Tag: Reaganomics

Again, the 1980s Boom Was About More Than Just the Reagan Tax Cuts

 

Until I started reading the new issue of the Economist magazine, I was unaware that a new Ronald Reagan biography — “Reagan: The Life” by H.W. Brands — would soon hit the market. (“Mr Brands recounts Reagan’s triumphs and the scandals even-handedly, and concludes that the Gipper’s achievements were comparable to those of Franklin D. Roosevelt, the president who led America most of the way towards winning the second world war.”)

But maybe I telepathically sensed the book’s impending arrival and that explains why I have been blogging so much lately about the Gipper. Or, more likely, I have felt compelled to throw a penalty flag on the improper use of Reaganomics by some current GOP presidential candidates. I don’t have a whole lot to add to what I’ve written previously, except to tie up a few loose ends on issues suggested by readers.

The Real Lessons of Reaganomics, At Least As I See Them

 

Official_Portrait_of_President_Reagan_1981If you want to promote pro-market policies by citing the success of Reaganomics, don’t do it the wrong way. And the wrong way is suggesting that the Reagan tax cuts paid for themselves. They didn’t (although their deficit impact was smaller than a static analysis shows). And that’s true whether you look at (a) income tax revenue/GDP or (b) real GDP growth to real revenue in the 1970s vs. 1980s, or (c) academic research.

Nor should you suggest the Reagan tax cuts immediately ushered in a period of crazy-go-nuts hypergrowth.They didn’t. Real GDP growth in the 1980s was about the same as the 1970s. Nor was their a pickup in productivity.

But, but, but … the way to judge a huge change in public policy is over the long term. “Making changes to the tax system and regulatory policies of a mammoth economy like the U.S. is like turning the rudder slightly on a supertanker: The initial effects are small, but it leads to a big shift in course over time,” economist Michael Mandel wrote in a fantastic 2004 magazine piece on Reagan’s economic legacy. This is especially true of sweeping tax reform and how changes in tax rates affect “investment in schooling, occupational choice, and business creation and development,” as AEI’s Aparna Mathur, Sita Slavov, and Michael Strain explain in“Should the Top Marginal Income Tax Rate Be 73 Percent?”

President Obama Keeps Forgetting About the Reagan-Clinton Boom

 

bill-clinton-ronald-reaganPresident Obama pushed his “middle class economics” message hard during a Cleveland speech earlier this week. And, in the process, offered his take on recent US economic history:

For the first eight years of this century, before I came into office, we tried trickle-down economics.  We slashed taxes for folks at the top, stripped out regulations, didn’t make investments in the things we know we need to grow.  At the end of those eight years, we had soaring deficits, record job losses, an economy in crippling recession. In the years since then we’ve tried middle-class economics. Today we’ve got dramatically lower deficits, a record streak of job creation, an economy that’s steadily growing.

The president modified his usual argument just a bit to frame the economic battle as middle-out Obamanomics vs. trickle-down Bushonomics, But in the past, he has subtlety lumped Bushonomics in with Clintonomics and Reaganomics. All part of the same tax-cutting, regulation-slashing, neoliberal wave from 1981 through 2008 that overall benefited the 1% at the expense of everyone else.

Yes, Reaganomics Sure Does Need a 21st Century Update

 

shutterstock_177028802“The GOP is Debating Whether Reaganomics Needs an Update” is a must-read piece by Washington Post reporter Jim Tankersley. One side answers the “What would Reagan do?” question by offering a nostalgic return to the 1980s Reagan agenda. Another prefers to apply the Reagan principles — a dynamic private sector, strong families and neighborhoods, upward mobility, work — to modern economic reality with different conservative policy results. Tankersley:

Leading Republicans are clashing over a signature issue the party has treated as gospel for nearly 40 years: the idea that sharply lower taxes and smaller government are enough by themselves to drive a more prosperous middle class — and win national elections. That simple philosophy has been the foundation of every GOP platform since the days of Ronald Reagan. Now, some of the party’s presidential hopefuls — along with some top conservative economists and strategists — are sending strong signals that they believe today’s beleaguered workers need more targeted help, even if growth speeds up.

For some context, here are a few then-and-now stats: