Today we are going to discuss Reaganomics. Reaganomics is a phrase used during the administration of Ronald Reagan to describe his economic policies. The phrase was coined by radio news personality Paul Harvey and Reaganomics is also a euphemism for supply-side economics. This is also known as the Trickle Down Theory.
There are four basic principles to Reaganomics. Basically, it's a policy to reduce the growth of government spending by reducing the federal income tax, reducing the capital of gains tax, reducing government regulation and tightening the money supply in order to control inflation.
Prior to the onset of Ronald Reagan, The United States economy had experienced a decade of a rising unemployment and inflation which was termed stagflation. At the time it was decided to stimulate the economy by expanding the money supply which would decrease the value of the dollar.
A federal oil reserve program was initiated to offset any future shocks in the energy market. President Jimmy Carter began to eliminate oil price controls and he also created the Department of Energy.
During the last year of the Carter Administration,the Federal Reserve under Paul Volker began to tighten the money supply in order to control inflation.
Upon taking office, President Reagan stated from the beginning that it was his intention to lower taxes. However, departing from the way its predecessors did it he simplifiedthe tax codes as well as lowering taxes and continued deregulation of industry. He also eliminated the luxury tax and the capital gains tax.
During the previous Republican administrations of Richard Nixon and Gerald Ford, supply and demand side policies or considered unconventional by the moderate wing of the Republican Party, George Herbert Walker Bush actually coined the phrase in 1980 as voodoo economics. He used this phrase when running against Ronald Reagan in the Republican primary.
During presidential election, Reagan presented as economic proposals that we return to a free enterprise system, a free market economy with little government interference similar to the way it had been during the 1920's. It was Reagan's intention to repudiate the New Deal and return to a laissez-faire economy that was popular in the 1920s.
Central to Reagonomics is the Laffer Curve. The Laffer Curve predicts that excessive tax rates will actually reduce potential tax revenues by lowering the incentive to produce. The model also predicts that individual tax rates lead directly to a reduction in tax revenue.
I am NOT an economist, I took one course in economics in college and the entire time I was in that class I had headaches. Just the thought of looking at a curve or a theory makes me physically ill. Having said all that, it looks to me like this is a way for the rich, corporations and the oligarchy to get away with murder.
Even though this looks bad, President Reagan actually made it worse if you can believe that. President Reagan significantly increased public expenditures primarily in the Department of Defense. Expenditures in the DoD went from 267.1 billion dollars in 1980 to 393.1 billion dollars in 1988.
In 1981 Reagan significantly reduced the maximum tax rate which effected only the highest income earners. I n 1981 the top marginal tax rate fell from 70% to 50% and in 1986 it was further reduced 28%.
In spite of Reagan's legacy of being an anti tax hero, he had to raise taxes 11times during his presidency. I'd like to see you get that through Congress. In today's Congress it would never happen.
Now I know that I have lost most of you over most of the technical aspects of Reaganomics but like I said prior I am NOT an economist but it was a disaster, an epic disaster.
Let's use some common sense. Reduce by 25% for example your household income, would it make sense to increase spending? Can you write a check for insufficient funds and get away with it? Of course not! Well, that's exactly what President Reagan did during his eight years in office. He significantly decreased the tax revenues which means less money coming in but at the same time he is spending more money on defense. Does that make any sense to you? Could you run your household like that? What would happen if you wrote rubber checks? Exactly what will happen is you will get arrested and the next thing you know you'll be standing in front of a judge explaining your actions! Well that didn't happen to President Reagan, he is considered the king of the anti-tax movement and he is considered a saint by the right wing of the Republican Party which nowadays is the entire Republican Party.
A lot of people consider the 1980's as good economic times. Why do they say that? A lot of it has to do with the oil glut. We had an excess amount of oil on the market which drove down the prices which kept gasoline prices lower than they normally would have been. This this was able to stimulate the economy somewhat and gave her a false reading on how the economy was actually doing.
Ronald Reagan is a hero to the Republican Party. It's my contention that President Reagan was one of the worst presidents in US history bar none. I put him in the rankings with Millard Fillmore, Franklin Pierce, James Buchanan and of course his own hero, Herbert Hoover.
Supply side economics is a failure. It has been proven time and time again that this type of economics causes depression. It helped contribute to the panic of 1896, the Great Depression of course and we cannot forget the George W Bush Depression of 2008.
Yes, I called it a depression not a recession. The government didn't want to call it a depression because they didn't want to scare people but believe me it was a depression.
We need to return to a Keynesian economic theory policy in this country. We need to have a new generation New Deal. The infrastructure of our country is a joke right now and it needs serious major repair work. We need a 21st century CCC. Alone it would stimulate our economy significantly. New employees, with money in their pocket will go to the stores and make purchases. Stores will need to order more merchandise in order to keep their shelves filled. Suppliers will order more product from the factories hence factories will hire more people to produce that product. The next thing you know all these new employees are paying payroll taxes, Social Security taxes and the economy will stimulate. Only short sighted people will complain about government expenditures for this. It's a great simple way of boosting the economy.
The last time a stimulus was done, money was given to the bank. Is that any way to stimulate the economy? Rich people don't spend money, they pour it into the bank and it sits there! You give that same money to someone who is poor or middle class and you know what they're going to do? They're going to spend it! That's how you simulate the economy. You don't trickle down from rich to poor, how ridiculous is that! You put that money where it's needed the most and our economy will turn around so fast that your head will spin.
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