equal, in our contemporary dollars, about $300,000.

Imagine, for a moment, what would happen today if John Kerry—suddenly inspired by FDR's bold example—were to propose a 100 percent tax on income over $300,000 to help wage the war against terrorism. Kerry would be hooted off the political stage, maybe even tagged a terrorist himself for trying to disrupt and destroy the American economy.

FDR's 1942 income cap proposal, interestingly, invoked no such feverish reaction. The nation, most Americans agreed, faced an emergency. All Americans needed to do their part. Some Americans were sacrificing their lives to stop fascism. The least the rich could do, as even some rich Americans agreed, was sacrifice some fortune.

"I regret," announced Hollywood starlet Ann Sheridan, "that I have only one salary to give for my country."

The opposition to FDR's income cap proposal would go about its business behind the scenes. The mandarins on the House Ways and Means Committee would quietly refuse to give the president's cap any serious consideration. But Roosevelt would not be deterred. Shortly after Labor Day, he repeated his call for a $25,000 income limit, "the only practical way of preventing the incomes and profits of individuals and corporations from getting too high." Congress would eventually relent and tilt in the president's direction. The Revenue Act of 1942 would leave America's most fortunate paying taxes on income over $200,000 at a tax rate well over 90 percent. The war years would go on to become, notes historian John Witte, "the most progressive tax years in U.S. history."

Today, by contrast, we are waging a war amid what have become the least progressive tax years in modern U.S. history. Pulitzer Prize-winning tax analyst David Cay Johnston estimates that our nation's wealthiest households are now paying federal income taxes at a mere 17.5 percent rate, after exploiting all available loopholes. America's richest households in 1943, after exploiting all available loopholes, paid nearly 78 percent of their total incomes in federal tax.

Americans during World War II, in other words, expected wealthy households to pay more than four times as much of their incomes in wartime taxes as we do today.
Those World War II Americans were onto something. High tax rates on high incomes do not, of course, insure war-time victory, either against fascism or terrorism. But high rates on high incomes do send a message. High rates announce in no uncertain terms that sacrifice will be universal, that all Americans—even our highest and mightiest—will be expected to do their part, to give of themselves in some way that counts.
In World War II, Americans did give of themselves, at the battlefield and on the homefront. Those who made that effort we now honor.

We ought to do that honoring not just by cheering, but by remembering. We ought to be remembering just how the "Greatest Generation" became great. Our parents and grandparents shared sacrifice, from the top down. We should, too."

Interesting, huh? Now consider, one of the causes of the Great Depression (from Wikipedia):

Marriner S. Eccles who served as Franklin D. Roosevelt's
Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951):
"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. [Emphasis in original.] Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product --in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression."

Sound familiar to anyone? Sounds eerily like 2008 to me. I work at a financial aid office- 4 lenders have gone out of business since January. Supposedly, there are more considering it or in the process of doing so, they just aren't talking. Of course, there is also the whole Bear Stearns mess. The housing loan and mortgage crisis, etc. etc. Two wars going on simultaneously and we have some very ominous signs on the horizon.

Are the rich getting richer and the poor poorer in 2008? Are corporations making massive profits and getting government handouts and tax cuts? The answer- yes! Don't believe me? Read this:
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/27/AR2008032703145.html
http://www.washingtonpost.com/wp-dyn/articles/A61178-2004Aug12.html
http://www.cbpp.org/1-25-05bud.htm
http://www.cbpp.org/4-14-04tax-sum.htm

Don't believe them? Check this (I love statistics, though from 2003):
http://www.ctj.org/pdf/allbushcut.pdf

Also, important are these statistics on tax rates for our country:

http://www.taxfoundation.org/publications/show/151.html

Notice how starting in the Eighties all of a sudden the rich had to pay much less in. The reason for this? The Voodoo/Trickle down policies of Ronald Reagan started to become a major player on the political scene. Not much has changed since then, in fact with Bush's tax cuts it's worse. We are a trickle down economy now. The rich corporations have all the money and they occassionally throw some money at us when it's conducive for them to do so. They have the money, blue-collar workers do not. Especially consider how these companies are trying to keep their money by sending jobs over seas. The combination of NAFTA trade policy, loss of our jobs overseas and to downsizing, and our trickle down economic policies and tax rates are crippling our economy and our workers.

Of course if big business gets in any trouble we'll be there to bail them out with our tax money (ya know the money WE give the gov't):
http://news.yahoo.com/s/ap/20080403/ap_on_bi_ge/congress_bear_stearns

What do all those hard working homeowners who got suckered into bad mortgages get?
Nothing so far.

And because I'm a bastard (from Media Matters):

In reporting on President Bush's March 5 endorsement of Sen. John McCain, several news outlets -- including ABC, USA Today, and CNN -- purported to contrast Bush and McCain's positions on tax cuts by noting only McCain's initial opposition to Bush's 2001 and 2003 tax cuts. None of the outlets noted, however, that McCain has changed his position and now supports making the Bush tax cuts permanent. Nor did the reports note that McCain has repeatedly claimed that he initially opposed the tax cuts because they were not paired with spending cuts -- reasoning he did not mention in his 2001 floor statement explaining his vote. In fact, McCain said both in 2001 and 2004 that he opposed the tax cuts because they favored the wealthy.
In his report during the March 5 broadcast of ABC's World News, correspondent Ron Claiborne reported that the "relationship between" McCain and Bush "has not always been so rosy. McCain and the president have clashed over a number of issues from tax cuts, to interrogation techniques, to military strategy in Iraq." Similarly, a March 6 USA Today article stated that McCain and Bush "have differed on domestic issues, including taxes," and during a report on the March 5 edition of CNN's
The Situation Room, CNN correspondent Elaine Quijano reported that "the two have differed sharply on tax cuts."
In fact, McCain has flip-flopped on his support for Bush's tax cuts, a fact omitted in each of these reports. In May 2001, McCain voted against the final version of Bush's initial $1.35 trillion tax-cut package. McCain voted against legislation in 2003, which would have accelerated the tax reductions enacted in the 2001 bill and to cut dividends and capital-gains taxes. In February 2006, however, he switched positions and
voted to extend the 2003 tax cuts on capital gains and dividends through 2010. Grover Norquist, president of the anti-tax group Americans for Tax Reform, reportedly said at the time: "It's a big flip-flop, but I'm happy that he's flopped." In May 2006, McCain voted for the final version of a bill that extended the tax cuts on dividends and capital gains. Now, while campaigning for the presidency, as Peter Baker reported February 7 on the washingtonpost.com campaign blog The Trail, McCain "says he supports making those tax cuts permanent."
Additionally, McCain has now claimed that he opposed the tax cuts because, as he stated during a January 24 Republican presidential debate, he "knew that unless we had spending under control, we were going to face a disaster." But that was not the reason he gave at the time of the 2001 vote. During the May 2001 Senate debate on the conference committee report of the
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), McCain made a floor statement in which he explained his vote against the bill, in which he stated: "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle class Americans who most need tax relief." McCain made no mention of the absence of offsetting spending cuts at the time. McCain reiterated this position in an April 11, 2004, interview on NBC's Meet the Press, saying: "I would have -- I voted against the tax cuts because of the disproportionate amount that went to the wealthy Americans."

Opinion: The point of all this, I'm hoping you will reach? Quite simply, we have to increase taxes on the rich. I'm talking $250,000 plus income earners. A return to close to seventies levels (adjusted for inflation) would be a start, though the Republicans would not have this in the present day in age. It's funny, how there is all this talk of how our taxes are out of control, yet many paid more in taxes in the past. Also, please consider how in the past when we've had ongoing, long term wars going on we had higher tax rates then. The government was making more money then (again adjusted for inflation). Now we have two wars going on at the same time with significantly less tax revenue coming in. Is it any wonder we are in a recession? Also, are we possibly facing much worse than a recession? I think, yes, if we do nothing about it. The causes of the Great Depression and what is happening right now in our economy are too similar. Also, factor in that wars were not a factor for that period. Add that to the list and we are in a precarious position. Finally, the Iraq war is it's own entity. Yet, if we are truly going to compare the sacrifices we are willing to make now to what we did sacrifice in WWII or Vietnam, we need to take a look at the big picture. We need to look at more than how long they went on and how many soldiers we lost, we need to look at more than definitions of "victory", we need to look at what we did collectively as a society then and to what we are doing now. I think the sacrifices we were willing to make then pale in comparison to what the Bush administration has asked of us and certainly of what McCain will ask of us. The question we all have to ask this election year is: what are we willing to contribute for the greater good of our country, our government, and our society and who is best able to do it? Furthermore, which candidate is recognizing this need, this imperative, and which is asking for more of the same? Finally, and most succinctly, who has the best plan for an economy of a country involved in two wars that is bleeding it dry? Drastic times call for drastic measures. Bush's drastic measures of the past have failed and in fact, caused many of the problems we now face. Now who's going to clean up the mess?