Contrary to what the Left seems to think, the 1950s was an age of a whole lot of guns—and nowhere near as much butter as we have today.
Last week, I wrote about federal priorities from a risk-mitigation point of view. My main point was cultural: The more we think of the state as sacramental and the president as totemic, the less inclined we are to make long-term investments in things that we might actually want the government to be good at — say, counteracting epidemics. The Internal Revenue Service, even in its current, slightly diminished state, has seven times the staff of the Centers for Disease Control. If you want to know where Uncle Stupid’s priorities are, just look at the books.
Culture matters. But there is a more straightforward dollars-and-cents way of looking at this question, too, one that is of especial interest to anybody who has ever heard Senator Bernie Sanders speak. Senator Sanders — and allied progressives are practically unanimous on this — tells a story about the American economy and American government that goes like this: After World War II, we had an economy that was closer to what they mean by one that “works for everybody.” Unions were strong, taxes were high, and, with the New Deal’s maturing and the Great Society on the horizon, government priorities were directed toward “ordinary, working people,” the middle class, etc.
It’s bullsh**, but it’s wildly popular bullsh**, and that’s the bullsh** Senator Sanders is selling.
The facts about federal taxes and federal spending in those years tells a radically different story.
Start with the taxes. In real terms, Americans paid almost exactly the same taxes in the 1950s as they pay today. Federal taxes from 1950-1960 averaged 16.8 percent of GDP; this year, federal taxes are projected to amount to almost exactly the same: 16.7 percent of GDP. There were some very high statutory (that’s how political types say “on paper”) income-tax rates in those years — 91 percent at one point — but practically nobody paid those rates. In fact, in spite of the claims you hear from Senator Sanders et al., wealthy Americans pay remarkably similar tax rates today to what they paid in the past. If you dig into the Congressional Budget Office numbers, you’ll see that the effective total federal tax rate for the top quintile and the top 1 percent have not moved very much over the years.
When the famous/infamous Reagan tax bill was passed, the top 1 percent were paying about 27 percent of their income in federal taxes, according to the CBO, and in 2016 they paid quite bit more, about 33 percent. The 1-percenters have been paying a federal tax rate in the high 20s to middle 30s since for a long time, even as tax legislation has changed. What has changed more significantly is that the lower-earning half of U.S. households have been taken off the income-tax rolls almost entirely, though they still pay a relatively heavy payroll tax. It is no great surprise, then, that the wealthy pay most of the federal taxes in gross terms and pay much higher tax rates, as the CBO reports: Households in the top income quintile pay about twice the tax rate as those in the middle; those in the top 1 percent pay even more.
What does that money pay for? Senator Sanders et al. would have you believe that programs for the poor and the middle class have been savaged, that education has been shortchanged, and that domestic priorities have been sacrificed to feed the war machine and to fund corporate welfare. My own view is that we spend too much on the military and far too much on corporate welfare; but, even so, Senator Sanders’s story does not match up with the facts.
Federal spending on the military has not grown over the years — it has shrunk, and shrunk radically. Irrespective of whether you think that is a good thing or a mistake, the facts are worth knowing. From 1950-1960, those golden years for nostalgists and populists Left and Right, military spending accounted for not only the majority of federal outlays but the great majority — upwards of 70 percent at times. Defense accounted for about 60 percent of all federal spending in those years — in 2020, defense will account for 15 percent of federal spending. Looked at relative to the economy, we spent 10 percent of GDP on the military from 1950-1960; in 2020, we will spend 3.3 percent of GDP, a reduction in military spending of about two-thirds in GDP terms.
Conversely, the “human resources” share of federal spending — welfare, entitlements, health-care support, education, etc., basically a big bucket marked “Stuff Democrats Like and Want More Of” — was very small from 1950-1960, averaging about 4 percent of GDP. In 2020, that category will account for spending equal to 15.2 percent of GDP, an increase of nearly fourfold. If you want a snapshot of Washington’s changing priorities: In 1954, defense was 69.4 percent of federal spending and human resources was 15.6 percent; today, defense is 15.1 percent of federal spending and human resources is 70.5 percent. We have essentially reversed our spending priorities, radically reducing military expenditures while ramping up spending on welfare, entitlements, health care, and education — precisely the opposite of the story Senator Sanders likes to tell.
Then there is the matter of fiscal sobriety. We ran very small deficits from 1950-1960, average 0.3 percent of GDP; this year’s deficit will be 5 percent of GDP — a deficit 17 times as large in economic terms. That’s because taxes have stayed almost the same while overall federal spending has jumped from an average of 17.2 percent of GDP (1950-1960) to 21.6 percent of GDP (2020).
In sum: The federal tax burden is about the same today as it was from 1950-1960, except for the fact that the rich pay more of it and the middle class pays less. Military spending has been chopped by two-thirds, while spending on welfare and education has skyrocketed, along with the deficit.
Which brings me the very long way back around to my point about our coronavirus response. In the 1950s, we had just come out of World War II and were facing the very real possibility of a nuclear World War III against the Soviet Union; we spent accordingly and taxed sufficiently. In 2020, we are running enormous deficits — 17 times as large as those of the postwar era — while mostly pissing money away on politically juicy transfer payments and social programs of questionable benefit. At the state and local level, government functions in large part as a supplementary welfare state, a full-employment program, which is why state and local spending goes overwhelmingly to personnel costs — salaries and benefits for current government workers and, increasingly, pensions and benefits for retired government workers. (In 2016, the average federal worker entering retirement was not yet 62 years of age; at the local level, many classes of government workers, including teachers, on average retire before reaching 60 years of age.) If you want to know what government priorities are, look where the money goes: Into the pockets of a lot of people very likely to vote for Bernie Sanders and his allies in a general election.
As always, I encourage you to look at the data for yourselves. The CBO reports are pretty straightforward.
Whatever you think of all that, two things are obviously true: One, what we are spending our money on is not preparing us for the actual challenges we face today or in the near future; two, Senator Sanders is full of it.