A major factor in the discussion presidential election should be the dramatic reduction in personal income taxes paid by the wealthy that we have experienced in the last 50 years. Older Americans will remember those sunny days of the 1950-70s when the middle class was a major part of our economy, wages were high, and the economy was strong. This was largely due to the fact that the working class had power through strong unions. Working people did not have to rely on food stamps to feed their children. And, if you will remember, executives and bankers earned only 60-80 times what the hourly employees earned. Also, the top 1% paid personal income taxes in the range of 70%. Now, unions are very weak and the middle class has very little bargaining power, executives earn 300-400 times the worker, and the top 1% pays 39.6 % of their earnings (except, of course, the amount of income earned by dividends, capital gains, and “carried interest” (a little known gift to the wealthy) which is taxed at 15%. Also, in that economically sound era, the annual US deficit was less than 5% of GDP while today it is 5-10% of GDP. Obviously we had a more stable economy then. If the “High Earners” are the “Job Producers”, why aren’t we paying workers good wages?
There are several other major contributors to this drastic change in our economy: 1. NAFTA (the 1992 North American Free Trade Agreement) and 2. the automation of our economy. Voters in the 1992 presidential election will remember Ross Perot’s loud statement that “we would hear a giant sucking sound as our manufacturing moved overseas”. In Iowa alone Maytag and Amana moved to Mexico putting thousands out of work. These people lost their means of income, while the companies made their products cheaper, so profits increased, the stockholders received increased dividends, and the top executives received big bonuses. What did we do for those who lost their jobs—very little. Yes, unemployment compensation was extended slightly. But, did we authorize a “GI Bill” to set up retraining so that new skills would apply to the changing economy like we did for our returning Vets after WWII? No! Did we extend monetary assistance for them? No! We just complained that we had a large Unemployment percentage.
The second major change in the economy is that automation and technology removed millions of jobs. If any of you had the opportunity to visit an automobile factory in 1960, you would have seen thousands of workers putting in engines, attaching fenders, and test driving the autos. Today, the plant is empty except for 10-15 people adjusting the automated welding and assembly machines. The elimination of jobs in the auto industry is typical of all manufacturing in the US. Hand assembly operations have gone to China, Viet Nam, and Indonesia.
So, do I have a solution to these problems? Not a complete solution. But, we could solve some of the problems by putting millions to work improving our infrastructure. That would place money into the hands of those who would spend it immediately. To pay for this, we could raise the top income tax brackets back to 70% and scale the rest down to the existing $250,000 income level and below. (Imagine those $10-50 million income recipients actually paying $5-25 million for their privilege of playing and working in America. I believe that executive pay would drop drastically. And, maybe there would be more for the workers.
• Henry T. Madden, of Iowa City and formerly of Cedar Rapids, was general manager of Allis-Chalmers Manufacturing Co. and Harnischfeger Manufacturing. Co. and former president of Harnischfeger, GMBH in Germany. Madden later ran Oak Hill Engineering Co., served on many local company boards of directors and started the Entrepreneurial Center in the Henry B. Tippie College of Business at the University of Iowa.