Friday, February 24, 2006

Reaganomics Doesn't Work, George

I had another argument with my mom, in which I declared that Reagan's tax cuts hurt the economy, so he had to raise taxes. She claimed Reagan's tax cuts helped the economy, and he never raised taxes. Such arguments always devolve to "where'd you get your information? " We both think the other's sources are liars. Thing is, I'm right.

An honest look at the numbers (you know, acknowledging FICA income to the government and real dollars adjusted for inflation) shows Reagan's tax cuts had no discernible effect on the economy (neither did Clinton's tax hikes). He reformed tax laws, some of which had the effect of raising taxes. The tax cuts definitely did negativaly effect government tax receipts, until the taxes were raised back up to cover his profligate and unnecessary defense spending.

Supply-side economics -- Reaganomics -- doesn't work to boost the economy, and George Bush's use of it, especially at a "time of war," is hurting our economy by increasing the deficit, and the interest payments on the debt.

Extra info: It was Fed Chairman Paul Volcker (1979-1987; yeah, Carter's Volcker) who helped create the boom (less of a boom than other decades in the latter half of the 20th century) which started in 1983, when he got inflation under control and, in 1982, reduced the interest rate again so people could buy homes, and businesses could borrow money. One of the Reagan myths debunked.
Carter didn't cause the inflation problem, but his tough policies and smart personnel solved it. Unfortunately for Carter, it took too long for the good results to kick in. Not only didn't Reagan help whip inflation, he actually opposed the Volcker policies!

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