As Washington Post columnist and MSNBC analyst Ezra Klein appeared during the midnight hour of Wednesday night's Democratic National Convention coverage on MSNBC, he described former President Bill Clinton as a "missile" for the Obama administration, and argued that high tax rates have not harmed the economy in the past.
But, as he pointed to periods of high growth while marginal tax rates were higher than modern times, he neglected to mention that the existence of more tax shelters often kept effective tax rates from being as high as they might have appeared, whereas many of those tax shelters were removed in the 1980s. He also did not note that the capital gains tax was cut in the mid-1990s during the Clinton presidency after Republicans took control of Congress.
Referring to Clinton's speech, Klein began:
When he says "arithmetic," I think what is fascinating about that is he means a particular part of it, what he is there to do. What he's kind of a particular missile for the Obama campaign on, is the plus side in arithmetic. His argument is that the Republicans before him and after him, they only focus on the minus, they only focus on what you can cut from the budget, if they do indeed cut that, than under his tenure as President, they added taxes.
And two things happened when that occurred that are really tough for Americans to explain away. One, of course, is that the tax increases helped balance the budget, helped get us to a surplus by 2001. But the other one, and this is actually a bigger deal, is that we had a fast-growing economy. The years of Bill Clinton were one of the best economies we've had on record in the 20th century.
Klein ended up dismissing the significance of marginal tax rates:
In fact, if you just generally look at when we have had fast-growing economies in American politics, it's been when we've had fairly large marginal tax rates -- the Lyndon Johnson economy, the Kennedy economy. We've had tax rates at the top end as high as 75, 80, 90 percent, and have had much fast growth than we had under George W. Bush when the tax rate went down to 35 percent, the top tax rate. That doesn't mean these tax rates lead to that fast growth, but it does mean is they don't derail it, and they do tend to help with the broad effort to balance the budget, which, of course, helps to some degree at least with getting the economy back on track.