America’s good old days

Donald Trump likes to boast that America is experiencing its greatest economy in history during his presidency, but most economists — and people like me who lived during that time — agree that our nation’s best economic growth was in the 1950s and 60s.

Flush off our victory over tyranny in World War II, soldiers and sailors returned home ready to get back to their families and work. In 1955 you could buy a new car for under $2,000 and a new home cost about $8,000. You can see evidence of that growth today in Storm Lake, where homes grew like mushrooms north of Milwaukee Avenue.

One income — generally the father’s — was enough to support a family in 1955, when average annual pay was $3,400. Most mothers stayed home and took care of the kids. Working women were mostly single, even teachers. Many school districts would not employ married women.

In Storm Lake, the economic engine was driven by the packing plant, where union workers with serious overtime could earn more than the plant’s general manager. They built homes, bought cars and boats, and sent their kids to college, at Buena Vista and elsewhere.

Flush with money, post-war United States eradicated polio and other deadly diseases, built hospitals within reach of nearly all Americans, paved an interstate highway system that connected every corner of the nation with automobiles and trucks, designed jet airliners that connected us with the world, developed transistors and electronics that enabled us to build computers, and introduced television into our homes creating vast new neighborhoods throughout the nation.

And we did all of this without adding to the national debt. In fact, we reduced it during this period.

All of this was funded by taxes that were higher than today. Federal taxes were progressive in the 1950s. The more you made, the more you paid. Rates started at 20% for the first $4,000 you earned, then rose to 22% on the next $4,000, 26% on the next $4,000, and so on in incremental steps until you reached $400,000, when the rate hit 91% on everything over that. Taxes averaged 42% on the highest earners. (By the way, $400k back then translates to $5 million today.)

This generated enough revenue to build the interstates, fund higher education, keep Russia and China in check, cure polio, pay off the national debt and keep Social Security solvent.

We can’t do any of that today.

After greedy politicians decided that was too much, exemptions were written into the tax code so that greedy magnates like Donald Trump could avoid paying taxes. Trump didn’t pay any for 11 of the 18 years between 2000 and 2017.

Tax rates in the 1950s weren’t set high just to raise revenue. They were also designed to prevent the wealthiest families like the Rockefellers from accumulating so much power that they could dominate the nation’s economy and government. Like Elon Musk, worth nearly a trillion dollars, who just spent $500 million in a failed attempt to elect two senators. That’s the equivalent of a regular person worth $50,000 blowing $20 on a sandwich and fries. Wealthy people can pay higher taxes and still stay plenty rich.

A Republican, Dwight Eisenhower, was President during most of the 1950s growth. Democrats who succeeded Ike stayed the course of economic stability. Democrat Bill Clinton, who served from 1993-2001, was the last President who did not run a deficit. After him we started charging everything on the national credit card.

Over the past decade, Iowa has engaged in the same fool’s errand as our federal government — reducing taxes so low that we destroy our standard of living. Starved by repeated billion dollar deficits, Iowa’s economic activity has slipped to worst in the nation. In the 1950s and 60s our schools were the best in the USA; now they rank 30th. Storm Lake’s streets were renovated on an annual basis in the 1950s and 60s. Today they are crumbling beneath our feet.

You can’t save your way to prosperity. Taxes prime the pump for economic activity by improving the quality of life so more people want to live here and invest here. That lesson was taught to us 70 years ago. It’s a lesson that continues to be learned from northern European high-tax countries like Denmark, Norway, Finland and Sweden, where the standard of living is highest in the world and their citizens consistently rank as happiest in the world. They don’t mind paying taxes because they are getting their money’s worth.

Wealth isn’t bad. It’s a driving force in building a robust economy that helps everyone. We need entrepreneurs with ambition to drive our nation’s growth. The people I know who have earned their wealth don’t resent paying taxes. As one told me: “If I pay a lot of taxes, it means I made a lot of money.”

One thing’s for certain: there’s plenty of money to make America’s economy great for everyone. We just have to be willing to share it.