For the past three and a half years, the U.S. economy has struggled under the economic policies of the Biden administration and congressional Democrats.
Increased taxes, spending, deficits, and debt have produced higher prices, lower wages, soaring interest rates, and slower economic growth. For typical American families, the Biden administration’s policies have resulted in lower standards of living and dashed hopes of a better future.
While the inflation rate has eased from its 9.1% peak, the highest level in 40 years, prices are still up 20% since Biden took office, far outpacing the increase in wages.
Millions of Americans are financially stressed, unable to buy a home, pay off their debt, or save for the future. Household debt is at an all-time high, up $3 trillion, or 21%, since the first quarter of 2021.
Along with these high prices, the U.S. economy is stuck in a slow growth rut. The latest numbers show the economy is slowing under high interest rates and persistent inflation, with personal spending and capital goods orders weakening.
Real gross domestic product (GDP) grew at only 1.4% last quarter, the slowest growth in nearly two years. In the last nine quarters, economic growth has averaged only half our historic growth rate.
The U.S. needs to adopt pro-growth policies to encourage faster economic growth. But if Biden and congressional Democrats are given another chance in November, we face even higher taxes, more spending, and slower growth. They are already planning to leverage the 2025 debate over extending the 2017 tax cuts to force the largest tax increase in our history.
They are drafting plans to raise taxes on individual taxpayers and American businesses, actions, which could tip the economy into a recession and result in larger deficits and debt.
The Biden administration’s most harmful proposal would raise the U.S. corporate tax rate to one of the highest in the world. This would be a major economic mistake. Increasing the corporate rate is the most economically damaging tax increase, and raising this tax in a weak economy would cause it to lose more revenue than it gained, likely triggering an eventual economic collapse.
Numerous studies have shown that raising the corporate rate would have a harmful effect on working families, lowering their wages and incomes, increasing the prices they pay, and reducing their retirement savings. A Federal Reserve study found that a higher corporate tax rate would be “uniformly harmful” to working people, leading to “significant reductions “ in their jobs and incomes.
Increasing the corporate tax rate would also put U.S. companies at a significant competitive disadvantage against our global competitors. Under the Biden administration, the U.S. rate would be higher than every other country we compete against, reducing investment in America and shifting profits and jobs overseas.
Americans faced similar financial challenges of high prices, stagnant growth, and soaring taxes and spending 44 years ago. The Republican Party platform in 1980 stated that nothing was more important than economic growth, and endorsed the Reagan economic recovery program of lower tax rates and spending cuts.
Once passed, the Reagan tax cuts and spending reforms kicked off an economic boom, with real GDP growth reaching 7% in 1983 and 8% in 1984, and averaging nearly 5% a year through 1988. Inflation dropped from 11% to 4% and nearly 20 million jobs were created in the largest peacetime expansion in U.S. history.
The Reagan tax cuts were modeled after the Kennedy tax cuts in the 1960s, which also set off an economic growth boom, with real growth averaging more than 5% a year. The Reagan-Kennedy tax cuts led to extended periods of unprecedented economic growth and a higher standard of living for all Americans.
Under our current path of high taxes and spending, the economic outlook is dim. The Congressional Budget Office (CBO) is forecasting 10 years of dismal and weak growth averaging 1.8% a year, much lower than the 3.5% average annual growth the U.S. experienced from 1960 to 2000. If that happens, we will have a decade of lower incomes, fewer jobs, and countless lost opportunities.
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But it does not have to be this way. As we have seen, an economic policy of low tax rates and fiscal restraint can increase investment, productivity, and output, leading to higher incomes and faster growth. Pro-growth tax policies that increase the incentive to work, save, and invest, along with spending restraint, would improve economic growth, getting us out of our slow growth rut and returning the economy to its historic growth rate.
Higher economic growth would generate trillions of dollars of economic activity, leading to higher wages and incomes, better jobs and opportunities, and more prosperity for all Americans. We cannot settle for another 10 years of subpar growth. Increasing economic growth should be our top priority.
Bruce Thompson was a U.S. Senate aide, assistant secretary of Treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.
