The Reality of "Reaganomics"

April 17, 2012

As crazy as it might be to suggest, I maintain that most “Reagan conservatives” know next to nothing about the actual presidency of Ronald Reagan (I have blogged about it before here). Reality is that Ronald Reagan was far from your modern day Tea Party disciple. Reagan opposed torture, was against military action against terrorists, and actually supported amnesty for illegal aliens. But setting all of those points aside for now, I want to focus on what is arguably the most popular component of “Reagan conservatism”, that being “Reaganomics.”

If you were to ask your average Reagan disciple what “Reaganomics” or “Trickle Down” economics are all about, chances are you would hear a lot of rhetoric about cutting taxes, eliminating government oversight, creating jobs, privatizing industry, experiencing indescribably Utopian prosperity, yadda, yadda, yadda. In short, you’d get a lot of hot air with little actual history behind it, almost like a talk radio pundit. Funny thing about those political pundits, isn’t it. They really don’t like ACTUAL history, do they?!?

The truth about “Reaganomics” is that Ronald Reagan didn’t have a whole lot to do with it. Ronald Reagan’s tax plan actually had its roots in the 1970s, with economist Arthur Laffer. Laffer originally drew up his ideas on a restaurant napkin and shared them with an advisor to President Ford. His idea outlined the obvious paradoxes that exist whenever tax rates approached 0% and 100%. Laffer suggested that raising taxes too high would reduce business activity, while lowering taxes would result in dangerously low revenue (really nothing all that profound, even to the layman). Ronald Reagan liked Laffer’s basic approach to economics, and consulted with him and others on his staff regarding how best to implement it. The difference, however, was that Reagan (unlike many on his staff) pushed for a much lower tax rate initially than did his advisers. According to many member of his staff, Reagan seemed to be oblivious to the idea of needed tax revenues, and enchanted with the idea cutting them. In David Stockton’s words, it seemed as though Reagan “had only the foggiest idea of what supply side was all about.” Stockton warned Reagan repeatedly that a large tax cut would spell doom to the national deficit, unless cuts in spending could be implemented. Even during the campaign of 1980 George Bush, Reagan’s opponent for the Republican nomination and eventual vice-president, called Reagan’s economic plan “voodoo economics.” Eventually, Reagan would realize the error of keeping such low tax rates in place, and as a result, raised taxes on four different occasions during his administration. Not exactly the type of facts you hear from self-proclaimed “Reagan Conservative” Sean Hannity!

Reagan’s economic philosophy embraced the idea that by lowering taxes, the people would end up with more money in their pockets. Reagan called his plan a “new beginning” for Americans, and a sure-fire way to economic recovery. This idea was, in part, fulfilled. While the majority of Americans experienced little or no actual economic prosperity, the top 1% of Americans blossomed. The net worth of the 400 richest Americans quadrupled under Reagan’s presidency, and corporate CEO’s made, on average, 93 times as much money as did the common American.

While it is true that Reagan’s economic policy gave relief to the problems of the 70s (a fact that Republicans should be very proud of), Reagan also managed to impact the federal deficit as well, which soared from 700 billion to 2.7 trillion during his eight-year tenure. Reagan’s commitment to military buildup created a conflict with his desire to lower taxes. Many began questioning where Reagan planned to find the money. To increase revenue, Reagan signed legislation that created “sin taxes” on alcohol and tobacco (isn’t Glenn Beck against those taxes?). Reagan also increased social security taxes, and forced the burden of funding various programs onto the states, who in turn raised taxes as well to fund the programs. In essence, “Reaganomics” was hardly the tax-cutting phenomenon that so many conservatives celebrate today. In fact, President Clinton had a lower tax rate than did Reagan!

(Source: azspot)

6:03am | URL: http://tmblr.co/Z_ljfxJpLDqj

(Notes: 38)