Reaganomics is Dead

[Toro]

According to one economist who worked for Reagan and Bush I.

Old-school supply-sider BRUCE BARTLETT says America needs a tax hike-and that Republicans should fight to make sure that it's done right.

BRUCE BARTLETT WAS A LIEUTENANT in the Reagan revolution. As an aide to congressman Jack Kemp, he helped write the legislation underpinning Ronald Reagan's 1981 tax cut and then worked in the Reagan and the George H.W. Bush administrations. Bartlett still thinks low marginal tax rates fired up the '80s economy, but he laments that conservatives misunderstand Reagan's legacy, thinking of tax cuts as a cure for every ill. His book criticizing George W. Bush got him fired from a conservative think tank in 2005. His latest, The New American Economy, should stir up more controversy. For a start, he argues that conservatives can learn from John Maynard Keynes, the economist who argued for big government spending in times of crisis.

You were a Reagan-era tax cutter, but now you've written a book praising Keynesian economics, more spending, even tax hikes. What gives? I wanted to show that economic ideas go through cycles. A crisis happens that the dominant thinking can't deal with, and a new theory comes along to solve the problem. When the crisis is past, that theory becomes the new all-purpose way to deal with every problem. And that leads to the next crisis.

Before John Maynard Keynes, economists had no solution to the Great Depression. They thought the government should do nothing. But after wartime spending pulled the economy out of the Depression for good, Keynes became the new conventional wisdom. But Keynes's ideas were designed for a deflationary depression. When you apply that medicine in an inflationary situation, you get even more inflation. Keynesianism met its Waterloo in the stagflation of the 1970s.

Enter "supply-side" economics. Almost. First the monetarists stepped in, arguing that to whip inflation we had to tighten the money supply. Supply-siders argued that we needed big tax cuts to give people incentives to work harder and get growth going. Tight money, tax cuts, and deregulation-that was the model. Once Reagan did all that, cutting the top tax rate as low as 28% in 1986, there was nothing left to do. But armies don't disband at the end of wars. They find new ways to fight.

So are Republicans fighting the last war? What good are tax cuts when people have no income to tax? In this crisis we've run into the same problem we had in the Great Depression: a liquidity trap. Money isn't circulating. The stimulus package may have been over-sold by Obama, but the principle was correct. We need government spending to get out of the trap.

Do you support the idea of another stimulus package? No. The lags in implementation are so great that it would have no effect until long after the recovery is under way. And I think the makings of a fairly rapid recovery are here.
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Reaganomics is Dead (Long Live Reaganomics) | Capital Gains and Games

 

[PLYMCO_PILGRIM]

What good are tax cuts when people have no income to tax? There is tons of income still being made by many people in small business, hell if my boss got a 2% tax break he would open up the 3rd shop and give 4 more people full time gainful employment. I dont buy that line AT ALL. I have personal experience that contradicts this statement.

I think the guy does make some other good points such as applying a great depression spending model to todays crisis being a bad idea. I hope he is right that a strong recovery is right around the corner. I just dont know if the way we are creating the recovery will be sustainable.

 

[Toro]

What good are tax cuts when people have no income to tax? There is tons of income still being made by many people in small business, hell if my boss got a 2% tax break he would open up the 3rd shop and give 4 more people full time gainful employment. I dont buy that line AT ALL. I have personal experience that contradicts this statement.

I think the guy does make some other good points such as applying a great depression spending model to todays crisis being a bad idea. I hope he is right that a strong recovery is right around the corner. I just dont know if the way we are creating the recovery will be sustainable.

I believe I read somewhere that when the Bush White House sent out the second round of stimulus checks a few years back, people saved 85% of it. That's good to help you and I repair our balance sheets (effectively transferring our debts to the balance sheet of the federal government), but it did nothing to increase the monetary velocity in the economy. That was his point. When money circulates at a slower rate in the economy, economic activity declines. You want policies that increase monetary velocity. Instituting policies which merely transfer debt from the balance sheet of the consumer to the federal government does not do much good.

 

[JakeStarkey]

If the market gains are made on the back of firing employees, in order to increased dividends, rather than growing the business, you may be right, Plymco_Pilgrim.

 

[garyd]

Yet if you borrow millions either from overseas or from the banks here and raise taxes where the hell does the private sector come by the money to expand and hire?

The real answer to the question why aren't the banks loaning out more money? is the government is borrowing it all.

 

[Chris]

Yet if you borrow millions either from overseas or from the banks here and raise taxes where the hell does the private sector come by the money to expand and hire?

The real answer to the question why aren't the banks loaning out more money? is the government is borrowing it all.

Mortgage interest rates are at 5% and money is readily available.

 

[garyd]

Not for small busineses it isn't. And that's the problem.

 

[Chris]

Not for small busineses it isn't. And that's the problem.

But I thought the "free market" was supposed to take care of all our problems.

There are hundreds of banks in this country.

 

[garyd]

Everyone ruled with a cast iron hand by the Fed. There really hasn't been a true free merket when it comes to banking since the Great Depression. When the government is borrowing all the money to make sure people can buy cars and homes there isn't much left to do much else.

 

[Oddball]

According to one economist who worked for Reagan and Bush I.

Old-school supply-sider BRUCE BARTLETT says America needs a tax hike-and that Republicans should fight to make sure that it's done right.

BRUCE BARTLETT WAS A LIEUTENANT in the Reagan revolution. As an aide to congressman Jack Kemp, he helped write the legislation underpinning Ronald Reagan's 1981 tax cut and then worked in the Reagan and the George H.W. Bush administrations. Bartlett still thinks low marginal tax rates fired up the '80s economy, but he laments that conservatives misunderstand Reagan's legacy, thinking of tax cuts as a cure for every ill. His book criticizing George W. Bush got him fired from a conservative think tank in 2005. His latest, The New American Economy, should stir up more controversy. For a start, he argues that conservatives can learn from John Maynard Keynes, the economist who argued for big government spending in times of crisis.

You were a Reagan-era tax cutter, but now you've written a book praising Keynesian economics, more spending, even tax hikes. What gives? I wanted to show that economic ideas go through cycles. A crisis happens that the dominant thinking can't deal with, and a new theory comes along to solve the problem. When the crisis is past, that theory becomes the new all-purpose way to deal with every problem. And that leads to the next crisis.

Before John Maynard Keynes, economists had no solution to the Great Depression. They thought the government should do nothing. But after wartime spending pulled the economy out of the Depression for good, Keynes became the new conventional wisdom. But Keynes's ideas were designed for a deflationary depression. When you apply that medicine in an inflationary situation, you get even more inflation. Keynesianism met its Waterloo in the stagflation of the 1970s.

Enter "supply-side" economics. Almost. First the monetarists stepped in, arguing that to whip inflation we had to tighten the money supply. Supply-siders argued that we needed big tax cuts to give people incentives to work harder and get growth going. Tight money, tax cuts, and deregulation-that was the model. Once Reagan did all that, cutting the top tax rate as low as 28% in 1986, there was nothing left to do. But armies don't disband at the end of wars. They find new ways to fight.

So are Republicans fighting the last war? What good are tax cuts when people have no income to tax? In this crisis we've run into the same problem we had in the Great Depression: a liquidity trap. Money isn't circulating. The stimulus package may have been over-sold by Obama, but the principle was correct. We need government spending to get out of the trap.

Do you support the idea of another stimulus package? No. The lags in implementation are so great that it would have no effect until long after the recovery is under way. And I think the makings of a fairly rapid recovery are here.
...

Reaganomics is Dead (Long Live Reaganomics) | Capital Gains and Games

The problem with declaring the Reagan economic model dead is that spending was never cut.

When anyone accomplishes both tax and significant spending cuts, then we can sit around arguing the merits of the results.

 

[eagleseven]

More appropriately,

Bush is dead, long live the black Bush!

 

[Modbert]

The problem with declaring the Reagan economic model dead is that spending was never cut.

When anyone accomplishes both tax and significant spending cuts, then we can sit around arguing the merits of the results.

And that is why I partly considered the GOP economic model to be a joke for years. They all kept harping on Reaganomics yet they never stopped the spending. Hell, Reagan took to spending like sailors to an open bar if you catch my drift. Raiding the coffers of Social Security and all too.

 

[Oddball]

The coffers of the cynically dubbed OASI "trust fund" have been raided, to varying degrees, since the middle of WWII...Republicans hardly invented that one.

 

[Modbert]

The coffers of the cynically dubbed OASI "trust fund" have been raided, to varying degrees, since the middle of WWI...Republicans hardly invented that one.

Of course not. But I think you get the point I'm trying to get across.

It's why I laugh when any Republican says they're Conservative. Just because they like to spend all of our money on different things than the Democrats doesn't make them Conservative.

And then they took the word Conservative and abused it until it became some sort of whackjob, the type that Goldwater warned the GOP about over forty years ago.

 

[Oddball]

And Eisenhower, even though he was a squishy wheeler-dealer.

 

[garyd]

Um doggie the Republicans have only had control of both house of congress for ten of the last 60 years and in the first 6 years of that they cut spending as much as they could. President for puposes of domestic spend are of small consequence if their party doesn't control congress.

 

[Modbert]

And Eisenhower, even though he was a squishy wheeler-dealer.

True I suppose, I just remember reading about Goldwater ranting here and there about how the current nutjobs of today were going to take over the GOP all the way back then.

 

[elvis]

why does this thread remind me of those freaks who thought McCartney was dead?

 

[Oddball]

Um doggie the Republicans have only had control of both house of congress for ten of the last 60 years and in the first 6 years of that they cut spending as much as they could. President for puposes of domestic spend are of small consequence if their party doesn't control congress.

They didn't cut spending at all. Even that douchebag Tom DeLay claimed that one of their bloated budgets was "cut to the bone".

The Shub vetoed exactly nothing during his first six years, when the GOP ruled the roost.

Drop the party man Kool-Aid, man.

 

[Modbert]

Um doggie the Republicans have only had control of both house of congress for ten of the last 60 years and in the first 6 years of that they cut spending as much as they could. President for puposes of domestic spend are of small consequence if their party doesn't control congress.

And here come the excuse machine.

True Conservatism has been dead for the Republicans for almost sixty years now. Again, just because Republicans cut funding for certain programs and gives it to others doesn't mean they are Conservative.