James O’Brien selects a few imaginative historical myths for debunking:
Here are a few facts about U.S. life 60 years ago, in 1956:
- The top tax rate was largely irrelevant. The average household income in 1956 was about $4,800. Only 8 percent of families earned more than $10,000 per year. The 91 percent top tax rate (and that really was the top tax rate – a holdover from World War II) kicked in at $400,000 for married couples, or the equivalent of about $3.2 million today). While few individuals made that much money in 1956, people who did earn large sums of money could deduct everything from interest on auto loans to sales taxes, and could – and did – structure things so that their income was funneled through tax shelters at much lower rates.
- There was a lot less money overall. Adjusted for inflation, that $4,800 average household income would be about $42,000 today. That is roughly 20 percent less than current average household income of about $53,000. Even in 1956, when a Harvard education cost $1000 per year, $400 per month hardly afforded a riotous existence for a family of four. One of the most striking things about 1956 was how little people at the top of their professions earned. Yogi Berra – the highest paid player in Major League Baseball that year – received $58,000. That would be a little over $500,000 today, essentially minimum wage by MLB standards.
- Tax revenues as a percentage of GDP were about the same as they are today. Since 1945, tax revenues as a percentage of GDP have fluctuated within a fairly narrow range of 15 to 20 percent. The state of the economy, not tax rates, has determined how much the government takes in. Despite the high marginal rates of the 1950s, the tax intake as a percentage of GDP was just 16.5 percent in 1956. It was 18 percent in 2015, so we are actually taking in more, rather than less money, although we are spending it in many new and different areas.
- Government spent less on everything but defense. The U.S. Federal budget for 1956 might best be described as “Spartan”, not in the sense of being frugal (although it was that) but in the sense of being primarily devoted to preparations for war. In the Cold War climate, defense spending soaked up 60 percent ($47 billion) of the total $76 billion Federal budget – about three times the current percentage — and spending on “social programs” was essentially nonexistent. There was no Department of Education, and total Federal spending on education was just $1.5 billion. Healthcare expenditures were just $1.0 billion; there was no Medicare, (which now represents 15 percent of the total Federal budget), no Medicaid, and certainly no Obamacare. The Interstate Highway Program – so beloved by liberals – was conceived as a defense spending measure and was designed to be self-funding through diesel and gasoline taxes.
- Opportunities were anything but equal. Racial discrimination was rampant and gender bias was everywhere. Many fields were essentially closed to women and to people of color, while quota systems deterred talented Jewish students from pursuing careers in fields such as engineering and law. We can argue all we want about white privilege in 2016 but in 1956 it was endemic, and bred not just economic but social and cultural inequality.
When we look at the United States in 1956 we see a country with high (but largely irrelevant) marginal tax rates, no social programs to speak of, and a massive defense budget. With Europe still recovering from World War II, the economy is strong, and companies are willing to spend and hire. The country’s focus, however, is not on the welfare of its people, but on its survival in a grim ideological and geopolitical struggle with a ruthless and determined opponent. Those who portray the 1950s as some sort of golden age of progressivism are writing historical fiction, not history.
The 1950s for the United States (and for Canada) were, to borrow a notion from John Scalzi, run in “easy mode” — in game terms, the lowest difficulty setting. There was no peer-level competition in manufacturing or even in services and this provided profit levels that allowed both corporations and workers to enjoy unrealistic long-term conditions that finally came to an end in the gas shocks of the 1970s, after the devastated economies of the defeated Axis powers finally were able to compete again. Twenty-five years of minimal competition left the major corporations totally unable to cope with even minimal competitive pressures from overseas … but willing to use whatever political levers were available to try to quash those foreign upstarts.
But as the courtiers of King Canute were finally obliged to accept, even the King can’t order the tide to recede when it’s convenient.