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Rep. Ocasio-Cortez Wants to Emulate FDR on Taxes to Fund Green New Deal

The new congresswoman from the Bronx believes this will fund the Green New Deal. She's off-mark.
Gabriella Hoffman
by Gabriella Hoffman Read Profile arrow_right_alt

There are many issues awarding the newly-minted Congresswoman Alexandria Ocasio-Cortez (D-NY) too big of a platform before serving in Congress.

She’s the future of the Democrat Party, some observers declare, given her socialist chops. The new-found embrace of socialism by the Democrat Party isn’t so new. That party has toyed with socialism for decades; they are just more transparent about it now.

It can be strongly argued she hasn’t earned her stripes yet to be elevated to great heights. Who am I, a 27-year-old female, to say this? But I agree with former Missouri U.S. Senator Claire McCaskil (D-MO), a rarity I must say, that she’s hasn’t served in Congress long enough to be elevated.

McCaskill (D-MO), who was handily defeated by her successor Senator Josh Howley (R-MO), remarked that Ocasio-Cortez is a “bright and shiny new object” but cautioned she hopes Ocasio-Cortez “realizes that parts of the country that are rejecting the Democratic Party…need to hear how their work is going to be respected.”

It’s fair to criticize Ocasio-Cortez on her preposterous policy proposals like the Green New Deal and blunders like unemployment is low due to people having two jobs but not so much her dancing skills from her high school days.

What is fair game, however, is her complete and utter misunderstanding of economics. Case in point: her recent call for taxing up to 70 percent of high income earners who should pay “their fair share” fund outlandish proposals like a Green New Deal:

“What is the problem with trying to push our technological capacities to the furthest extent possible?” Ocasio-Cortez asked. “There’s an element where yeah, people are going to have to start paying their fair share in taxes.”

During the 60 Minutes interview with Anderson Cooper, he probed her about whether such a proposal makes her a radical, to which she replied in the affirmative—likening herself to fellow “radical” President Franklin D. Roosevelt’s. FDR famously taxed Americans at a 94% income tax rate and felt a kinship with Soviet dictator Joseph Stalin, who also taxed and collected 90% of income for those he oppressed. I guess that’s a great radical to emulate.

Here’s a taste of FDR’s economic policies for your reading pleasure:

Congress reduced taxes. Income tax rates were cut across the board. FDR’s top marginal rate, 94% on all income over $200,000, was cut to 86.45%. The lowest rate was cut to 19% from 23%, and with a change in the amount of income exempt from taxation an estimated 12 million Americans were eliminated from the tax rolls entirely.

Corporate tax rates were trimmed and FDR’s “excess profits” tax was repealed, which meant that top marginal corporate tax rates effectively went to 38% from 90% after 1945….By the late 1940s, a revived economy was generating more annual federal revenue than the U.S. had received during the war years, when tax rates were higher. Price controls from the war were also eliminated by the end of 1946. The U.S. began running budget surpluses.

It should be noted that FDR’s policies kept poor people in poverty:

New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.

Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people – blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.

What about the good supposedly done by New Deal spending programs? These didn’t increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen — we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.

UCLA put out a 2004 study by economists Harold L. Cole and Lee E. Ohanian that found that FDR’s policies — including high taxation — prolonged the Depression by seven years.

“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian*, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”*

“President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services,” said Cole, also a UCLA professor of economics. “So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.”

“High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns,” Ohanian said. “As we’ve seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market’s self-correcting forces*.”*

Giancarlo Sopo, a self-proclaimed Democrat with family who fled communist Cuba, sounded the alarm on the danger of his fellow embracing Ocasio-Cortez’s policies, which his family escaped. Sopo wrote:

Democratic socialism is a lot like the system my family fled, except its proponents promise to be nicer when seizing your business…Despite my working-class immigrant roots, I am concerned by the popularity of socialism within my party. On the night of Alexandria Ocasio-Cortez’s victory in New York, I thought her use of the term was a misnomer. Then I began studying the views of the Democratic Socialists of America (DSA), the rapidly growing national organization she belongs to, and was disturbed by what I learned.

Like those of yesteryear, today’s socialists believe the government should nationalize major industries*, propose eliminating private ownership of companies, and reject profits. In other words, democratic socialism is a lot like the system my family fled, except its proponents promise to be nicer when seizing your business.*

When I confronted some progressive friends about this, they initially dismissed my concerns. After sharing some articles with them, the conversation shifted to “they just want us to be more like the Nordic countries” and “they’re not like real socialists!” Both are reductionist, self-delusions to avoid confronting difficult truths.

The latter is a particularly absurd fallacy because it requires one to believe that adults who willfully join socialist organizations, sound like socialists and call themselves socialists are not what they claim to be.

Unbeknownst to Ocasio-Cortez and her acolytes, unleashing market-based economic policies globally has substantially reduced economic inequality here and abroad.

In 2015, the Huffington Post published a piece on how capitalism—not high taxation or nationalizing business—can reduce income equality.

The answer to fixing the deficit and fixing income inequality is innovation driven through capitalism. Many of the best ideas that work in anything are the non-linear strategies, or the non-obvious ways of getting things done. When the obvious doesn’t work, which it isn’t right now, it’s time to look at the problem in a non-linear fashion.

If you want to help balance the budget and reduce the federal deficit, instead of putting a gun to the head of the wealthy and forcing them to pay more in taxes, play to the vanity of large corporations and sell them the naming writes to streets, parks and other publicly held properties.

Even the New York Times argued income inequality was on the decline as recent as 2014. Moreover, the World Bank noted that although the population grew by about 2 billion, roughly 1.2 billion people moved up and out of extreme poverty. The more economically prosperous a country—especially when the wealth generators and highest income earners aren’t burdened by high taxes—the less income equality the world sees.

I implore my fellow Millennial, the newly-elected Congresswoman from New York, to not take cues from The Communist Manifesto on economic policies. High taxation and nationalization of industries doesn’t reduce economic inequality; it aids and abets it by lending itself to creating equal miserable outcomes.


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