What Was America's Golden Age?

In comments at Art's place, Gene Hayward asked both Art and me to describe the characteristics of America's Golden Age.

This was the period following WW II, spanning roughly 1950 through the mid 70's, or perhaps a few years later, when the United States experienced robust GDP growth.  Though this growth was far from consistent, it was on average, considerably higher than what we have been able to achieve since.

I've looked a GDP a lot, and in a lot of different ways.  The tag list low in the right hand frame indicates over 40 posts on this blog tagged GDP.  Here is a fairly recent one with a graphic demonstration of how the Golden Age differed from the Great Moderation Stagnation that followed.  A more detailed graph with historical commentary can be found here.

The most important defining characteristic of the Golden Age is this GDP growth record.  The next questions are what were the causes and the results?

For causes, I would consider:

Steeply Progressive Tax Rates
Strong Unions
Social Safety Net
Growing Income in the Labor Force and an increased Standard of Living

Regulations on Businesses
Particularly the Strong Regulations on Banking and Finance enacted during the Great Depression, and most particularly Glass-Steagall.
Fiscal Policies consistent with Keynesian Economics

Results:

Robust middle class
Relative equality in income and wealth
Sharp reduction in the number of people in poverty
The Strong Economic Growth that characterized the period

One might consider that the results cycle back into the causes creating a virtuous spiral.  That's how I see it.

Another characteristic of this period was secular inflation.  In this environment, a commodity price shock can send inflation soaring, and that happened twice in the 70's.  I distinctly remember some time in '73 or '74 thinking that nobody would ever look back on that time as "the good old days."  Then disco music came along and sealed the deal, but that's another story.

Shortly thereafter, Volker came along and slayed the inflation dragon.  Since then, we have had secular disinflation.  As you can see in the link above, in this environment, commodity price shocks have not caused inflation spikes.

The Reagan administration vigorously continued the deregulation trend started under Carter, and dramatically changed the tax code (lowering tax receipts relative to GDP, and shifting the burden from the rich to the declining middle class.)

Since then - except for Clinton bucking the trend, at least partially - it's been all lower taxes and deregulation.  This has skewed both income and wealth toward those that already have the most.  The result has been the Great Stagnation, and the slow strangulation of the American Economy.