The greatest periods of American economic growth came when taxes were very low—such as in the 19th century—or being lowered and simplified, as in the 1920s, 60s, and 80s. Inescapably, to tax wealth creation is to discourage it. But there is a large and politically potent segment of the population that, because its interests are now aligned with those of the government, seek to promote dependency through entitlements. This segment favors ever higher taxes (although they disguise the fact by demanding that only “the rich” pay their “fair share.”) But, as with regulation, high taxes inevitably produce low growth—and low growth threatens entitlements in the long term. If the United States remains in the doldrums for several more years without hope of a real turnaround, Medicare as it is currently constituted will go bankrupt in 2019. Raising taxes to prevent that will only slow overall growth, and that will actually defeat the purpose of saving Medicare.
So there is really no alternative to pursuing policies that encourage economic growth through private action by liberating the forces of the free market. A presidential candidate who finds a way to ground his economic policies in this core truth—and harnesses the idea to a larger and more optimistic understanding of the United States, both past and future, and resists the take-your-medicine tone that dominates the conservative policy discussion of the present moment—will be able to draw a sharp and effective contrast with the failures of the Obama years.
from Growth: The Only Way Out of this Mess – The American past offers the best guide to a prosperous future by John Steele Gordon in the July/ August, 2011 Commentary Magazine