Posted on 06/10/2004 10:01:06 AM PDT by KentTrappedInLiberalSeattle
Ronald Reagan did some fine things, but the economic theory that bears his name was not one of them. Reaganomics made the world safe for today's reckless tax-cutting. And the public hardly understands the social upheaval these policies will soon unleash.
Reaganomics held that cutting taxes and reducing the size of government would let loose the nation's entrepreneurial juices and lead to economic growth. Note that the theory comes in two parts. The fun part is cutting taxes. The not-so-fun part is reducing government. Do the first part without the second, and you end up with budget deficits and an exploding national debt.
That's what happened. And far from cutting government, Reagan expanded it, mainly through increased defense spending. The debt tripled.
To his credit, Reagan raised taxes when the deficits got out of hand. Not to his credit, his tax increases mostly targeted working people. We refer to the infamous 1983 hike in Social Security taxes.
Social Security is supposed to be a pay-as-you-go program. That is, today's workers pay Social Security taxes to support today's retirees. The program had been running a small deficit. Rather than fix it with a small increase in Social Security taxes, Reagan pushed through a big hike, thus giving birth to the Social Security surplus.
The idea was that Americans should start paying more Social Security taxes to prepare for decades hence, when the enormous baby-boom generation retires. But not a cent was ever set aside for that purpose. The Social Security surplus was simply spent. Overtaxing for Social Security reduces pressure on the income tax, which hits upper-income Americans the hardest. Many workers with low or moderate incomes saw their total tax bills actually rise under Reagan.
Reagan also raised a bunch of excise taxes, which he liked to call "revenue enhancements." One of them, a 5-cents-a-gallon tax on gasoline, was not bad energy policy, but it was a tax that affected the rich and poor equally.
But what about all that economic growth in the Reagan years? How can we call that dumb luck? Easily.
When Reagan took over, the American economy was in bad shape. No doubt about it. But it was already on the launching pad for takeoff. It didn't matter who was president.
Jimmy Carter's new Fed chairman, Paul Volcker, had just killed the inflation monster, but at the price of a deep recession. OPEC was collapsing at that time, along with energy costs. So what greeted the new President Reagan? An economy ready for an upturn, with falling gas prices and inflation gone. You didn't need a rocket scientist to get that baby off the ground.
Economic growth can run largely on debt for a while, but eventually the markets get nervous, which they did in October 1987, when they crashed. Adding to the excitement, Reagan had deregulated the savings-and-loan industry, leaving the taxpayers to guarantee the S&Ls' junk-bond investments. The game eventually ended, and the first President Bush had to clean up the mess.
Like Reagan, the current President Bush is a big spender. Unlike Reagan, Bush has done nothing to slow the snowballing deficits.
And there's another difference. When Reagan took office, the baby boomers were approaching the peak of their earning power. Thus, the nation was better able to pay down its debt. But the boomers will soon start to retire. They will drain tax dollars, not contribute them.
So only simpletons will insist that as a percentage of gross domestic product, Bush's deficits are lower than Reagan's and therefore of no consequence. This totally ignores the "implied" debts to the baby-boom generation, which make for terrifying numbers.
Imagine a childless two-income couple that earns $80,000, borrows $20,000 and has no savings. Now think of another couple with the same finances but that plans to send triplets to college next year. They're not at all in the same financial boat.
The awful thing about Reaganomics wasn't so much Reagan's actual economic policy, even though it got mighty sloppy. It is the cult of Reaganomics: the idea that cutting taxes is a free lunch, and never mind spending or future obligations. In a very few years, when tomorrow's retirees find themselves at war with younger taxpayers, everyone will wish they had never heard the word.
It's funny how liberals talk about two sides of their face. I know a liberal who complained about the tax cuts, and is now complaining about having to pay state taxes. (apparently, higher state taxes are the fault of the tax cuts. you'd think he'd be happy to contribute)
Spending is never reckless or irresponsible. Reducing spending always is.
The problem is, the liberals believe this. The budget increases came primarily from spending on social programs, not military ones, in order to get Congress' support for the military buildup. Reagan sacrificed that part of his economic program because he decided that the threat from the USSR was much more important to deal with first.
Yeah those reckless !% tax cuts can really lay waste to the budget, expecially after spending growth has outstripped inflation for what, like 100 years running?
So Carter was responsible for the boom of the 80's. I'm guessing that Clinton will still be responsible for the boom of the 90's though.
Losing the 1980 election...
"Reaganomics made the world safe for today's reckless tax-cutting. And the public hardly understands the social upheaval these policies will soon unleash."
Right...and that's why this country, which leads the world, has experienced its longest-running economic success since Reagan lowered the top tax rate from 70%.
"Reaganomics held that cutting taxes and reducing the size of government would let loose the nation's entrepreneurial juices and lead to economic growth."
Absolutely! This country leads the world in technology as this boom was a result of freeing up capital to be spent in the free-market.
"Do the first part without the second, and you end up with budget deficits and an exploding national debt.
That's what happened."
No. Do the first, while actually increasing spending, is what happened. The Democrats increased all but one of Reagan's proposed economic budgets and that is why we ended up with this huge debt.
"And far from cutting government, Reagan expanded it, mainly through increased defense spending. The debt tripled."
Defense spending only increased through his first term and returned to normal by his second term. Comparatively speaking, Reagan's defense spending was still lower than that of WWII or Vietnam...and did nothing more than bring it back from where it once was. A small price to pay when you consider its results. as we would be spending much more if the Soviet Union hadn't collpased.
Funny how Democrats are all for goverment spending except when it comes to the one area that government (military) is constitutionally mandated to provide. The Preamble says: "PROVIDE for the common defense and SUPPORT the general welfare." Liberals have obviously mixed these ups.
The kind of America Ronald Reagan built was the kind that the world's citizens
beg, borrow and steal to get to from their respective commie paradises
More leftwing delusionism. He left out the part about how Carter was really responsible for the release of the hostages. The fact that it happened on inauguration day was just a coincidence. Reagan's policies accomplished 2 things that no one thought possible. The first was simultaneous low inflation, low interest rates and low unemployment. No Democrat ever imagined such an economy. The second was the collapse of the Soviet Union. Reagan predicted it, actively worked toward it and got it done. The man was a giant.
Duh...though the last time I checked, spending bills originated in the House of Representatives. Who was running Congress? I think they share in the blame.
Social Security is supposed to be a pay-as-you-go program. That is, today's workers pay Social Security taxes to support today's retirees. The program had been running a small deficit. Rather than fix it with a small increase in Social Security taxes, Reagan pushed through a big hike, thus giving birth to the Social Security surplus.
Weren't Democrats bragging about the surplus in 2000?
The idea was that Americans should start paying more Social Security taxes to prepare for decades hence, when the enormous baby-boom generation retires. But not a cent was ever set aside for that purpose. The Social Security surplus was simply spent.
Duh, again. That's what happens when you put the "surplus" in Treasury bonds. It is the rough equivalent of moving your wallet from your left pocket to your right pocket, only the government calls it a loan and makes the people pay the interest at gunpoint. And they accused Enron of creative accounting...
Overtaxing for Social Security reduces pressure on the income tax, which hits upper-income Americans the hardest. Many workers with low or moderate incomes saw their total tax bills actually rise under Reagan.
Since when did the rich stop paying Social Security taxes?
Reagan also raised a bunch of excise taxes, which he liked to call "revenue enhancements." One of them, a 5-cents-a-gallon tax on gasoline, was not bad energy policy, but it was a tax that affected the rich and poor equally.
Equal taxation is a bad thing? There was a time when it was mandated by the Constitution.
But what about all that economic growth in the Reagan years? How can we call that dumb luck? Easily.
And what was the prior decade? Bad luck?
Adding to the excitement, Reagan had deregulated the savings-and-loan industry, leaving the taxpayers to guarantee the S&Ls' junk-bond investments. The game eventually ended, and the first President Bush had to clean up the mess.
How is it deregulation when taxpayers are forced to guarantee private investments? This guy must have been in charge of California's energy deregulation.
Like Reagan, the current President Bush is a big spender. Unlike Reagan, Bush has done nothing to slow the snowballing deficits.
The only smart thing he's written in this whole article.
And there's another difference. When Reagan took office, the baby boomers were approaching the peak of their earning power. Thus, the nation was better able to pay down its debt.
So why is this "debt-paying" nation $6 trillion+ in debt?
But the boomers will soon start to retire. They will drain tax dollars, not contribute them.
Baby boomers won't drain tax dollars if we reform/privatize entitlement programs and replace the income tax with a consumption tax.
So only simpletons will insist that as a percentage of gross domestic product, Bush's deficits are lower than Reagan's and therefore of no consequence. This totally ignores the "implied" debts to the baby-boom generation, which make for terrifying numbers.
Only simpletons would pay this guy to write for them. Bush's deficits are lower than Reagan's as a percent of GDP. Whether they are of any consequence is a separate issue. What are these "implied" debts, and are they comparable to the "implied" debts of their entitlements to my generation?
Imagine a childless two-income couple that earns $80,000, borrows $20,000 and has no savings. Now think of another couple with the same finances but that plans to send triplets to college next year. They're not at all in the same financial boat.
If I earned $80,000 a year, I wouldn't be racking up another $20,000 in debt. If people run 25% deficits in their personal budgets because it makes them feel good, it is no surprise that they would elect representatives that would do likewise with tax dollars.
The awful thing about Reaganomics wasn't so much Reagan's actual economic policy, even though it got mighty sloppy. It is the cult of Reaganomics: the idea that cutting taxes is a free lunch, and never mind spending or future obligations. In a very few years, when tomorrow's retirees find themselves at war with younger taxpayers, everyone will wish they had never heard the word.
Those who think the government should fix all of the society's problems are the ones looking for the free lunch. They want to get rid of poverty, crime, etc., but don't want to do any of the work required to get it done. So, they send the government after the wealth of the "greedy rich" and brag about how compassionate they are.
Oh, I'm already starting to hear screeches about the evil W. Boooosh cutting "essential" services. Soon they'll be all over him for both spending AND cutting.
>>And the public hardly understands the social upheaval these policies will soon unleash.<<
The collapse of the welfare state... the end of idle-poor criminality and drug abuse... the end of the surge of broken homes... the pubic turning against the practice, if not the legality of abortion...
See, if he hadn't created the SS surplus, the rats wouldn't have been able to spend it.
Neat trick here - trying to put the blame for the Ponzi scheme aka Social Security on RR. Any unfunded pension scheme or 'pay as you go' will go bankrupt sooner or later unless the population increases exponentially for ever.
Revenues from Income and Corporation taxes increased during the Reagan Years faster than the economy grew - so Reagan in fact increased taxes by cutting rates.
Another journalist who flunked Economics 101 in school.
Ahem... Freudian Slip?
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