Well, better late than never.
Commenting on a front-page news analysis in today’s New York Times today that “reports on a startling (at least at the Times) idea to cut the deficit and thus tame the rapidly rising national debt: economic growth“, John Steele Gordon thinks the idea sounds kind of familiar:
If this sounds familiar, it is because this was the very heart of Reaganomics 30 years ago. It is amusing that [writer David] Leonhardt takes pains to ensure Times readers, before they come down with the vapors, that not all tax-rate reductions are tax cuts.
Read the whole thing.
Sorry, Hon. Reagan raised the national debt to new and astronomical records. He was a spend-&-spend Republican. But Bush II walloped Reagan’s records, on the heels of Democrat Bill Clinton annually reversing the Reagan spend-&-spend trend down to near nothing.
President Ronald Reagan is the first President to increase the National Debt by more than $100 Billion in one year!
President Ronald Reagan is the first President to increase the National Debt by more than $200 Billion in one year!
President George H.W. Bush is the first President to increase the National Debt by more than $300 Billion in one year!
President George H.W. Bush is the first President to increase the National Debt by more than $400 Billion in one year!
President George W. Bush is the first President to increase the National Debt by more than $500 Billion in one year!
President George W. Bush has increased the National Debt by more than $500 Billion AGAIN! Almost hits $600 Billion!
President George W. Bush has increased the National Debt by more than $500 Billion a THIRD time!
President George W. Bush has increased the National Debt by more than $500 Billion a FOURTH time!
President George W. Bush has increased the National Debt by more than $500 Billion a FIFTH time!
Government prevents employment and growth in two ways:
1) Specific obstacles: red tape, mandates, development bans, arcane or impossible tax rules, etc. that make employment and small/new businesses painful and expensive to do.
2) The sheer volume of spending: it’s a burden (not a stimulant) to the rest of the economy. In several ways: it frightens people (the endlessly mounting debt will end in… what?), destroys incentives (people sense that they will be keeping less of what they earn), and generally redirects money from relatively-efficient private uses to inefficient government-bureaucrat uses.
Correspondingly, government can aid employment and growth in two ways:
1) Cut the obstacles it created.
2) Cut overall spending.
Item (1) is traditional supply-side economics, Reaganomics, etc. Make it easier for businesses to supply things, and you will get more supply: which in turn brings lower consumer prices (less inflation) as well as more jobs.
Item (2) is an idea from Austrian School economics. It is rejected by the mainstream, as Keynesianism preaches that government spending is good, the opposite. But Margaret Thatcher proved (2) in the 1980s, when she slashed British government spending against the advice of British economists – and, after a brief painful adjustment period, got wonderfully high growth.
Now as for the NYT: Yes, they finally figured out that (1) is a good idea. Yay! Maybe thirty years from now, they will also get a clue about (2).
Um, Auntie, what does you comment have to do with the point that Reagan’s policies fostered growth?
Oh, and where in the post did we mention W? And, don’t forget, Clinton cut spending with a Republican Congress–something the Gipper never enjoyed.
Please address the subject matter of the post. Thanks!
Note how Granny Goodness doesn’t condemn Obama’s 1.6 trillion in spending.
So if you don’t have an issue with 1.6 trillion, 10% unemployment, and stagflation, then you shouldn’t have a problem with policies that actually cause growth.
I’ve finally done it: explained in a simple way the true consequences of budget deficits:
http://joeedh.wordpress.com/2010/11/17/balancing-the-budget-saving-the-working-class/
Anyway. I happen to think both parties are deeply responsible for spending. Arguing whether Obama or Bush was worse on spending is ridiculous. They both suck when it comes to balancing fiscal resources.
Some politicians (a minority) call this the “government bubble.”
how do you know that the economic growth during the reagan era was caused by tax cuts and not massive government spending?
Actually Chad, I’ve heard from lots of folks working in the Defense industry that Reagan’s call for a 600 ship Navy, STAR wars defense platforms and multiple new weapon systems were terrific economic starters for their industry.
It’s a conundrum of sorts for GOPers interested in learning history’s lesson(s) and one that requires a honest assessment by economists beyond partisan sloganeering.
joeedh, good little article and I agree with the “we’re have a bubble – in government” concept.
Another aspect of the way Keynesian economics destroys the working class is, Fed money-printing and 0% interest rates. They make it impossible to get ahead by saving. (If you are a working-class retiree, they make it impossible to live off your savings.) They represent an inflationary stealth tax on the average person – for the sake of goosing the asset markets, i.e., the people who bought more house than they could afford in the housing bubble, the big Wall Street banks who also got bailouts, etc.
Notice that Fed money-printing (QE1 which injected $1.4 trillion new dolars and now QE2, injecting another $600B) and 0% interest rates go hand-in-hand with deficit spending. They are needed to finance the deficits. The deficits would otherwise cause sky-high interest rates and, in today’s indebted world, a true financial collapse.
As for the Bush vs. Obama question: I have made your same point many times, that Bush raised domestic (non-defense) spending far too much and was wrong to run $400B deficits and 1% interest rates. But I usually follow it up by pointing out that that makes Obama even worse, with his $1.4T deficits and 0% interest rates.
I sum it up like this: Bush pointed the bus off the cliff, Obama stepped on the gas pedal.
Because, economic ignorance aside, government spending doesn’t cause growth. Oh, it may *divert* resources to special industries, companies or individuals – giving growth to those lucky winners. And it is always fun to borrow scads of money and spend it wildly on new homes and buildings and computers and clothes and cars, having a terrific party, perhaps for years. But sorry, that is not real growth. It’s only debt-and-spending. The illusion of growth. “False growth” which, when it happens in biology, we call “cancer”.
(continued) Returning to the background info I gave at #2: To the extent that real growth did happen in the Reagan years – growth in production and productive capacity, growth in the nation’s real wealth – it happened because of the supply-side stuff Reagan did, the lifting of burdens from the backs of our nation’s entrepreneurs. And lower taxes factors into that, so they helped somewhat. But the growth would have been that much greater – and we would be that much better off today – if the Democrats in Congress had also let Reagan cut spending.
(continued) As was seen in the 90s, when the Republicans in Congress forced Clinton to keep a lid on spending – to the economy’s benefit.
Obviously spending is out of control right now, and I’m hoping the new congress can work with the President to find smart, bi partisan, solutions to solve the issue.
But I’ve always wondered why Republicans, mainly fiscal conservatives, are so in love Reagan. He cut taxes, but then realized he cut them too much and had to raise them once he realized the debt was balooning out of control. Even then, the increased taxes weren’t enough to off set the increased spending and the decrease in tax revenues. Unlike a fiscal conservative would do, he increased the size of our government in more ways than one. He took this nation from the leading world’s largest inernational creditor to the leading debtor nation. His tax cuts began the downfall of the middle class and were likely a reason Bush had to raise taxes against his will.
In all honesty, Clinton, with a Republican congress, was the last president for a while to practice some sort of fiscal conservatism. He reduced spending, balanced our budgets and even lossened business regulations towards the end of his presidency, maybe a little too much. Yea, Reagan envigorated our economy, but at what cost to future Americans?
Actually: He cut taxes and domestic, non-defense spending. Then Democrats in Congress forced him to restore much of that spending. And then some of those taxes. At the end of it, taxes and domestic / non-defense spending were both significantly lower than they would have been otherwise, making Reagan the “least bad” President in those areas. Imperfect as Reagan was… the other Presidents have been worse. Even Clinton, despite the Republican Congress, did raise domestic spending more – as well as taxes. I admire Reagan as the “least bad” of a large, sorry lot.
True, but I dk why you ignore the raise in his defense spending as well. Under Reagan, the gross debt as a percentage of GDP increased, whereas it decreased under Clinton. Reagan did a good job helping the economy in the short term, but started us on the path of out of control spending we currently find ourselves on.
In fact, Reagan essentially spent us out of a recession by cutting taxes and increasing spending, the best of both worlds approach. That’s definitely not a conservative ideal.
General answer: Police, courts and military are among the 3 legitimate functions of government in protecting people’s rights of life, liberty and property. Not that “waste” or excess spending is ever justified in those areas, but, bringing them up gets us to the concrete answer: Reagan’s defense increases were largely necessary to defeat Communism. And it was a tremendous gift to human freedom (not to mention the Aermican economy) that his policies eventually did.
You addressed merely one point, and probably the weakest point, of my argument. I still fail to see how one can justify tripling the national deficit in order to “defeat communism” or create temporary economic prosperity. I just don’t see why conservatives love Reagan so much. Maybe I’m missing something. I just don’t see how Reagan’s economic policy was as conservative as people seem to think. Maybe someone can help me see what I’m missing?
Whoa, cowboy. Who’s trying to justify it? I’ve said the Congress should have let Reagan cut domestic spending a lot more, to keep the budget in balance (while paying for tax cuts and defense increases to defeat Communism).
Same with Bush 43, by the way. Bush, to his discredit, increased domestic / non-defense spending year after year even before he got a Democratic Congress in Jan. 2007. Had he merely frozen domestic spending at Clinton levels, his deficits would have been much smaller – even with his tax cut and 2 wars.
As I’ve explained, the conservative elements were the supply-side improvements including the tax cuts. And then, there were unfortunately some non-conservative elements. Reagan tried to have deeper spending cuts which would have been fiscally conservative, but the Congress denied him the full extent of that, forcing larger deficits. Thus we got a Keynesian policy. (BTW, of course you know that Congress has the actual budgeting / spending authority under the Constitution.)
Yea I do, and as long as congress isn’t in comeplete disagreement with the president, he has veto power..
ilc still hasnt shown that the tax cuts, rather than the increase in spending, grew the economy during the 80s either.
“Please address the subject matter of the post. Thanks!”
That’s getting to be the default response when you’ve been trumped. It’s not working.
@21: dan has been ineffectively beating that drum for a long time.
Oh that’s rich. Our new troll objecting to the request to stay on tpoic. Maybe if he had something to say, he’d be able to stay on topic.
Chad, first of all I have but you don’t want to hear it. Second, you might get more out of me if you address the comment to me.
@21,
Lol, I have addressed the subject matter, yet people don’t wanna seem to address that.
actually, ILC, you’ve given me propaganda, not facts or evidence. prove to me that tax cuts grow the economy. you might want to find some data, rather than simply citing talking points from the heritage foundation. while you’re at it, you might want to explain to me what went wrong with the bush tax cuts, since those were also supposed to grow the economy, and we all know that was a giant snafu.