Rep. Chris Gibson's commentary "It's compromise, or fiscal chaos," Dec. 17, is based on an incorrect understanding of the basis for economic growth.
Mr. Gibson is right that the country needs more jobs and growth to help raise gross domestic product and federal tax revenues, and that growth will help reduce budget deficits. But he wants to extend the current tax rates, not let the Bush tax cuts for the rich expire, and that's the path to continuing decline, not growth.
Mr. Gibson relies on the trickle-down idea that lower taxes on top incomes stimulate investment and growth. But levels of employment, small business income and investment depend on the level of aggregate demand, not on after-tax income levels at the top.
The bottom 98 percent spends a far higher percentage of its income than does the top 2 percent, so stimulating growth requires shifting the tax burden toward the top. Therefore, while Mr. Gibson is also correct that "lower tax rates for the middle class will increase consumption as historically middle-class families spend 96 percent of disposable income," lower tax rates for the top 2 percent have exactly the opposite effect.
This has been amply demonstrated: Before the Bush tax cuts for top incomes were passed, trickle-down theorists at the Heritage Foundation in 2001 confidently predicted those cuts would eliminate the national debt (then about $6 trillion) by 2010. Instead, the national debt doubled to about $11 trillion during the Bush years.
The growth of income inequality is also reducing aggregate demand and growth. The median income has declined nearly 10 percent since the crash of 2008. By 2010, the top 1 percent of income earners were receiving 93 percent of all new income.
To reduce the budget deficit and slow the growth of the national debt, the policies supported by Mr. Gibson must be abandoned. Higher effective tax rates on top incomes are essential for recovery, growth and deficit reduction.
J. MICHAEL HARRISON
Delmar
Retired administrative
law judge