The Evolution of a National Burden – Part 5/7

The 16th Amendment was not the first time there was an American income tax. The financial requirements of the Civil War prompted the first American income tax in 1861. At first, Congress placed a flat 3-percent tax on all incomes over $800 and later modified this principle to include a graduated tax.

Congress repealed the income tax in 1872, but the concept as a source for funds did not go away.

In 1894, as part of a high tariff bill, Congress enacted a 2-percent tax on income over $4,000. The tax was almost immediately struck down by a five-to-four decision of the Supreme Court, even though the Court had upheld the constitutionality of the Civil War tax as recently as 1881.

In addition, Democratic Party Platforms under the leadership of three-time Presidential candidate William Jennings Bryan (1860 – 1925), however, consistently included an income tax plank, and the progressive wing of the Republican Party also supported the concept.

In 1909, progressives in Congress again attached a provision for an income tax to a tariff bill. Conservatives, hoping to kill the idea for good, proposed a constitutional amendment enacting such a tax; they believed an amendment would never receive ratification by three-fourths of the states. Much to their surprise, the amendment was ratified by one state legislature after another, and on February 25, 1913, with the certification by Secretary of State Philander C. Knox, the 16th amendment took effect. Source: Our Documents.gov

Then came World War I (1917 – 1921) that cost $20 billion (equal to $256.4 Billion in 2012)

By 1920, the federal debt was $22 billion (equal to $253 Billion in 2012). It would take ten years to pay that debt down to $16.2 billion ($221.92 Billion in 2012).

Next was World War II and the national debt grew to $43 billion by 1940. In 1950, after defeating Nazi Germany and Imperial Japan in 1945, the national debt was $257.4 Billion (equal to $2.451 Trillion in 2012).
The Marshall Plan to rebuild Europe after World War II cost the US $13 Billion (equal to $112 Billion in 2012). The Marshall Plan money was in the form of grants that did not have to be repaid. The total of American grants and loans to the world, 1945-53, came to $44.3 Billion (equal to $381.9 Billion in 2012).
The Korean War (1951-1953) cost $30 Billion ($273.6 Billion in 2012). In 1953, the National Debt was $275.2 Billion.
The cost of the Vietnam War (1959-1975) was $111 Billion ($743 Billion in 2012). In 1975, the National Debt reached $576.6 Billion
The Persian Gulf War (1990-1991) cost $61 Billion ($102 Billion in 2012). By 1990, the National Debt reached $3.233 Trillion
The Iraq War (2003 to 2012) cost $715 Billion ($784 Billion in 2012 dollars) and still growing.
The war in Afghanistan has cost $583.3 Billion to November 10, 2012 and it isn’t over yet.

After World War II, the National Debt was reduced from 120% to 30% of GDP by 1981 when President Carter (1977 – 1981) left the White House. During that thirty-six year period (1945 – 1981), welfare spending in the US, including unemployment and workers compensation funded by taxes paid by workers and/or employers, cost $509.8 Billion and the federal government funded wars in Korea and Vietnam but still reduced the National Debt.

I repeat: under seven US presidents, Truman, Eisenhower, Kennedy, LBJ, Nixon, Ford and Carter, the National Debt was reduced from 120% (1945 at the end of World War II) of Gross Domestic Product to 30% of GDP by 1981.

Then Ronald Reagan was elected president.

Note: The Inflation calculator used for this series of posts may be found at Dave Manuel.com, and the primary source for government spending was US Government Spending.com

Continued on December 7, 2012 in The Evolution of a National Burden – Part 6 or return to Part 4

Also discover Each President’s share of the US National Debt and learn more from the National Debt Info-Graphic by President 1945 – 2012

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Lloyd Lofthouse, a former U.S. Marine and Vietnam Veteran, is the award winning author of The Concubine Saga.

His latest novel is Running with the Enemy. Blamed for a crime he did not commit while serving in Vietnam, his country considers him a traitor. Ethan Card is a loyal U.S. Marine desperate to prove his innocence or he will never go home again.

And the woman he loves and wants to save was trained to hate and kill Americans.

To follow this Blog via E-mail see upper left-hand column and click on “FOLLOW!”

National Debt Info-Graphic by President 1945 – 2012

By president, starting with Truman in 1945, this info-graphic shows the growth of the national debt, the growth of the interest on the national debt, the lowest and highest tax rates at the beginning of each president’s term, the average GDP per president and the average unemployment rate during each president’s term.

In addition, at the bottom, the senate and house majorities are included for each president. Red is for the GOP (Republicans) and blue is for the Democrats. This way, anyone may see which party held the majority in one or both houses of Congress during periods where the debt increased the fastest. Starting with Reagan to Obama but not including Obama, the fastest gains were when a Republican was president and the GOP held a majority in one or both houses of Congress.

Using all of the data on this info-graphic, you may discover who holds the most responsibility by president and/or Congress for the growth of the national debt.

Starting with President Carter, pay attention to the growth of the debt in comparison to the changing tax rates and you may discover one of the reasons for the more than $16 Trillion national debt.

Also pay attention to the average unemployment rates of each president and you will learn that as the taxes went down, federal spending went up, and unemployment climbed (on average). Growth of annual GDP also started to drop as taxes dropped. From Truman – Ford, annual GDP averaged 3.85%, but from Carter to G. W. Bush, GDP averaged 2.96%.

Unemployment also went up as taxes went down. Truman to Ford, the average unemployment rate was 5.41% (and that includes the 8.09% under Ford).

From Carter to G. W. Bush, the average unemployment rate increased to 6.17%.

In fact, starting with Reagan, the total debt each president is responsible for includes the interest to December 2012.

– CLICK on INFO-GRAPHIC for LARGER IMAGE! –

* Reagan was responsible for lowering taxes from seventeen brackets to two brackets and those rates appear in G. H. W. Bush’s column

** The G. W. Bush tax cuts appear in President Obama’s column. However, in 2008, his last year in office, it was the worst year for jobs since 1945 and the unemployment rate was 7.2% in December. The total number of jobs lost in 2008 was 2.6 million. In addition, under-employment reached a record high from 715,000 to 8 million people, the highest since such records were first kept in 1955. Source: CNN.com

Then in 2008, G. W. Bush’s last year as president, the average GDP for the 4th quarter dropped to almost a minus10%. Source: Treasury.gov

*** Unemployment reached a high of 10% in October 2009 while GDP retreated to a minus 2.6%. The lowest unemployment rate reached 7.8% in September 2012 (Obama’s presidency does not end until 2016 so we do not have average unemployment for his term or a final average GDP). Source of data: bls.gov

Total GDP growth since 2009 to the first quarter in 2012 has been + 6.8%. Source: Treasury.gov

Data and facts mostly from primary sources:

Note: Deductions are not accounted for

Tax Rate in 1945 under Truman (listed tax rates and brackets apply to all taxpayers with twenty-five tax brackets) – average unemployment during his term was 4.26% while GDP grew + 4.82%. Note: During the Great Depression, unemployment reached as high as almost 25%.

23% on earnings up to $2,000 but not over – adjusted for inflation $24,931
50% on earnings of $14,000 to $16,000 – adjusted for inflation $174,517 – 199,499
75% on earnings of $44,000 to $50,000 – adjusted for inflation $174,517 – 199,449
94% on earnings over $200,000 – adjusted for inflation $2,493,107

Tax Rate in 1953 under Eisenhower (married filing separately with twenty-four/twenty-six tax brackets) – average unemployment was 4.89% during his term while GDP grew + 3%.

22.2% on earnings up to $2,000 but not over – adjusted for inflation $16,807
53% on earnings of $14,000 to $16,000 – adjusted for inflation $117,652 – 168,882
75% on earnings of $44,000 to $50,000 – adjusted for inflation $369,764 – 420,187
92% on earnings over $200,000 – adjusted for inflation $1,680,746

Tax Rate in 1961 under Kennedy (married filing jointly with twenty-four/twenty-six tax brackets) – average unemployment was 5.97% during his term while GDP grew + 4.65%.

20% on earnings up to $4,000 but not over – adjusted for inflation $30,017
50% on earnings of $32,000 to $36,000 – adjusted for inflation $240,139 – 270,156
75% on earnings of $100,000 – 120,000- adjusted for inflation $750,434 – 900,520
91% on earnings over $400,000 – adjusted for inflation $3,001,734

Tax Rate in 1963 under LBJ (married filing jointly with twenty-four/twenty-six tax brackets) –average unemployment was 4.17% during his term while GDP grew + 5.05%.

20% on earnings up to $4,000 but not over – adjusted for inflation $29,331
50% on earnings of $32,000 to $36,000 – adjusted for inflation $234,645 – 263,976
75% on earnings of $100,000 – 120,000- adjusted for inflation $733,267 – 879,920
91% on earnings over $400,000 – adjusted for inflation $2,933,067

Tax Rate in 1969 under Nixon (married filing jointly with twenty-five/thirty-three tax brackets) – average unemployment was 5.09% during his term while GDP grew + 3%

14% on earnings up to $1,000 but not over – adjusted for inflation $6,114
36% on earnings of $24,000 to $28,000 – adjusted for inflation $164,733 – 171,644
53% on earnings of $52,000 – 64,000- adjusted for inflation $317,922 – 391,289
70% on earnings over $200,000 – adjusted for inflation $1,222,777

Tax Rate in 1974 under Ford (married filing jointly with twenty-five/thirty-three tax brackets) – average unemployment was 8.09% during his term while GDP grew +2.6%.

14% on earnings up to $1,000 but not over – adjusted for inflation $4,551
36% on earnings of $24,000 to $28,000 – adjusted for inflation $109,231 – 127,437
53% on earnings of $52,000 – 64,000- adjusted for inflation $236,668 – 291,284
70% on earnings over $200,000 – adjusted for inflation $910,262

Tax Rate in 1977 under Carter (married filing Jointly with twenty-six/thirty-four tax brackets) – average unemployment was 6.54% during his term while GDP grew +3.25%

0% on earnings up to $3,200 but not over – adjusted for inflation $11,848
36% on earnings of $27,200 to $31,200 – adjusted for inflation $100,712 – 115,522
53% on earnings of $55,200 – 67,200- adjusted for inflation $204,385 – 248,817
70% on earnings over $203,200 – adjusted for inflation $752,375

Tax Rate in 1981 under Reagan (married filing jointly with sixteen/seventeen tax brackets) – average unemployment was 7.54% during his term while GDP grew 3.4%

0% on earnings up to $3,400 but not over – adjusted for inflation $8,393
37% on earnings of $29,200 to $35,200 – adjusted for inflation $73,806 – 86,888
54% on earnings of $60,000 – 85,600 – adjusted for inflation $148,105 – 211,297
70% on earnings over $215,400 – adjusted for inflation $531698

Tax Rate in 1989 under G. H. W. Bush (married filing jointly with two tax brackets) – average unemployment was 6.3% during his term while GDP grew 2.17%

15% on earnings up to $30,950 but not over – adjusted for inflation $56,004
28% on earnings over $30,950 – adjusted for inflation $56,004

Tax Rate in 1993 under Clinton (married filing jointly with five tax brackets) – average unemployment was 5.2% during his term while GDP grew 3.88%.

15% on earning up to $36,900 but not over – adjusted for inflation $57,298
39.6% on earnings over $250,000 – adjusted for inflation $388,200

Tax Rate in 2001 under G. W. Bush (married filing jointly with five tax brackets) – average unemployment was 5.27% during his term while GDP grew 2.09%.

15% on earning up to $45,200 but not over – adjusted for inflation $57,267
39.1% on earnings over $297,350 – adjusted for inflation $376,725

Tax Rate in 2009 under President Obama (married filing jointly with six tax brackets) – average unemployment reached a high of 10% in October 2009 while GDP shrunk a minus – 2.6%. The lowest unemployment reached 7.8% in September 2012 (Obama’s presidency does not end until 2016 so we do not have average unemployment or GDP for his term). Source: bls.gov

10% on earnings up to by not over $16,700 – adjusted for inflation $17,466
25% on earnings of $67,900 – 137,050 – adjusted for inflation $71,015 – $143,338
35% on earnings over $372,950 -adjusted for inflation $390,060

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According to Dave Manuel.com, “From 1948 through to 2009, the United States economy has grown by an average of 3.28% per year. … If we exclude Barack Obama due to incomplete data, then the worst performance was turned in by George W. Bush, as the economy grew by an average of 2.09% per year during his time as president.”

“Democrats have occupied the White House in 26 of the 62 years since 1948. Average GDP growth in the country over those 26 years has been 4.01%.

“Republicans have occupied the White House in 36 of the 62 years since 1948. Average GDP growth over those 36 years has been 2.75%.”

Do you know the difference between a primary fact gathering source, the media and an opinionated radio or TV talk show or Blog?

Answer: primary fact gathering sources are where the media, talk shows and Blogs get their facts. A few examples of primary fact gathering sources are the US Treasury, the Bureau of Labor Statists, the Centers for Disease Control, the FBI, the CIA Factbook and the World Bank.

However, then what the public hears may be distorted due to political and/or religious bias or political agenda.

The US Treasury reports that, “From 2009 to the present, federal revenues relative to the economy have been at their lowest levels in 60 years.

However, “Growth in the U.S. has outpaced that of other advanced economies (Germany, Euro area, Japan and UK) affected by the global financial crisis.

“Total GDP growth since 2009 to the first quarter in 2012 was + 6.8%.” But in the fourth quarter of 2008, G. W. Bush’s last year as president, average GDP was almost a minus10%.

Then by the 3rd quarter of 2009, GDP had returned to growth instead of loss and has stayed in the growth area since then. Source: Treasury.gov

The Evolution of a National Burden – Part 3/7

If you have heard or read, as I have, that the US Founding Fathers did not support universal health care for Americans, it helps to compare medical care then with today and then remember that the Founding Fathers wrote a Constitution that was flexible and designed to change with the times as the country grew.

In fact, when the US Founding Fathers wrote the US Constitution, there wasn’t one country on the planet that had universal health care.

The first country that would have a universal health care system was Germany with Otto von Bismarck’s social legislation in 1883 (almost one hundred years after the adoption of the US Constitution).

Next was the UK when she passed the National Insurance Act in 1911 marking the first steps toward universal health care covering most employed persons and their financial dependents and all persons who had been continuous contributors to the scheme for at last five years.

As you have now learned, in 1787, the concept of universal healthcare did not exist anywhere in the world, so how could America’s Founding Fathers be against something that did not exist?

In 1792, America’s population was 4.2 million and its GDP was $223 million, the cost of defense was $1.2 million (.5% of GDP); interest on the Federal debt was $2.3 million (1% of GDP), the deficit was $1.4 million (.6% of GDP), and the national debt was $77.2 million (34.6% of GDP).

There was no welfare spending probably because 95% of Americans lived in rural America and produced most of the food they consumed from farming and/or hunting. If you live in a log cabin or a sod hut that you built and you grow or hunt the food you eat, is there a need for food stamps?

Today, 79.2% of Americans live in urban cities and do not grow or hunt the food they eat. These people buy food from markets.

In fact, less than 1% of America’s population claims farming as an occupation. The number of farms in the US is about two million. Source: EPA.gov

In addition, life expectancy in 1790 was age 34.5 for males and 36.5 for females, and “the views held by 18th century physicians are very different from those held by medical practitioners of today. Physicians in the 18th century had no knowledge of bacteria, germs, or viruses, nor of the fact that disease was spread by them. Therefore, they did not practice sterilization, or personal or hospital hygiene. … (and) Many people lived too far away from any doctors to use their services, and other people did not have access to doctors because of social customs or beliefs.” Source: US History.org

However, today, life expectancy in the US is about age 75.7 for males and 80.8 for females. Do you know how that increase in the average life span came about?

In the 218 years since 1792, the nation has changed dramatically. Today we have paved roads, railroad, airports, hospitals, electricity, X-ray machines, Cat Scans, MRIs, antibiotics, nuclear weapons, missiles, passenger aircraft, lasers, modern medicine, the Internet, etc. In 1792, heat came from burning coal or wood and light came from candles. Most people went to the bathroom in an outhouse if there was one available. For most of the US, there was no toilets, running water, sewer systems, etc.

In addition, the first commercial electric power transmission in the US came near the end of the 19th century. Availability of large amounts of power from diverse locations would become possible after Charles Parsons’ production of turbogenerators beginning in 1889.

In 1792, there was no federal pension programs for old people such as federal employee retirement and disability ($119.9 Billion today); Social Security ($706.7 Billion today and funded through a worker-employee tax trust paid for by working people).

Did the nation need a national health care plan, retirement and Social Security programs when the average person would be dead by age 35? Did anyone even think about it back then?

Beyond the occasional local community supported one-room school house, there was no state or national education systems. But the nation changed, and in 2010 the federal budget cost of public education was $139.4 Billion ($113.2 Billion was paid to the states by the federal government) and state and local costs of public education were $872 Billion funded by state and local taxes such as sales tax and property tax.

Does welfare make Americans dependent and do we have a welfare state in America today?
The answer is NO!

By 2010, America’s population was 308.7 million (compared to 4.2 million in 1792); its GDP was $14.5 Trillion; the cost of defense was $847.2 Billion; interest on the federal debt was $196.2 Billion; and although there was no socialist, life-time cradle to grave welfare system in the US (did you watch the above video?), the cost of welfare was listed as $502.3 Billion that is explained in detail by the CRS overview of federal welfare spending.

We often hear about the cost of big government. Well, the cost of running the federal government in 2010 was only $24.7 Billion for a federal work force, not counting the military or judicial system (federal courts), of 2.8 million people or 0.9% (less than 1%) of the total US population .

Sixty-four thousand work in the federal judicial system and 1.6 million serve in the military fighting America’s endless wars. By June of 2012, the civilian federal work force was down to 2.2 million or .7% (still less than 1%) of the current 314.8 million US population.

From The Encyclopedia of Earth we learn that, “The tax mechanisms used during the first 150 years or so of U.S. tax history bears little resemblance to the current system of taxation. First, the U.S. Constitution restricted “direct” taxation by the federal government – meaning taxes directly on individuals. Instead, the federal government relied on indirect taxes including taxes on imports (tariffs) and excise taxes. Tariffs were the major source of U.S. government receipts from the beginning of the nation up to the early 1900s. For example, in 1800, custom duties comprised about 84% of government receipts. Internal federal revenue collections (which exclude tariffs on imports) as recently as the early 20th century were primarily derived from excise taxes on alcohol. In 1900 over 60% of internal revenue collections came from alcohol excise taxes with another 20% from tobacco excise taxes.”

As you have discovered, the source of federal government revenues has changed dramatically the last 200 years as the country changed along with the needs of her people and military.

For example, the cost of a musket to arm one US solider in 1792 would have been $250 to $500 in today’s money. For a comparison, a legal fully automatic M16 assault weapon used by US troops that has been registered with the ATF, and can be transferred to a private citizen currently sells for about $16,000, plus a $200 transfer tax.

The cost of one Nimitz-class aircraft carrier runs about $4.5 billion. The original USS Constitution, also known as Old Ironsides, was launched in 1797 and cost about $300,000 to build ($5.45 million in 2012).