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Thread: Reaganomics

  1. #1
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    Reaganomics

    Did Reaganomics improve the Economy?

    http://www.youdebate.com/DEBATES/REAGANOMICS.HTM

  2. #2
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    Supply Side Economics

    The short answer to your question is yes. The huge surplus revenues enjoyed by both the state and federal governments of the 1990's were a direct result of Reagan's "voodo economics", a term created by George Bush Sr. during the 1980 election primaries.

    Let's look at some false claims generally made by liberals:

    1.) false: Growth in the 80s was no greater than growth in the 70s
    2.) false: supply side economics was...the theory is TO INCREASE GOVERNMENT SPENDING and decrease taxes.

    As has been stated so recently by the Bush Administration, Reaganomics is the principle that cutting taxes will increase consumer and corporate spending, because more money will be left at their disposal. The result will be increased economic activity, which leads to the type of robust economy that will yield greater tax revenues for the government.

    Most conservatives who subscribe to such logic would also advocate reductions in government spending when it comes to pork barrel spending and entitlements. If you believe that these cuts failed to occur at the rate Reagan initially proposed you would be correct. Reagan was faced with an enormous military threat and a congress that suffered from a severe case of the "indispensable necessity" syndrome. Although, the contemporary view at that time was a rejection of Keynesianism and an overall reduction in taxes on marginal revenue would end stagflation, elected officials refused to make cuts in the social services, fearing retribution at the polls. This led to one of the biggest disappointments the Reagan Administration faced in its economic policy. They had failed to reduce federal spending, which had been part of Reagan's economic policy. Federal spending had only decreased by 0.8% of GDP from 1981 to 1989. However, it wasn't a total loss, as it did fall slightly.

    As for the claim that growth was the same in the 1970's as it was in the 1980's, it is dead wrong. Overall, growth rates increased, inflation slowed, and unemployment dropped. Real GDP growth per worker increased a whole percentage point, from an annual growth rate 0.8% (under Carter) to 1.8% (under Reagan). Productivity growth remains higher. Productivity in manufacturing grew at a 3.8% annually, a record for peacetime growth! Unemployment declined from 7.0% in 1980 to 5.4% in 1988. Finally, inflation fell from 10.4% in 1980 to 4.2% in 1988. Wow, it sounds wonderful!

    What policies were responsible for this type of unprecedented economic growth? Let's take a look, shall we?

    -Top marginal tax rate on income was reduced from 70% to 28%
    -Corporate income tax reduced from 48% to 34%
    -Reducing regulations
    -Redefining antitrust laws, and allowing for banks to expand holdings
    -Deregulation continued (started under Carter administration)

    The purpose of lowering tax rates on labor and capital, reducing the amount of growth of government spending, controlling inflation through monetarism, and decreasing overall government interference in the market place; was to increase saving and investment, increase economic growth, return to functional financial markets, and kill the beast of stagflation. As we have seen here, Reagan's policies were largely successful, except in the area of government growth.

    Reaganomics succeeded where so many had failed. Stagflation had been checked, and we saw the largest peacetime expansion of an economy ever, with the possible exception of what is occurring in China right now. Once again, the left's attempts to mire a great president run anti to wisdom and truth. If liberals ran our economy it would fail, just as it has so many times in Europe's experimentation with socialism. Will they ever learn from their own idiocy? I am not optimistic, not at all.
    Why am I so opposed to socialism/communism? Because I understand the difference between people who can and those who can't. People with the skills needed to operate a business or develop new technology are a rare gift and deserve the fruits of their own labor, like all other people. When you start breaking down the distinction between somebody who maximizes their potential and somebody who does not, by saying that playing field ought to be leveled to accommodate those who do not, you effectively decrease the incentive for achievement. Assuming that this is true, I believe it is; where does that leave those of you who do not know the slightest bit about extracting the world's resources, engineering products for consumption, and creating new markets for the betterment of all humanity? Where is the incentive for educating one's self in these high arts? How does your egalitarian view solve these problems without first considering this perspective?-ME

  3. #3
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    after reagan's tax cuts took place, the united states experienced the worst recession since the great depression.

    poverty increased greatly. in fact, poverty rose every single year from 1981 to 1992.

    our country experienced a huge increase in the deficit. when reagan took office, we were 994 billion dollars in debt. when he left, we were 2867 dollars in debt. why did this happen? because while reagan cut taxes, he also increased military spending. the trade deficit also quadrupled during this time period.

    in 1993 Clinton raised the taxes on the rich, the opposite of reaganomics. opponents argued that this would stop the growing economy. that did not happen at all. in fact, we experienced incredible economic growth during the clinton administration.
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    The sole reason for the economic boom had not a damn thing to do with clinton, it was all microsoft and the computer companies.

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    Rubinomics, baby!
    Alot of what people have said is that there was a real problem with the economy at the start of the reagan administration, which reagan solved to too much of a degree. a 70% top income tax rate is on the wrong side of the Laffer curve, and needed to be cut. But cut to 38%? A bit extreme. Reagan policies can be described as a pendulum, where the middle is the perfect equilibrium. The economy at the start of reagan's term was on one side of the arc, and reagan swung it to the other side, obviously passing through the middle in the mean time and thus getting that boom. As it continued to move past the middle though, we got back into bad times, with the '87 crash and the 88-92 recession.

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  6. #6
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    one thing you did not mention

    Intersting. You wrote 300+ words on how you think reaganomics worked miracles. But not ONE songle word on how greatly the national debt and deficit EXPLODED during his terms.

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    Regan's tax program worked because we still had an industrial sector with viable markets that could respond to increased production using virtually unrestricted investment tax credits and accelerated depreciation for expansion that also tapped the reduced upper income reductions for capital investment purposes (the true good old days in the business community). When democrats achieved control of congress in 1986, the program was abolished, followed by the crash that lasted until the dot.com bubble began expanding. That crash happened to coincide with completion of China's initial stage of infrastructure modernization of port facilities, and China's rapid full entry into formerly US dominated world consumer markets. The Regan administration's failure was military/government spending and increasing national debt service that overcame the gains accomplished with tax incentives and, at the end, being the victim of some really bad timing.

    In contrast, Bush Jr.'s tax cuts, with a declining industrial sector, is no more than thinly disguised vote buying resulting in reduced tax revenues accompanied by a GDP driven by government/consumer debt and massive increases in military and government spending. The only question is how long the illusion can be sustained with a service economy tax base churning the same dollars over and over again with non-recoverable tax bites reducing them at each transaction.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  8. #8
    JPSartre12 Guest
    Quote Originally Posted by georged
    Regan's tax program worked because we still had an industrial sector with viable markets that could respond to increased production using virtually unrestricted investment tax credits and accelerated depreciation for expansion that also tapped the reduced upper income reductions for capital investment purposes (the true good old days in the business community). When democrats achieved control of congress in 1986, the program was abolished, followed by the crash that lasted until the dot.com bubble began expanding. That crash happened to coincide with completion of China's initial stage of infrastructure modernization of port facilities, and China's rapid full entry into formerly US dominated world consumer markets. The Regan administration's failure was military/government spending and increasing national debt service that overcame the gains accomplished with tax incentives and, at the end, being the victim of some really bad timing.
    Reaganomics would have worked fine if the Democratic Congress had kept its part of the deal. They pledged $3 in cuts from old programs for every $1 in new programs. They lied. Period.
    In contrast, Bush Jr.'s tax cuts, with a declining industrial sector, is no more than thinly disguised vote buying resulting in reduced tax revenues accompanied by a GDP driven by government/consumer debt and massive increases in military and government spending. The only question is how long the illusion can be sustained with a service economy tax base churning the same dollars over and over again with non-recoverable tax bites reducing them at each transaction.
    I love how everybody thinks that all of the US manufacturing jobs are being outsourced. Take a look at this:
    http://www.ofii.org/facts_figures/

  9. #9
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    Quote Originally Posted by JPSartre12
    Reaganomics would have worked fine if the Democratic Congress had kept its part of the deal. They pledged $3 in cuts from old programs for every $1 in new programs. They lied. Period.

    I love how everybody thinks that all of the US manufacturing jobs are being outsourced. Take a look at this:
    http://www.ofii.org/facts_figures/
    Politicians lied? That’s terrible and could shake my faith in the system.

    US company manufacturing jobs and US manufacturing jobs provided by foreign investment are economic worlds apart. Whoever provides the investment capital takes the profits, the key to national wealth, no different than positive trade. Those manufacturers are servicing their US consumer goods markets without import tariffs, shipping and in most cases infrastructure costs. We get salaries and taxes to drive public focused GNP transactions while the profits head home. US interest rates are still at rock bottom, which normally means no demand for US manufacturing expansion.
    These are my principles. If you don't like them I have others. ~Groucho Marx~

  10. #10
    JPSartre12 Guest
    Quote Originally Posted by georged
    Politicians lied? That’s terrible and could shake my faith in the system.

    US company manufacturing jobs and US manufacturing jobs provided by foreign investment are economic worlds apart. Whoever provides the investment capital takes the profits, the key to national wealth, no different than positive trade. Those manufacturers are servicing their US consumer goods markets without import tariffs, shipping and in most cases infrastructure costs. We get salaries and taxes to drive public focused GNP transactions while the profits head home. US interest rates are still at rock bottom, which normally means no demand for US manufacturing expansion.
    It's not quite as gloomy as you think. Yes, foreign investors take some of their profits back home, but there are many feeder companies that provide parts for those foreign companies coming in as well. In the auto industry, for example, there are many small companies that are created just to provide parts and services to a transplanted auto company and they provide local revenue along with the wages, property taxes, etc.
    And does it really mater if the bulk of our GDP comes from the service industry, anyway? There are many who would argue that we should manufacture off-shore in order to preserve our own environment. I don't happen to sahre that belief, but I thought I'd throw it out there for comments.

  11. #11
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    The nature of manufacturing jobs is to become so productive that job loss is inevitable. This is a world-wide phenomenon, not just in the U.S. Productivity has skyrocketed, while wages have nosedived in nearly every industrialized country.

    In the article linked below, China is hemorrhaging manufacturing jobs. Surprise, surprise. I have to ask also, what's so bad about service jobs?


    http://www.axaonline.com/rs/axa/publ...Declining.html
    - Which is worse--ignorance or apathy? For my part, I don't know and I don't care. -

  12. #12
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    To the people who say poverty increased during regan....did the percent increase.
    CON 4.1
    According to the Statistical Abstract of the United States for 1996, the number of people (white, black, and Hispanic) below the poverty level increased in almost every year between 1981 (31.8 million) and 1992 (39.3 million).

    only 8.9 million people more were in poverty. 256.5 million people lived in the US in '92 and about 229.5 million in '81.

    So in '81, the people in poverty made 7.2%
    in '92, 6.5%.

    So, clearly less people were in poverty as a percent which is the only thing that matters.

  13. #13
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    Supply side economics

    Stormin Norman,
    . . . our experiences, knowledge and logic leads most of us to agree that the revenue obtained from too low of a tax rate doesn’t justify the specific tax’s overhead and other collection expenditures. (I mention this because “supply side” proponents may agree but they never refer to this facet of tax administration).

    Too large of a tax rate increasingly induces individuals’ and enterprises’ affairs to both legally avoid and/or illegally evade taxes.

    I’m among those that contend as you approach some specific tax rate, the graphic characteristic of a tax’s revenue and tax rate relationship changes. At that point (that differs for specific basis of taxation), the revenue per rate of tax begin decelerating at a continuously more significant extent as tax rates are further increased, (i.e. diminishing returns per increase of tax rate).

    If a variety of lesser tax rates are applied on a different basis, and are proportionally levied upon different segments of our populations and different industries, despite the additional administration expenditures, and due to evading the concept of diminishing returns, greater aggregate tax revenue can be achieved. This is another facet of tax policy that supply siders rarely discuss.

    Supply side economics conclude that tax reductions are in them- selves always to the nation’s net economic benefit. It’s easy to rationalize reduction of taxes upon ourselves or our own enterprises to be to our nation’s best interests. We then further rationalize supply side economics supporting reduction of our taxes equate to the concept’s complete validity.

    As George Gershwin wrote, “It ain’t necessarily so”.

    Respectfully, Supposn

  14. #14
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    Quote Originally Posted by heil bushler View Post
    Intersting. You wrote 300+ words on how you think reaganomics worked miracles. But not ONE songle word on how greatly the national debt and deficit EXPLODED during his terms.
    Reagan had to rebuild the Navy and increase spending on other military programs due to Carter's neglect. As far as your other claims,

    President Reagan entered the White House with an attitude of working honest deals with the Congress on spending. He wanted more defense spending, lower entitlement spending, lower tax rates which would boost the economy (and thus revenues) and seemed to achieve that agreement with Congress in both 1981 and 1982. However, despite getting concessions on taxes, the Democratic-controlled House of Representatives never once cut spending, and the actual budgets were higher than what Reagan asked for 7 out of 8 years. This attitude of "cut spending later" helped continue the debt trends that began under Ford and Carter. By the end of Reagans terms, debt had increased by $2 trillion.

    Actual budget figures in the link below:

    The President Reagan Information Page:Budget Myths

    President Reagan was able to sign into law the tax cuts in late 1981 after an attempt by congressional Democrats to block the cuts (i.e. "gridlock") failed...but at the reduced rate of 25%, and an effective rate of 23% since the cuts would be over three years (5% in 1981, retroactive; 10% for 1982; 10% for 1983).

    All taxpayers received these cuts, not just the rich as anti-Reagan revisionists would have you believe, as shown in the table of effective tax rates. And, also contrary to liberal recounting, the tax cuts helped spur the economy (see the expansion). In addition, income tax revenues increased during this period and the share of taxes paid by the rich increased also! In other words, the liberals have been lying to you.

    The Reagan Information Page:The Tax Cuts

    The smallest amount by which a Reagan budget was increased by the Democrat-controlled House of Representatives was $50 billion. The government shut down on numerous occasions because of budget battles between Reagan and Congress. Interestingly, back then no one blamed the Speaker of the House for shutting down the government. They blamed the President.

    When Reagan’s tax plan was passed in 1982, there were supposed to be two dollars in spending cuts for every dollar of tax cuts. But spending never got cut. In the end, for every new dollar of tax revenue, the Democrats spent $1.80. Rather than cut spending, they let the government shut down and blamed Reagan.

    House Atreides - The Truth About Tax Cuts

    Watch out for the Liberal’s Revisionism!
    “For the scientist who has lived by his faith in the power of reason, the story ends like a bad dream. He has scaled the mountains of ignorance; he is about to conquer the highest peak; as he pulls himself over the final rock, he is greeted by a band of theologians who have been sitting there for centuries.” - Robert Jastrow

  15. #15
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    Prior to Reaganomics we did not have the widespread phenomena of jobless and homeless people.

    I witnessed the dreadful fate of thousands of Americans losing jobs they had held for years and years, jobs that they thought they would hold throughout their working lives. There was a sudden increase in the number of homeless Americans as Americans could no longer make mortgage payments on their homes because their jobs had been outsourced.

    This was the beginning of downsizing, outsourcing, the destruction of America.

    All because of Reaganomics and his wholesale attack on unions and American working people.
    Brother, you can believe in stones as long as you do not hurl them at me. Wafa Sultan

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    War is sweet to those who have not tasted it, but the experienced man trembles exceedingly at heart on its approach. – Pindar

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