President Obama during Monday night’s press conference put the blame for the current economic malaise on “tax cuts for the wealthiest few Americans.” “We have tried that strategy time and time again,” he said during his opening statement. “And it’s only helped lead us to the crisis we face right now.”
This, of course, is both historically and economically ludicrous. The marginal rates on the federal income tax have been substantially lowered four times in American history, in the 1920’s, the 1960’s, the 1980’s, and the 2000’s. Each time the American economy immediately responded with increased growth, lower unemployment, and increased government revenues.
To be sure, each of these prosperous periods were then followed by periods of economic distress (although the recession of 1990-91 was very shallow). But to argue that the tax cuts caused the economic distress is a classic example of the post hoc ergo propter hoc fallacy. The Great Depression came out of agricultural distress as food prices declined in the 1920’s. Government mistakes then converted an ordinary recession into a calamity. The 1970’s stagflation was touched off by the Johnson Administration trying to have both guns (the Vietnam War) and butter (the Great Society) while the Federal Reserve accomodated federal deficits by keeping interest rates low. The current mess was not caused by the Bush tax cuts, it was caused by the Fed keeping interest rates too low for too long aftere 9/11, Fannie and Freddie facilitating a housing bubble, and banks drastically lowering credit standards, which pumped up the housing bubble still further.
Logical fallacies are a dime a dozen in political rhetoric, of course, and politicians seldom allow historical truth to get in the way of promoting an agenda. Still, it is not encouraging to see a new president– a self-declared apostle of postpartisanship yet–use such hyper-partisan twaddle in his very first press conference. If this is how Obama intends to govern, it’s going to be a long four years.