In Is Capitalism a Threat to Democracy? Caleb Crain makes the case that unfettered capitalism* leads to a whole lot of awful and so must be fettered by the "restraining hand" of Big Government. Crain presents 1950s America as an example of how to do it right. In his own words:
"America’s top marginal tax rate stayed at ninety-one per cent until 1964. …The result—highly inconvenient for free-market fundamentalists—was prosperity. In the three decades following the Second World War, per-capita output grew faster … than ever before or since. There were no significant banking or financial crises.
During America’s golden age of full employment, the economy came, in structural terms, as close as it ever has to socialism"
Let's look at that 91% top marginal tax rate. What matters more than the statutory tax rate is the effective tax rate - that is, after credits and deductions. What we find is that the effective top rate wasn't much higher in the 1950s than it is now:
Even more important is how much the federal government actually collected in taxes during this Golden Age of high taxes on the rich. After all, governments need to collect money to redistribute money. So in the 1950s were federal tax revenues higher than they've been more recently? No.
As the above charts make clear, the 1950s federal government did not enjoy a bigger slice of economic pie than in the following decades. Nor was 1950s monetary policy all that different from the Reagan and Clinton years. The overall "regulatory burden" was also much, much lighter then than it is now. Sure, the Eisenhower administration made ample use of economic stimulus in response to recession (e.g., public works, tax cuts, easing credit), but that wouldn't have made the economy, "in structural terms, as close as it ever has to socialism".
The 1950s were a hopeful time - things were getting better, at long last. But it was not a prosperous era. To wit:
“A full 25 percent of Americans, 40 to 50 million, were poor in the mid-1950s, and in the absence of food stamps and housing programs, this poverty was searing. Even at the end of the 1950s, a third of American children were poor. Sixty percent of Americans over sixty-five had incomes below $1,000 in 1958, considerably below the $3,000 to $10,000 level considered to represent middle-class status. A majority of elders also lacked medical insurance." Stephanie Coontz, p.31
In 1960, the average American household spent 68% of their budget on housing, clothing, and food. By 2002, these expenses accounted for 50% of household spending, and then down to just 39% by 2015. Considering food expenditures alone, the average American household spent 21% for food away from home in 1960 and 43% in 2015. Long story short: things have gotten a lot better since the 1950s. Of course, it is no more a Golden Age now than it was then. But that's a different story.
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*Leaving aside the issue that no serious economist or politician advocates "unfettered capitalism". Ditto the strawman bugaboo "laissez-faire" capitalism.
References:
100 Years of U.S. Consumer Spending/US Bureau of Labor Statistics
Stephanie Coontz, The Way We Never Were: American Families and the Nostalgia Trap Basic Books; Revised, Updated edition (March 29, 2016)