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Credit: Jared Bernstein

Behind almost all of the disturbing issues raised by Mitt Romney's jaw-dropping tax returns stands one largely unchallenged conservative article of faith. Much lower tax rates for capital gains than income earned through labor, conservatives claim, spur investment, catalyze economic growth and fuel job creation. But if that Republican theology isn't true, then the United States has for decades done nothing more than deliver a massive windfall to the wealthiest Americans needing it least. Unfortunately, that's precisely what the data show. As it turns out, lower capital gains taxes increase income inequality - and not investment - in America.

As Paul Krugman recounted two weeks ago, the historically low capital gains rate enjoyed by Mitt Romney hasn't always been 15 percent. In the not-too-distant past, it reached 39.9 percent and with the Reagan tax reform of 1986 was briefly the same as the top tax rate on income. But successive presidents of both parties lowered the capital gains rate on investment income because they believed, the Washington Post explained, "it spurs more investment in the U.S. economy, benefiting all Americans."

But as Jared Bernstein demonstrated with the chart above, there's no evidence to support that claim. Bernstein found that the business cycle, not acts of Congress, drive investment in the U.S.

Hard to see anything in the picture supporting the view that either the level or changes in cap gains taxes play a determinant role in investment decisions.

Remember, the ostensible reason for the favoritism in tax treatment here is to incentivize more investment and faster productivity growth. But that's not in the data and the reason it's not in the data is because investors aren't nearly as elastic to cap gains rates as their lobbyists say they are (more precisely, they'll carefully time their realizations to maximize their gains around rate changes, but that's not real economic activity-that's tax planning).

Reviewing other analyses, Brad Plummer of the Washington Post concurred with that assessment that low capital gains taxes don't necessarily jump-start investment in the economy:

The top tax rate on investment income has bounced up and down over the past 80 years—from as high as 39.9 percent in 1977 to just 15 percent today—yet investment just appears to grow with the cycle, seemingly unaffected...

Meanwhile, Troy Kravitz and Len Burman of the Urban Institute have shown that, over the past 50 years, there's no correlation between the top capital gains tax rate and U.S. economic growth—even if you allow for a lag of up to five years.

Billionaire Warren Buffett, the inspiration for the "Buffett Rule" advocated by President Obama and his Democratic allies, couldn't agree more. As he told The New York Times last year:

"I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77—shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off."

But if lower capital gains tax rates have had little impact on investment, they have had an outsized impact on income inequality in the United States.

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If nothing else, Mitt Romney seems dedicated to proving that repetition of a lie will make it true. On no point is Romney's tilting against the windmill of truth more comically pathetic than his long-ago debunked claim that President Obama "did not cause this recession, but he made it worse." After a tidal wave of fact-checkers demolished his mythology last summer, Romney on June 30 pretended, "I didn't say that things are worse" before reinstating the falsehood in his stump speech just days later. Now, Mitt has a new twist on his "Obama made it worse" fraud, declaring in light of the improving economic outlook that "It's getting better not because of him, it's in spite of him and what he's done."

Sadly for the myth-maker from Massachusetts, the numbers and the overwhelming consensus of economists - including John McCain's 2008 brain trust - demand Mitt Romney give credit where credit is due.

That, of course, is something the serial deceiver Romney is refusing to do, even as he acknowledges the economy is improving. As Mitt put it in New Hampshire ten days ago:

"I'm sure the president will want to take credit for it, for any improvement. Guess what? He doesn't deserve it."

Two days later during a GOP debate, Romney repackaged his con job this way:

"The president is going to try and take responsibility for things getting better. You know, it's like the rooster taking responsibility for the sunrise. He didn't do it," Romney said. "In fact, what he did was make things harder for America to get going again."

But back on planet Earth where the force of gravity still applies and the sun rises in the east and sets in the west, Romney's slander shuold receive the ridicule it rightly deserves.

This summer, Time blasted Romney's accusation that "the recession is deeper because of our President," concluding "that Romney's claim has no credible basis" because "there's no credible economic data showing that Obama has inflamed our economic problems." As Greg Sargent noted on June 27, both the AP and the Washington Post's own fact-checker demolished Romney's talking point on the recession which the NBER declared over in June 2009. Confronted three days later by NBC producer Sue Kroll about the growing economy, modest job gains and surging stock market, Romney simply denied he ever made the charge:

"I didn't say that things are worse...What I said was that economy hasn't turned around."

Nevertheless, just four days later Romney marked Independence Day by returning to his lie. As the New York Times reported:

Speaking at the annual July Fourth parade here on Monday, Mr. Romney told a crowd of supporters and passersby, "the recession is deeper because of our president," adding, "it's seen an anemic recovery because of our president."

Mr. Romney made a similar assertion earlier when reporters had pressed him on the point near the parade staging grounds, after initially seeming to limit his commentary to the president's handling of the recovery, which he said, "has been slower and more painful,'' But then he went ahead and said it, that the president "made the recession worse."

As it turns out, it's not just the tidal wave of reporters and fact-checkers that washed away the mud Mitt Romney hurled at President Obama on the economy. A bevy of economists, including ones who worked for Romney endorser John McCain, long ago concluded that Barack Obama saved the U.S. economy from calamity.

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Credit: TPM

On Monday, Jeb Bush's Wall Street Journal op-ed raised conservative hopes that the former Florida Governor would jump in and grab the wheel of the clown car that is the 2012 GOP presidential field. But if Republicans were disappointed when Jeb squelched the nascent "Draft Jeb" movement, the American people should be relieved. After all, the American social mobility that Jeb touted in "Capitalism and the Right to Rise" is at modern lows after the decade of economic devastation presided over by his brother. And despite Jeb's mythmaking about taxes, regulations and so much else, the record shows that more Americans can climb the economic ladder when a Democrat sits in the White House.

What Upward Mobility? Whose Right to Rise?

To be sure, conservatives are praising Jeb Bush's ahistorical and data-free endorsement of the call to arms Congressman Paul Ryan issued at the Heritage Foundation:

Congressman Paul Ryan recently coined a smart phrase to describe the core concept of economic freedom: "The right to rise."

Think about it. We talk about the right to free speech, the right to bear arms, the right to assembly. The right to rise doesn't seem like something we should have to protect.

But we do. We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

Unfortunately for Jeb Bush and Paul Ryan, the supposed "right to rise" is now in tatters after the very years in which their ideology reigned supreme. As Fareed Zakaria pointed out in "The Downward Path of Upward Mobility":

Some believe we're still doing fine. In his address to the Heritage Foundation last month, Rep. Paul Ryan (R-Wis.) declared, "Class is not a fixed designation in this country. We are an upwardly mobile society with a lot of movement between income groups." Ryan contrasted social mobility in the United States with that in Europe, where "top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class."

In fact, over the past decade, growing evidence shows pretty conclusively that social mobility has stalled in this country. Last week, Time magazine's cover asked, "Can You Still Move Up in America?" The answer, citing a series of academic studies was, no; not as much as you could in the past and -- most devastatingly -- not as much as you can in Europe.

As Zakaria noted, according to the OECD, upward mobility from the bottom was "was significantly lower in the United States than in most major European countries, including Germany, Sweden, the Netherlands and Denmark." And as TPM reported, an analysis by the Economic Mobility Project suggested that Jeb and George Bush could be the poster children for the limits of social mobility in the United States:

"Most studies find that, in America, about half of the advantages of having a parent with a high income are passed on to the next generation," their report concludes. "This means that one of the biggest predictors of an American child's future economic success -- the identity and characteristics of his or her parents -- is predetermined and outside that child's control. To be sure, the apple can fall far from the tree and often does in individual cases, but relative to other factors, the tree dominates the picture. These findings are more striking when put in comparative context. There is little available evidence that the United States has more relative mobility than other advanced nations. If anything, the data seem to suggest the opposite."

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Credit: ThinkProgress

When President Obama on Tuesday declared that decades of Republican trickle-down economics "never worked," conservatives were predictably apoplectic.

But for all of their protests of "class warfare", "socialism" and worse, Obama was being kind to the Republican ideologues. After all, as the historical record shows, from economic growth and job creation to stock market performance and just about every other indicator of the health of American capitalism, the modern U.S. economy has almost always done better under Democratic presidents. Despite GOP mythology to the contrary, America generally gained more jobs and grew faster when taxes were higher (even much higher) and income inequality lower. And while the U.S. recovery from the Bush recession remains painfully slow, most economists - including the nonpartisan CBO and some of John McCain's own 2008 advisers - believe President Obama saved it from the abyss.

(Click a link below for the details on each.)

• Job Creation and Economic Growth
• The Stock Market
• Income Inequality
• National Debt
• The Bush Recession and the Obama Recovery

Job Creation and Economic Growth

To be sure, George W. Bush provided the perfect bookend to era of modern Republican economic management ushered by Herbert Hoover. The verdict on President Bush's reign of ruin was pronounced even before Barack Obama took the oath of office. Just days after the Washington Post documented that George W. Bush presided over the worst eight-year economic performance in the modern American presidency, the New York Times on January 24, 2009 featured an analysis ("Economic Setbacks That Define the Bush Years") comparing presidential performance going back to Eisenhower. As the Times showed, George W. Bush, the first MBA president, was a historic failure when it came to expanding GDP, producing jobs and fueling stock market growth.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The meager one million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:

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Credit: CBPP

On this the fourth Thanksgiving weekend since the start of the Bush recession, families across America are still struggling with persistently high unemployment, underwater mortgages and stagnant wages. But as the nonpartisan Congressional Budget Office (CBO) reminded us this week, Americans can be thankful for the 2009 stimulus. Despite Republican mythmaking that the American Recovery and Reinvestment Act (ARRA) "created zero jobs," the CBO reported that the stimulus added up to 2.4 million jobs and boosted GDP by as much as 1.9 points in the past quarter. As it turns out, that conclusion confirms the consensus of most economists - including John McCain's 2008 brain trust- that President Obama's recovery program is continuing to deliver benefits for the American people.

From the beginning, the CBO has testified to the success of the largely concluded 2009 stimulus package in driving employment and economic growth. (That's one reason why Republicans like GOP frontrunner Newt Gingrich want to abolish the agency.) Now, as The Hill reported Tuesday, the CBO has found that "President Obama's 2009 stimulus package continues to benefit the struggling economy":

The agency said the measure raised gross domestic product by between 0.3 and 1.9 percent in the third quarter of 2011, which ended Sept. 30. The Commerce Department said Tuesday that GDP in that quarter was only 2 percent total.

CBO said that the stimulus also lowered the unemployment rate by between 0.2 and 1.3 percentage points and increased the number of people employed by between 0.4 million and 2.4 million...

By CBO's numbers, the $800 billion stimulus added up to 0.9 million jobs in 2009, 3.3 million jobs in 2010 and 2.6 million jobs in 2011.

But to really gauge the success of the stimulus, it's worth taking a second look at just how dire the U.S. economic situation was when the Obama administration made its fateful prediction that unemployment would peak at 8 percent. As The Economist and the Washington Post's Ezra Klein detailed, in early 2009 the American economy was not only in much worse shape than anyone imagined; it was literally on the brink of collapse.

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Credit: Martin Sullivan

House Budget Committee chairman and supposed GOP wunderkind Paul Ryan chose the wrong the week to attack President Obama for "sowing social unrest and class resentment." After all, just one day earlier the CBO confirmed that income inequality in the U.S. is at highest level in 80 years, a yawning gap certain to be enlarged by the latest crop of proposed Republican tax cut windfalls for the wealthy. Worse still, 24 hours after Ryan accused Obama putting the nation on path to "painful austerity, the kind you see in Europe," new GDP figures showed the U.S. economy grew at a healthier 2.5 percent last quarter. Meanwhile in the UK, where the Conservatives' draconian austerity program is now well underway, the economy has ground to a complete halt.

Writing in the New York Times, Catherine Rampell summed up the new U.S. GDP data from the Bureau of Economic Analysis. "The American economy, "she wrote, "has finally reached the size it was before the recession began four years ago." But as Martin Sullivan explained in words and pictures (above):

Republicans constantly remind us that the Obama stimulus--the American Recovery and Reinvestment Act of 2009--did not work. They voted against it. In the United Kingdom the government is led by Conservative Prime Minister David Cameron. His government did not adopt stimulus. Instead it boldly enacted an economic program that cut spending and raised taxes. The chart below shows the results and compares it to the U.S. experience. After three and a half years, U.S. GDP is just about returning to the pre-recession peak. That's awful. But it's far better than the U.K. where GDP is still five percent ($750 billion in US terms) below its pre-recession peak.

If anything, Sullivan understates the divergent paths and performance of Team Obama in Washington and David Cameron's Tory "austerians" in London. As the data show, the 2008 economic calamity in the U.S. was more severe. As The Economist and Ezra Klein of the Washington Post documented, only months after the February 2009 passage of the stimulus did the White House and the American people learn than the U.S. economy actually contracted by a staggering 8.9 percent in the last quarter of 2008. Reviewing CBO data, the Center on Budget and Policy Priorities found that without the American Recovery and Reinvestment Act, U.S. GDP could have been up to 2.5 percent lower. By the third quarter of 2011, CBO estimated that ARRA saved up to 2.5 million jobs and reduced the unemployment rate by 1.3 percent. As former McCain economic adviser Mark Zandi put it last year, federal intervention prevented "Depression 2.0."

To be sure, trillions in lost economic growth, persistently high unemployment and consumer spending stuck at 2006 levels are nothing to write home about. But British Prime Minister David Cameron would take U.S. economic performance in a heartbeat.

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Credit: Center for American Progress

On Thursday, House Speaker John Boehner peppered his address to the Economic Club of Washington with a dozen mentions of America's so-called "job creators." But in claiming that high taxes and unnecessary regulations have "pummeled" his supposed job producers, Boehner willingly misrepresented the source of and solutions to the nation's economic problems. After all, recent surveys show that regulations and taxes are not killing small business. With corporations flush with cash and the total federal tax burden at a 60 year low, the U.S. instead faces a demand crisis fueled by staggering household debt.

But John Boehner perpetrated the biggest fraud of his address when he declared, "Job creators in America are essentially on strike." If so, they've been on the picket line for a decade. As it turns out, George W. Bush's tax breaks for the wealthy sadly coincided with the worst period of job creation of any president since Herbert Hoover.

Like his lieutenant Eric Cantor, John Boehner has been regurgitating the "job creators" talking point for months. (Arguably, the sound bite dates back to 1993, when Republicans deployed the same "job killing" language against the Clinton upper-income tax increases that preceded the 1990's economic boom.) In May, Boehner served up the "job creators" line seven times in a speech to the Economic Club of New York. Contending that "the mere threat of tax hikes causes uncertainty for job creators -- uncertainty that results in less risk-taking and fewer jobs," Speaker Boehner explained that same month just who his magical job creators are:

"The top one percent of wage earners in the United States...pay forty percent of the income taxes...The people he's [President Obama] is talking about taxing are the very people that we expect to reinvest in our economy."

If so, those expectations were sadly unmet under George W. Bush. After all, the last time the top tax rate was 39.6 percent during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The meager one million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:

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Credit: Deloitte

Click here for larger image.

Judging from the furious reaction of some of the gilded-class crowd and their Republican protectors, billionaire Warren Buffett struck a nerve with his plea to Congress to "stop coddling the super-rich." Former American Express CEO, Harvey Golub and tea party sugar daddy Charles Koch were quick to protest respectively "the unfair way taxes are collected" and that "my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington." Meanwhile, House Majority Leader Eric Cantor attacked President Obama's "efforts to incite class warfare."

Of course, a truism of American politics is that the side decrying the class war is the one winning it. And at a time when the federal tax burden is at its lowest in 60 years and income inequality at its highest level in 80, Republicans would still rather wave the unbloodied shirt of class warfare than ask what America's rich and famous can do for their country.

That became abundantly clear during the debt ceiling crisis Republicans manufactured. Weeks before Cantor's Sunday op-ed in the Washington Post accused President Obama of class warfare and a desire to "make it harder to create jobs," his GOP colleagues were already singing from the same hymnal. Senators Dan Coats (R-IN) and Kelly Ayotte (R-NH) quickly called a proposed $4 trillion debt reduction deal 17 percent of which came from new revenues "class warfare." Utah's Orrin Hatch wasn't content to lament "the usual class warfare the Democrats always wage." The poor, Hatch insisted, "need to share some of the responsibility." As for a Senate resolution asking the same of millionaires, Alabama Republican Jeff Sessions said that was "rather pathetic."

Of course, what is really pathetic is the declining tax burden on the small slice of Americans now taking an ever-larger piece of the economic pie.

Even after extorting in December a two-year extension to the upper-income Bush tax cuts and steep reductions in the estate tax impacting only 0.25 percent of families, Republicans refused to countenance a dime of new tax revenue as the debt ceiling debate began. First Eric Cantor and then John Boehner walked out of the debt compromise discussions with President Obama for the same reason. As Boehner put it in his national address in July, "I know those tax increases will destroy jobs."

Back in May, John Boehner explained to CBS News who Republicans would be trying to protect during the debt ceiling negotiations with President Obama:

"The top one percent of wage earners in the United States...pay forty percent of the income taxes...The people he's talking about taxing are the very people that we expect to reinvest in our economy."

If so, those expectations were sadly unmet after the tax cuts of George W. Bush. After all, the last time the top tax rate was 39.6 percent during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The meager one million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:

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That all six of the Republicans selected to the Congressional debt reduction "Super Committee" are signers of Grover Norquist's anti-tax pledge is hardly surprising. But the choice of Arizona Senator Jon Kyl, is an especially fitting one for the GOP. After all, Kyl didn't merely define a generation of Republican talking points when he explained earlier this year that his was "not intended to be a factual statement." As it turns out, from regurgitating bogus claims that "tax cuts pay for themselves" and spur "job creators" to his war on the estate tax, Jon Kyl has long been a leading fabricator of GOP tax cut myths. And when it comes to super lies on taxes, his fellow Republican super committeemen are not far behind.

In June, the second ranking Senate Republican joined House Majority Leader Eric Cantor in walking out of debt reduction talks led by Vice President Biden because of their refusal to accept even a dime of new tax revenue. As Jon Kyl explained last summer (starting around the 1:20 mark above), tax cuts don't increase the national debt:

"You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans."

Kyl's was just the latest repackaging of President Bush's long ago debunked claim that "you cut taxes and the tax revenues increase." Texas Senator Kay Bailey Hutchison parroted that line, "Every major tax cut we've had in history has created more revenue." Then House Minority Leader John Boehner agreed, insisting last June that the Bush tax cuts had nothing to do with the depleted U.S. Treasury, "It's not the marginal tax rates ... that's not what led to the budget deficit. The revenue problem we have today is a result of what happened in the economic collapse some 18 months ago." For his part, Senate Minority Leader Mitch McConnell rushed to defend Kyl's fuzzy math:

"There's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject."

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It was the best of times, it was the worst of times. Just for different groups of Americans. That's the picture emerging from a wave of stories about the depths of the American economic downturn. On the same day The Economist revealed that the U.S. economic contraction beginning in late 2007 was far deeper than originally thought, new IRS data showed that Americans' average income plummeted by almost 14% in 2009 compared to two years earlier. For most, employment and incomes have yet to recover. But for the gilded class, things are apparently back to normal.

As The Economist explained, the Bush recession Barack Obama inherited in January 2009 was far more severe than previously understood:

The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.

Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.

Whether that information might have led to a much larger stimulus package in February 2009 is impossible to know. But what's clear is the toll the deepening Bush recession took on American households that year. As Reuters explained:

Average income in 2009 fell to $54,283, down $3,516, or 6.1 percent in real terms compared with 2008, the first Internal Revenue Service analysis of 2009 tax returns showed. Compared with 2007, average income was down $8,588 or 13.7 percent.

Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009.

That dip is explained in part by the temporary loss in stock market and other asset wealth for the three percent of Americans who earned over $200,000 a year. And it probably has a lot to do with the fact that in 2009, as Politico reported, a rising number of millionaires paid no taxes at all:

Though the tax rate for Americans earning a gross adjusted income of $1 million or more averaged 24.4 percent, up from 23.1 percent in 2008, that's still lower than the 28.5 percent rate they paid in 2002 when President George W. Bush was in office.

And, the data shows, the 235,413 taxpayers who reported earning seven digits or more in 2009 took in a total of $726.9 billion -- yet 1,470 paid not a penny of income taxes. In 2007, 959 Americans earning $1 million or more paid no income taxes.

But while America's so-called "job creators" didn't create jobs after receiving their decade-long Bush tax cut windfall, they did buy a lot of expensive shoes. That's word from the New York Times, which reported Wednesday that "sales of luxury goods are recovering strongly":

Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin "Bianca" platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.

Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering -- they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.

As Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, put it, "If a designer shoe goes up from $800 to $860, who notices?"

Certainly not America's rich and famous. After all, the recession that has proved so devastating for most Americans for the wealthy has been merely a hiccup.

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