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Perspective: Economic rebound is tied to taxes

jack dewitt

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In February, I wrote about wealth creation and ended the article with a quote from William Jennings Bryan: “Burn down your cities and leave the farms, and your cities will spring up again as if by magic; but destroy our farms and the grass will grow in the streets of every city in the country.”

Today our economy is under siege, and people are beginning to understand, I think, the importance of a strong and vibrant farm-food industry. Food is the most basic of needs for people (though some might argue for toilet paper!). Before this crisis, it was said that service industries drove 80 percent of our economy, and I wrote (in February) that I sometimes wonder how long we can remain a rich nation when so much wealth is consumed on such things as packaging, individual delivery services, and convenient throw-away items. It is amazing how quickly we found out that the only really necessary service industries involve food and health services. Fifty percent of our services have now been idled.

We are also finding out that globalization is not serving our basic needs so well. Too much of our health industry is dependent on supplies produced in other countries, including medicines. They may be produced cheaper there, but in a crisis, the basic needs of the producing country get met first, and supplies can become political pawns.

We are also finding that the concentration of meat processing in a handful of big slaughterhouses threatens our meat supply. Animals don’t stop growing when the slaughter house closes. Meat animals, like perishable produce, have a “best if used by” date. Our decades of pursuing greater efficiency by concentrating food production in ever larger, more efficient operations can have consequences we never imagined.

For grain and legume farmers, work goes on as usual, except for social distancing at parts houses and other suppliers. I do miss not being able to drop into a restaurant and have lunch or just a cuppa. And some of my favorites might not be there when this is over. For all of us, markets are being hammered down some more. The livestock sector is being hit especially hard. Who ever thought markets for milk, beef, and pork on-the-hoof could just disappear overnight? And the same is happening to vegetable growers who depended on restaurants and schools to use their crops. But those who have been selling direct to consumers are seeing big spikes in demand. Markets will adjust eventually, and no one needs to go hungry. The farms will keep the cities fed, and the service economy will revive when the time is right.

But it may take a while. After 9/11, it took the airline industry three years to rebound to previous levels. Until a COVID-19 vaccine is available, I expect restaurants, movie theaters, sports events, and any event that would normally draw large crowds will be seriously handicapped. On the other hand, maybe not. People flock to beaches and parks when given the chance.

So far $2.4 trillion in stimulus money has been authorized by Congress. What happens when all that new money gets spent? Will we have rapid inflation? Maybe not. Most of that money will go for rent, mortgages, utilities, and other expenses that would otherwise go unpaid in this crisis. It will have to be paid back eventually, though, through higher taxes and/or inflationary policies that make the debt appear to be smaller than it really is. Personally, I prefer the former.

From 1946 to 1960, earnings of individuals or married couples over $200,000 ($2.8 million in 2020 dollars) were taxed at 91 percent. To stimulate the economy, President John F. Kennedy persuaded Congress to lower the rate to 70 percent for earnings over $100,000 for individuals and $200,000 for married couples. Corporate taxes were 50 percent of earnings over $25,000. During the decade of the ’60s, the economy boomed. We sent men to the moon. We built a national highway system of four lane roads without traffic lights from Seattle to New York and from Chicago to New Orleans. We built an overwhelming military deterrent of missiles, bombers, and warships to fight a Cold War. All this while fighting a war in Vietnam and sending billions of tons of food aid to Africa and Asia. I remember it as a time of middle class affluence like no decade since.

In 2020, the highest individual tax rate is 37 percent for earnings over $518,400 ($622,050 for married couples) and 21 percent for corporations. Our national debt in March, 2020 — before COVID trashed our economy — was $18 trillion, about 85 percent of 2019 GDP of 21.2 trillion. In 1980, before the tax-cutting of the last 40 years, national debt was 68 percent of GDP. National debt, it seems, has been stimulated more than the economy in the last four decades.

So far this year Congress has added $2.4 trillion because of COVID. So, by the end of 2020 national debt will most likely be well over 100 percent of GDP. Sorry folks, besides cutting spending, it’s time to raise taxes and reverse the trend. Do it for our grandchildren.

 

Jack DeWitt is a farmer-agronomist with farming experience that spans the decades since the end of horse farming to the age of GPS and precision farming. He recounts all and predicts how we can have a future world with abundant food in his book “World Food Unlimited.” A version of this article was republished from Agri-Times Northwest with permission.

Any views or opinions expressed in this article are those of the author and do not reflect those of AGDAILY. Comments on this article reflect the sole opinions of their writers.
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