Why doesn't anyone blame Ronald Reagan?

[soccerballtux]

Before anybody says anything about Clinton let me remind them that the economy was expanding so rapidly the government spending could not keep up. That would have happened regardless.

 

[halik]

Originally posted by: JS80

Originally posted by: jackace
Here is a very good article by Nouriel Roubini on Reaganomics.

http://pages.stern.nyu.edu/~nroubini/SUPPLY.HTM

The reason why supply side effects do not work is very simple: the estimated responses of labor supply and savings to tax rate cuts are too small to generate the extra revenues that would maintain a tax rate cut revenue neutral.

Consider the evidence on each of these two effects.

1. The labor supply effect:

1.1. The maximum income tax bracket was reduced from 91% to 70% during the Kennedy presidency in the 1960s and then down to 50% by Reagan in 1981.3. However, the labor force grew at an average rate of 1.6% over the 1982-89 period, about the same as during the previous four years. So the first Reagan tax cuts of 1981 had no effect on labor supply.

1.2. The maximum tax bracket was reduced from 50% to 28% in 1986 but again this tax cut had no positive effect on labor supply. A study by Randall Mariger, an economist at the Federal Reserve Board, found that tax rates cuts increased the labor supply by less the 1% between 1985 and 1986.

1.3. The 1993 Clinton increase in the top marginal tax bracket to 39.6% had no effect on the labor supply of the rich, (see the discussion above).

2. The Effect on Savings:

2.1. The evidence is that the response of savings to the after-tax real return to savings is quite small. In the 1973-1980, private saving averaged 7.8 percent of GDP, and dropped to 6.9% in 1986 and 4.8% in 1989. In other words, the saving rate was significantly lower after the 1981 and1986 tax cuts than before it.

2.2. Computer simulations suggests that, even in the case of an extreme policy change, the elimination of all income taxes to be replaced by a tax on consumption only, private savings would increase only by 20%. In other terms, since private savings are about 5% of GDP, in the best scenario they would become 6% of GDP.

2.3 About 80% of savings are already sheltered from current taxation in pension plans that are tax-deferred. So, any policy change that increase the return to taxation would have minimal effects on savings.

So, in conclusion the verdict from history and empirical evidence is quite clear. Supply side economics is "voodoo economics". Reductions in tax rates (starting from initial moderate tax rate levels) do not siginificantly increase labor supply and savings, do not increase economic growth, do not raise total tax revenue and do not reduce budget deficits. Their likely effect on the level and growth rate on output is close to zero while they lead to significantly larger budget deficits.

Great, change all tax rates to 70% because it won't decrease labor supply and won't harm the economy!

I think his argument was that cutting taxes slightly (aka opposite what clinton did in the 90s) has minimal impact on gdp growth and labor supply. I'd imagine that follows from the envelope theory of optimization.

 

[dmcowen674]

Originally posted by: techs
Topic Title: Why doesn't anyone blame Ronald Reagan?

I do all the time when I say the rich don't trickle anything down but shit.

Trickle down economics that was coined under Reagan does not work and never will.

 

[Thump553]

There are two schools of thought on Reagan. The neocons think he walked on water and could do no wrong. A more objective view would include many bad things he did, like wrecking the budget/almost bankrupting the USA, pursing an illegal war in direct contravention of specific laws passed by Congress (Iran-Contra, which included selling arms to an enemy of the US, Iran, to fund his dirty little war), giving the first major encouragement to Islamic terrorists by pulling out of Lebanon when they bombed a military barracks, and never taking retaliatory action, and instituting his famous trickle down economics which has directly led to income stratification in the US, etc. A vastly overrated President, in my view, but he could give a good speech (after all, he was a cowboy actor).

 

[AFMatt]

Reagan inherited an economy in far worse shape than what we are dealing with now, and turned it around. 1982-1990 = second longest period of straight economic growth in our history. Did government spending go up? Sure it did. Did % of gov't spending compared to GDP go up? Nope. Dems will pick him apart because he didn't believe in government handouts.
It is a fact that economic growth averaged 3+% during the Reagan years compared to 2.1 average for the following Bush and Clinton years. Median family income grew by $4,000 during his presidency, then lost $1500 after. Interest rates, which were sky high when he took over for Carter, inflation (also sky high), and unemployment fell faster under Reagan than they did after he left. Unfortunately, some of Reagan's tax cuts caused the defecit to explode near the end. Obama's plan would likely have a very similar effect in that area.

 

[MikeyLSU]

never realized just how liberal this board was till seeing this thread with so many basically calling Reagan one of the worst presidents in history.

 

[winnar111]

Because he rescued our economy from Jimmy Carter.

 

[microbial]

Reaganomics did not work under Reagan.

GWB resurrected reaganomics and it was proven not to work yet again.

The next time some politician tells you that the best way to help the average working American (Joe-the-plumber or Jane-six-pack) is by giving tax breaks and incentives to the very wealthy, please tell them to go F. themselves. It's patently and demonstrably false.

Reagonomics is dead. R.I.P. forever.

 

[bozack]

Originally posted by: MikeyLSU
never realized just how liberal this board was till seeing this thread with so many basically calling Reagan one of the worst presidents in history.

Dude seriously? this board as been a liberal paradise for the past eight years...here's to hoping they all go on vaca while their guy is in office.

 

[bozack]

Originally posted by: microbial
Reaganomics did not work under Reagan.

GWB resurrected reaganomics and it was proven not to work yet again.

The next time some politician tells you that the best way to help the average working American (Joe-the-plumber or Jane-six-pack) is by giving tax breaks and incentives to the very wealthy, please tell them to go F. themselves. It's patently and demonstrably false.

Reagonomics is dead. R.I.P. forever.

But giving tax incentives to industry certainly does help create jobs/wealth...

Just use MA as an example, here we have a healthy tax break for the film industry and movies are being shot left and right, plus the breaks that towns and the govt gives to high tech and pharma are pretty large...the downside is the state taxes and fees the crap out of its middle and upper middle bracket

 

[Muse]

Originally posted by: XZeroII
So let me get this straight...

Bush is on his way out and your best buddy is moving in so now you have to start in on Regan? Are you so filled with hate that you have to start up with Regan now?

Hey, Ronnie is fair game. I think this is an interesting argument. Myself, I never had a favorable impression of Reagan. He was a douche as governor of California, he was a douche as president. My eyes continue to roll at the hero worship he got. I honestly think that McCain consciously tried to channel him a time or two, but failed.

 

[brandonbull]

Other than him trying to bankrupt the US by out spending the Russians and using drug smuggling and arm deals with Iran to fund an illegal war, he was tops.

 

[jackace]

Originally posted by: JS80

Originally posted by: jackace
Here is a very good article by Nouriel Roubini on Reaganomics.

http://pages.stern.nyu.edu/~nroubini/SUPPLY.HTM

The reason why supply side effects do not work is very simple: the estimated responses of labor supply and savings to tax rate cuts are too small to generate the extra revenues that would maintain a tax rate cut revenue neutral.

Consider the evidence on each of these two effects.

1. The labor supply effect:

1.1. The maximum income tax bracket was reduced from 91% to 70% during the Kennedy presidency in the 1960s and then down to 50% by Reagan in 1981.3. However, the labor force grew at an average rate of 1.6% over the 1982-89 period, about the same as during the previous four years. So the first Reagan tax cuts of 1981 had no effect on labor supply.

1.2. The maximum tax bracket was reduced from 50% to 28% in 1986 but again this tax cut had no positive effect on labor supply. A study by Randall Mariger, an economist at the Federal Reserve Board, found that tax rates cuts increased the labor supply by less the 1% between 1985 and 1986.

1.3. The 1993 Clinton increase in the top marginal tax bracket to 39.6% had no effect on the labor supply of the rich, (see the discussion above).

2. The Effect on Savings:

2.1. The evidence is that the response of savings to the after-tax real return to savings is quite small. In the 1973-1980, private saving averaged 7.8 percent of GDP, and dropped to 6.9% in 1986 and 4.8% in 1989. In other words, the saving rate was significantly lower after the 1981 and1986 tax cuts than before it.

2.2. Computer simulations suggests that, even in the case of an extreme policy change, the elimination of all income taxes to be replaced by a tax on consumption only, private savings would increase only by 20%. In other terms, since private savings are about 5% of GDP, in the best scenario they would become 6% of GDP.

2.3 About 80% of savings are already sheltered from current taxation in pension plans that are tax-deferred. So, any policy change that increase the return to taxation would have minimal effects on savings.

So, in conclusion the verdict from history and empirical evidence is quite clear. Supply side economics is "voodoo economics". Reductions in tax rates (starting from initial moderate tax rate levels) do not siginificantly increase labor supply and savings, do not increase economic growth, do not raise total tax revenue and do not reduce budget deficits. Their likely effect on the level and growth rate on output is close to zero while they lead to significantly larger budget deficits.

Great, change all tax rates to 70% because it won't decrease labor supply and won't harm the economy!

Yeah that's exactly what he is saying. :roll:

 

[ProfJohn]

A lot of people on here seem to forget that congress controls the budget.

And if you want proof that Reaganomics works I give you this.
http://www.nber.org/cycles/cyclesmain.html

A list of business cycles starting all the way back in 1854.

In the 28 years prior to Reagan taking office there were 6 business cycles, aka six recessions.
The average recession during that time lasted 10 months.

In the 28 year AFTER Reagan took office there have been three cycles, one of which started right after he took office. (this does NOT include the current slowdown/recession)
The length of the two recession that took place after the Reagan tax cuts were 8 months.

The lengths the expansions that took place after his tax cuts were 92 months and 120 months. The longest and second longest expansions in history.

Finally... an interesting fact:
The Reagan deficits were almost dollar for dollar caused by the defense build up.
The Clinton surplus was also almost dollar for dollar created by cuts in defense spending.

 

[ProfJohn]

Originally posted by: microbial
Reaganomics did not work under Reagan.

GWB resurrected reaganomics and it was proven not to work yet again.

The next time some politician tells you that the best way to help the average working American (Joe-the-plumber or Jane-six-pack) is by giving tax breaks and incentives to the very wealthy, please tell them to go F. themselves. It's patently and demonstrably false.

Reagonomics is dead. R.I.P. forever.

You understand that the Bush tax cuts went to EVERYONE, right?

And on a percentage of income basis the poor and middle class got a bigger tax cut than the rich.

Look at the IRS tax tables. The 'rich' pay a higher percentage of overall taxes now than at any time in our history.

 

[trenchfoot]

Not only did Reagen use Voodoo Economics, his wife had enlisted the use of an astrologer to make important decisions for them.

All of it right out of Fantasyland Hollywood.

RIP Ronnie.

 

[jpeyton]

.

 

[SirStev0]

Originally posted by: jpeyton
Broadband really needs to hit the $25/month or less mark to be affordable for everyone.

Comcast/Verizon charge $50/month in my area.

I think that's what Obama means; drive the costs down, expand the infrastructure, increase bandwidth and availability.

There was a reason Google CEO Schmidt latched onto Obama publicly; Google is a big proponent of expanding broadband penetration in the US.

Me thinks you be in the wrong thread... ARRRRRRRRR!

 

[PrinceofWands]

Lots of people blame Reagan. He's high up my top 10 list of all time worst presidents.

 

[BoomerD]

Originally posted by: brandonbull
Other than him trying to bankrupt the US by out spending the Russians and using drug smuggling and arm deals with Iran to fund an illegal war, he was tops.

Yep. Colonel Oliver North was a good Marine. He sacrificed his career for his President.
Ronnie Rayguns should have been impeached over the Iran-Contra affair. Lots of US laws were bent if not outright broken, and the allegations of US government's involvement in illegal drug trafficing to help pay for much of it, lingers to this day.

 

[BansheeX]

You're honestly going to sit here and blame Reagan for the tech and housing bubble tagteam Greenspan engineered under Clinton and Bush2? Wow, just wow. The guy was a failure by libertarian standards and did not reduce the size of government like he said he would, but Fed policy under him was quite good. Volcker raised interest rates to 20% to combat the inflation that had built up under LBJ, Nixon, and Carter. Reagan didn't create Fannie Mae (FDR) or Freddie Mac (Nixon), government sponsored enterprises that are (a) unconstitutional (b) created risk by giving the perception that its securities are government-backed. Reagan didn't start the Federal Reserve (Wilson) which couldn't sit on its hands and be lender of last resort, begetting academic "direction" via price fixing interest rates that created the bubble of the 20s and 90-00s. Reagan didn't abandon honest money (Nixon). Reagan didn't declare lending standards discriminatory via the Community Reinvestment Act (Carter). Reagan didn't start the Federal Deposit Insurance (FDR) to eliminate the perception of risk that otherwise would have dissuaded depositors from contributing to highly leveraged banking models.

I mean, this whole "regulation" buzzword is pure garbage. This is all the result of government interference in the market. You may as well argue that giving a 5 year old an ak47 is okay so long as adult is there to watch the clips. Umm, hello, nothing good come of giving that kid an ak47. If anybody bribes the "regulator", you're screwed. It's not that we need a better regulator, the power is bullshit to begin with and shouldn't exist.

 

[PingSpike]

I was under the impression that that FDIC wasn't implemented to cripple investment in favor of savings. It was implemented so that an entire generation of people might actually be willing to again put some of their money in a bank after losing their life savings, instead of burying it in masonry jars in their back yard.

 

[BoomerD]

Originally posted by: PingSpike
I was under the impression that that FDIC wasn't implemented to cripple investment in favor of savings. It was implemented so that an entire generation of people might actually be willing to again put some of their money in a bank after losing their life savings, instead of burying it in masonry jars in their back yard.

Mason jars...not masonry. Masonry is brick and block construction...

http://en.wikipedia.org/wiki/Masonry

Or maybe you meant Masonry as in the Masonic Lodge...freemasonry

 

[CitizenKain]

Originally posted by: MikeyLSU
never realized just how liberal this board was till seeing this thread with so many basically calling Reagan one of the worst presidents in history.

That's because he was but idiots keep idolizing him. If he hadn't been shot he would have been run out of office in 84.

 

[Mxylplyx]

Originally posted by: Moonbeam
About the only thing associated historically with Republicans, and undeservedly so, of any worth, is fiscal responsibility. The Democrats, if they have any brains, will peal such conservatives away.

I have believed for a while that if Dems

1. stole the fiscal responsibility issue from Republicans, even if it did so through higher taxes

2. Tackled immigration enforcement, while framing it as an attempt to help blue collar American workers

The Republican party would be done for until it formed a new voting coalition.