The economy in the 1950s and ’60s was truly fabulous. A high school graduate could afford a house with almost any kind of employment. One of my high school classmates (class of ’57) went to work for a bank and another went to work for a power company. A third went to work for the railroad. All of them had families and modest homes before I graduated from college (University of Illinois). People in my hometown of Decatur, Ill., owned so many boats that they had to be moored in the lake and owners had to row out to get their boat because there were not enough slips at the marina. There are almost no boats in my hometown now and the marina has been closed for more than 20 years.
I went to work as a junior auditor for a CPA firm in Los Angeles in 1962 making $3.30 per hour. My wife didn’t work. I had two cars, an old one and a new one. Credit cards had not been invented so people had to live on what they earned. The only credit available was through department stores, gasoline cards and car loans. I was refused credit at Sears Roebuck for a year. My wife and I had a small savings account and ate at restaurants on La Cienega Boulevard about once a month.
At the end of my first year of employment I received a 25-cent-per-hour raise and bought a house. A new four-bedroom home with a two-car garage, a fireplace and kitchen appliances only cost $18,000. A home could be bought for $99, $50 down and $49 to close. The developer held a seven-year balloon mortgage for the down payment. At the end of seven years (or earlier) the home was refinanced to pay off the second mortgage. In 1962 my house cost less than three times my annual salary. Currently a person with a degree in accounting earns about $60,000 to start. Compared to 1962, they should be able to buy a new four-bedroom house for less than $180,000. There aren’t any, especially for a down payment of $300.
My Social Security deduction was just over 3% and everyone had “skin in the game” because all income was taxed at a minimum of 20% after a 10% deduction and a $600 exemption. Almost anyone making more than 35 cents per hour was paying income taxes. Currently, half of wage earners pay almost no income tax, so they vote for politicians who promise free stuff because it doesn’t cost them anything. My effective tax rate was 16% of my gross pay. If we had this tax rate structure in place today, Washington would have so much money they could reduce income taxes below this and have no national debt.
Welfare wasn’t a word. People who were “down on their luck” were taken care of by churches, families and local government programs that had only subsistence level benefits that encouraged people to seek employment. There were better programs for people who were truly unable to work. Then Lyndon Johnson and the Democrats created the Great Society in 1964. This is when, in my view, the federal government began to allow states to pay people not to work. To make matters worse, through the Aid to Families with Dependent Children program, only people with children could collect these benefits and they had to be single. This program has destroyed the American family.
In 1964 the federal debt was $268 billion, 50% of GDP. Debt as a percentage of GDP declined to a low of 31% in 1974. It has been on a steady rise since then to its current unsustainable level of about 120%.
The country will never be what it was like in the 1950s and early 1960s, but making a serious movement to balance the federal budget will reduce the rate of inflation and cause a reduction in home mortgage interest rates, making home ownership more affordable. I believe the income tax structure should be changed to require more people to pay some taxes so they will be more interested in how our government spends our money.
Herbert Johnson, an Air Force veteran and Illinois native, has been a Florida resident for more than 50 years.