Trickle Down Economics (Reaganomics). Does it work?

[onejayhawk]

Originally posted by Richard III
So far, no one has credited Reagan or Thatcher era central banking policies/reforms for the boom, for which some of the credit must surely go.
R.III

Hear. Hear. One of the best things that Jimmy Carter did as President was nominate Paul Volker to the Fed. One of Reagn's smartest moves was to keep out of his way.

Originally posted by Voodooace

Gee, that's funny.

And I always thought REAGAN was the president during the REAGAN years, lol.

And I thought the president signed bills into law.

Tharein is the problem. Congress would never send President Reagan a budget. Ever. On every bill, spending was attached. It was sign a bill he wanted and spend the money the Democrats wanted, or veto his own bill. So it is fair to say that Tip O'Neil raised spending. They sandbagged Bush the same way in 1991. He gave them the tax increases they wanted, but they renigged on the spending cuts.

BTW, you keep mentioning triple deficites. Back the words up with some numbers. Its possible, but it requirres some tricky number crunching. Debt service at Double digit rates was a backbreaker through a large part of the period. Factor that out and recompute.

J

 

[JollyRoger]

Originally posted by rmsharpe


For every dollar Ronald Reagan proposed, the Tip O'Neill left spent $1.82. Had we fully followed the Reagan plan, I believe it was some five or so years we would not be defecit spending.

Let's see . . . five years after Reagan . . . Clinton . . . end of deficit spending . . . right in between the two Bush recessions. W's tax cut was essentially trickle down in that it gave the average Joe a $300 tax cut while giving a much higher tax cut (in both absolute & % terms) to Joe's richer Uncle. Don't worry, the budget will stay balanced . . . the surplus will pay for the tax cuts. Where is that surplus-funded balanced budget now? Of course supply-side economics assumes that Joe's rich Uncle will do something with his windfall that will ultimately benefit Joe. Can't say that has happened since W's tax cut. Joe is more likely to be unemployed than he was before the tax cut (good thing he got that $300) and his 401(k) has a negative momentum not seen since the days of King George the First.

Blame the Democrats for the unbalanced budget? Wouldn't be prudent in 2004 when the deficit will likely have not been reversed by a Republican controlled Congress. I wonder if trickle down economics assumes that votes will trickle up? If not, then let's invent the supply-side election. $1=1 vote.

 

[etj4Eagle]

Originally posted by JollyRoger


Let's see . . . five years after Reagan . . . Clinton . . . end of deficit spending . . . right in between the two Bush recessions. W's tax cut was essentially trickle down in that it gave the average Joe a $300 tax cut while giving a much higher tax cut (in both absolute & % terms) to Joe's richer Uncle. Don't worry, the budget will stay balanced . . . the surplus will pay for the tax cuts. Where is that surplus-funded balanced budget now? Of course supply-side economics assumes that Joe's rich Uncle will do something with his windfall that will ultimately benefit Joe. Can't say that has happened since W's tax cut. Joe is more likely to be unemployed than he was before the tax cut (good thing he got that $300) and his 401(k) has a negative momentum not seen since the days of King George the First.

Blame the Democrats for the unbalanced budget? Wouldn't be prudent in 2004 when the deficit will likely have not been reversed by a Republican controlled Congress. I wonder if trickle down economics assumes that votes will trickle up? If not, then let's invent the supply-side election. $1=1 vote.

Of course one thing about supply side economics is that it takes time, often years for the effects to work their way through the system. Supply side economics are the only thing that can really lower the unemployment rate in the long run, since the long run unemployment rate is dertermined by the size of the capital stock. And it is those rich people who provide the capital investments to expand it.

Unfortunately due to the lags inherent with any economic policy, the effects can often occur after a leadership change. Of course at the same time it would be nice if the Bush adminstration had remained consistent on why the tax cuts were good. Since the same cuts that are to return extra surplus of an economy in danger of overheating can't be the same cuts that will stimulate a faltering economy.

 

[Richard III]

First, hello Jolly Roger! I thought dungeons were a state responsibility...

Originally posted by JollyRoger
W's tax cut was essentially trickle down in that it gave the average Joe a $300 tax cut while giving a much higher tax cut (in both absolute & % terms) to Joe's richer Uncle. Don't worry, the budget will stay balanced . . . the surplus will pay for the tax cuts. [...] Can't say that has happened since W's tax cut. Joe is more likely to be unemployed than he was before the tax cut (good thing he got that $300) and his 401(k) has a negative momentum not seen since the days of King George the First.

I edited your post slightly, since doing so doesn't take away from my question: am I correct, americans, in characterizing the tax cut as more like an early tax return?

I remember all sorts of confusion and controversy over how the tax cut wasn't really permanent somehow, but instead that the stimulus was getting money early instead of getting more back. I'd always wanted to clear up what all that fuss was about, but I was too busy dealing with issues at my province's soviet style liquor system at the time to pay the close attention I'd wanted.

Please clarify...

R.III

 

[The ANZAC]

Well, supply-side economics does work, at least mostly. Even Say himself said that sometimes it can go awry.
But on the whole, supply-side is much better than wage-side. For examples of wage-side economics screwing up, look at the beginning of the Great Depression and the 70s, where wage freezes caused the situations to become even worse.
But lets look at high bracket tax cuts. First I would rather see the income tax abolished, but that's beside the point. During the Reagan years, they lowered taxes for the rich, but they had increased revenue, even though the taxes had been cut because it freed up capital for the private industries to grow and expand. (This is from "The Reagan Administration," The Vision of the Anointed, BasicBooks, 1995, pp. 82-85 for all you source hounds ) Reaganomics/Say's Law/Supply-Side Economics are the way to go in the long run, it's superior to our other alternatives.

 

[Garvarg]

There is absolutly no question that trickle down economics does work. The problem is that we (most north americans) are not at the bottom! It does increase production and creates a higher standard of living, just not here. The bottom is where the money trickles down to. Korea, Tiawan, Mexico and more. These are the economies that benifited the most. This is a global community. The only way it would benifit the US the most is if it was illegal to buy or produce goods outside of the states. Only buy American products and stop vacationing outside of the country. Is that what the people want? No, trickle down the money so I can buy a better foreign car to cheaper DVD player made in China.

As stated earlier, no single policy works all the time. "The times, they are a changin" to quote Bob.

 

[onejayhawk]

Originally posted by Richard III
I edited your post slightly, since doing so doesn't take away from my question: am I correct, americans, in characterizing the tax cut as more like an early tax return?

I remember all sorts of confusion and controversy over how the tax cut wasn't really permanent somehow, but instead that the stimulus was getting money early instead of getting more back. I'd always wanted to clear up what all that fuss was about, but I was too busy dealing with issues at my province's soviet style liquor system at the time to pay the close attention I'd wanted.

You have the gist of it. The tax cuts are more token than anything. For real tax cuts you have to go back to John F Kennedy, a certified supply sider before the name came into existence, who reorganized the whole tax structure specifically to boost the economy.

It is interesting to note on the side, where Japan and to a lesser extent Germany got their leg up in status as consumer producers. During the postwar years, their profits were strictly regulated. Interest rates were artificially low. Consiquently, the only reasonable thing to do with a profit was to reinvest in your own company through building and modernizing. Since winning and losing in the game could not be scored in money amassed, the quality of the product became the scratch test.

When the restrictions were lifted after 10-25 years, depending on the restriction, all the modernization was a coiled spring which would drive them for a generation. Quality is still the by-word, or buy-word. Unfortunately the habit of reinvesting has had some bizarre side effects, which are threatening the whole structure, but that's another thread.

J

 

[jpowers]

Originally posted by onejayhawk
It certainly did work in the 1980's. Tax revenues exploded. Deficites began to decline. Interest rates and unemployment dropped like rocks. A good time was had by almost all.

J

PS "Almost" will be commenting shortly.

The National deficit rose at a ridiculous rate in the '80's, and only the top 5% of the nation's citizens had higher net worths in 1990 than in 1980.

 

[onejayhawk]

Originally posted by jpowers


The National deficit rose at a ridiculous rate in the '80's, and only the top 5% of the nation's citizens had higher net worths in 1990 than in 1980.

Again, back it up. Congress has the spending power. Congress was Democrat. The Debt service problem was a Carter legacy. Run the numbers with that out.

J

 

[Cloudyvortex]

I am certain that the debt problem is something that 'Crats and 'Pubs can share the blame for.