Deficit spending leads to inflation. If the government had no income, it would severely undermine faith in the dollar, which is already bad due to republican overspending. Growth without high inflation requires high tax rates on the rich, which historically has grown wealth for all demographics including the richest 5 percent.
http://www.alternet.org/workpl...onomic_crashes/?page=2
"Do tax cuts actually stimulate the economy?
Vast sums of money have gone into creating that myth. Major intellectual industries have been created and sustained to sell that story. At the center of that claim is the Legend of Saint Ronald Retro Reagan.
Reagan cut income taxes, big time. But he raised Social Security and Medicare taxes. That meant that rich people paid less and working people paid more. The immediate result was that the economy faltered. Then Reagan raised taxes, though not by as much as he cut them. At about the same time, oil dropped from $40 a barrel to $20. The economy did grow. That is until the stock market crash of '87.
There is vastly more evidence the other way. Tax increases stimulate the economy. It may not make sense, it may be counterintuitive, but here are the facts.
What if taxes went up to over 90 percent?
According to the Reaganauts and Bushwackers, the world would collapse. Business would grind to a halt. Investors would flee. Workers would lay down their tools.
Back in World War II, taxes did go up that high.
Americans who earned as little as $500 per year paid income tax at a 23 percent rate, while those who earned more than $1 million per year paid a 94 percent rate.
The result:
The American economy expanded at an unprecedented (and unduplicated) rate between 1941 and 1945. The gross national product of the United States, as measured in constant dollars, grew from $88.6 billion in 1939 -- while the country was still suffering from the depression -- to $135 billion in 1944, according to Economic History Services.
From 1946 to 1963, the top rate fluctuated from 86 percent to 91 percent.
Average economic growth was 3.5 percent per year.
The current top income tax rate is 35 percent.
Economic growth has been, at best, 2.5 percent -- that is, if you stop counting in 2007. And don't consider the type of growth, which consisted primarily of increased debt and pyramids of borrowing.
In 1992 the top tax rate was 31 percent.
Bill Clinton increased it to 39.1 percent.
The Dow Jones average went up 360 percent. The number of jobs went up 237,000 per month (under Bush, as of 2007, it was just 72,000 per month). Median household income went up rather than down. The budget was balanced.