HELP! Might anyone care to respond to this question, posed in response to my contention that government has stifled our economy:
If the gov't has stifled the creation of real jobs through excess taxes & regulations, how do you explain the fact that the U.S. economy has had very healthy periods during times when tax rates were higher than they are now & when there were more restrictions?
How 'bout 1945 to 1973? GDP went up 500%-
(http://www.usgovernmentspending.com/spending_chart_1950_1980USb_12s1li011lcn__US_Gross_Domestic_Product_GDP_History) while taxes were hstorically very high?
This has been discussed quite a few times. Check out the list here.
But a main thing to keep in mind is GDP is basically useless.  
Really, just think about it logically. GDP is basically a measure of spending essentially. You say GDP went up 500%. If that's so great, why don't we just make GDP go up 1000%? We could do it over night. Current GDP is a little over $14 trillion. All the government would have to do is print a $126 trillion note, and then spend it on something. Bam. GDP is up by a thousand percent. Not kidding. Why he heck haven't we done this already???
Just at a glance:
A: Correlation does not prove causation
B: There were significant cuts in government spending after 1945, for obvious reasons. This is the biggest reason the Great Depression ended.
C: There have been very significant advances in technology, particularily communications and transportation, in that period. Easier communication (in both the literal and metaphorical senses) will have a very, very powerful effect on the world economy. Look at how the railroad networks of the Gilded Age facilitated mass production and industrialism for a historical parallel.
1) Just how important are the tax rates themselves, compared to the revenue brought in by the government? As a % of GDP, tax revenue hovered around 17%-18% throughout those decades. In 2000, revenue was 20.6% of GDP, falling to 16% after the Bush tax cuts before bouncing back up to 18%, then plummeting due to the recession.
2) What proof is there of more restrictions in the past than in today? Restrictions in what areas, to what degree? Even if one can find numbers to measure the breadth of regulation*, the changing technological environment makes it impossible to make any meaningful comparions. Today we have more people, more businesses, more output in different goods and services; how do you measure regulation in light of that? How do you compare the efficacy (or, for our side, inefficacy) of regulation between 1973 and today? If businesses circa 1973 were more regulated than today, does one readopt the regulations of 1973?
*and I have a feeling that, if one did find such numbers, they would be higher today than in 1973, or the 60s, or the 50s
Peter Schiff actually went into that with some research:
Regarding GDP, the graph you have linked is nominal, not real, so it's not very useful (it doesn't even appear to show recessions which should be an obvious red flag).
Regarding tax rates, there were far more exemptions back then as I understand it, so effective marginal tax rates were much lower than the official number.