Welcome login | signup
Language en es fr
OccupyForum

Forum Post: The Myth of Reaganomics

Posted 2 years ago on Oct. 20, 2012, 10:19 a.m. EST by ThomasKent (131)
This content is user submitted and not an official statement

Romney and other conservative politicos are absolutely off the mark. If we compare Barack Obama’s first term to conservative icon Ronald Reagan’s first term, the Obama administration outperforms Reagan’s on most key economic measures.

Many Americans are too young to remember, or perhaps have forgotten, how frenetic President Reagan’s first term was.

Reagan, like Obama, inherited an economic mess from his predecessor (Carter), and was so beleaguered by the economy that as late as August of 1983, when unemployment stood at 9.5%, he did not believe he would be re-elected. Reagan’s objective was to implement his theory of “Reaganomics,” which was based on stimulating the economy with tax cuts, tax credits and accelerated depreciation (supply-side economics).

Reagan’s primary catalyst to achieve this objective was the passage of the Economic Recovery Tax Act (ERTA) in July of 1981, which introduced phased-in reductions in marginal tax rates that were substantial. ERTA was however a “bridge too far” and failed miserably creating massive budget deficits and weakening the economy, culminating in a severe recession which lasted through 1982.

Luckily Reagan saw his error, and with the passage of TEFRA (Tax Equity and Fiscal Responsibility Act) in September of ‘82, the economy began to get its footing back. TEFRA became the remedy to ERTA. In fact, TEFRA was the largest peacetime tax increase ever signed into law by any of our presidents, and ironically it was a Republican, Ronald Reagan, who signed it into law.

TEFRA kicked off one of the most substantive bull cycles in our financial history: one that endured for more than five years. Reagan deserves credit for backing TEFRA and for its powerful economic result. However, few realize it was Democrat Pete Stark of California who sponsored TEFRA. Had it not been for Reagan’s pragmatism and ability to work across the aisle with Democrats like Stark, Speaker of the House Tip O’Neill, and other members of Congress, TEFRA would not have happened and Reagan would likely have been a one-term president.

Reagan vs Obama

http://hypervocal.com/politics/2012/reagan-vs-obama-economy-market-numbers/

Reagan Worst President Ever http://www.youtube.com/watch?v=-b1ePD_Hi_w

16 Comments

16 Comments


Read the Rules
[-] 1 points by Shule (2066) 2 years ago

The real purpose for instituting laissez-faire economics (Reaganomics) which includes privatization, and cutting taxes today is to starve the government of its resources. When the government gets starved of its ability to function, it looses its ability to rein in the Corporations and Big Banks who will in turn then be totally free run rough shod over this country. One sees what the Corps are doing to this country already. Image if they were totally untethered from all modicum of regulation. Notice the only thing that never gets cut is the Defense department which acts as a strong arm for the Corps. EPA, big bird, and everybody else gets slashed.

[-] 1 points by ThomasKent (131) 2 years ago

This could set civilization back thousands of years.

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

"Debt and Democracy – Has the Link Been Broken ?", by Prof. Michael Hudson :

http://www.informationclearinghouse.info/article32754.htm .

[-] 2 points by brightonsage (4494) 2 years ago

Civilization back? Too late. When half of the people want to believe myths over reality and science, civilization has already been set back centuries. How about red states try one set of policies and the blue states the other set. Then when one set withers, the set who believes in foreign aid more than foreign conquest, will throw a few bones to the losers?

[-] 0 points by darrenlobo (204) 2 years ago

You're cherry picking your data to make a false point. One can easily also look at FDR's tax increases & his failure to end the Depression as proof of the opposite.

As to recovery:

Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.

http://mises.org/daily/3788

Hmmm....maybe tax cuts are good for the economy after all.

[-] 3 points by VQkag2 (16478) 2 years ago

Trickle down doesn't work. Give money to the wealthy and they invest in corps that create jobs overseas. Or theyhoard it & live off the interest.

Give money (tax breaks, debt forgiveness) to working class they spend it & the wealthy seeing the additional working class money instinctively move to suck it up.

Money does not naturally flow down like water, it flows up from the wealthy always finding new ways to suck it up.

More money for the working class, take our money back from the wealthy.

[-] 1 points by hazencage (58) 2 years ago

Tax cuts have the lowest multiplier effecf when compared to spending on job creation. Both are forms of government spending though. Its a good idea to cut tax rates when the tax base weakens due to a downturn in the economy, but the rates should increase when the economy is growing. In the end it is'nt about ideology but instead it is about finding the optimal tax rate.

[-] 1 points by VQkag2 (16478) 2 years ago

Well said. I would add that because of the massive inequity in wealth we MUST raise taxes on the millionaires/Billionaires, to use for job creation, which in turn will increase economic growth and therefore cut the deficit.

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

France is taxing its millionaires at 75%, and cutting spending by a huge chunk, and not coming even close to balancing its budget.

This thing is a bottomless pit. Better get a parachute.

http://www.cnn.com/2012/09/28/world/europe/france-budget/index.html

[-] 1 points by VQkag2 (16478) 2 years ago

We ain't France, & we ain't Greece, nor are we Spain or Italy.

You should stop spewing the economic fear mongering and focus more on positive solutions.

You don't know what will happen. If you think bad things are coming let's hear your ideas of avoiding that, or some positive suggestions for resolving our problems.

But just apocalyptic scare tactics serve no purpose.

Peace, Good luck in all your GOOD efforts.

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

ACtually, the entire west is pretty much in the same boat financially right now. Its just some of us have the ability to float a little longer due to our massive militaries.

I dont know what will happen, no one does. All we have for predictions is history.

Tax/trade/monetary/foreign policies all need radical makeovers. Neither party is able to do that.

[-] 1 points by VQkag2 (16478) 2 years ago

Neither can makeover the tax/monetary/trade/foreign policies"? So we are doomed?

How do you think we need to modify our.......... tax policy?

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

Do you see either party putting forth radical changes to any of those four? Even mentioning anything radical? I dont.

[-] 1 points by VQkag2 (16478) 2 years ago

Me neither!

How do you think we need to modify our.......... tax policy?

[-] 1 points by ThomasKent (131) 2 years ago

Cherry picking? What did Harding have to do with this? If FDR did not end the Great Depression who or what did?

Harding was President from 1921 -1923.The Great Depression didn’t start until 5 years after he left office. President Harding rewarded friends and political contributors, referred to as the Ohio Gang, with financially powerful positions. Scandals and corruption, including the notorious Teapot Dome scandal, eventually pervaded his administration; one of his own cabinet and several of his appointees were eventually tried, convicted, and sent to prison for bribery or defrauding the federal government.

Wiki Warren G Harding

http://en.wikipedia.org/wiki/Warren_G._Harding

On August 2, 1923, President Harding died while on a speaking tour in California. Vice-President Coolidge was in Vermont visiting his family home, which had neither electricity nor a telephone, when he received word by messenger of Harding's death. Coolidge dressed, said a prayer, and came downstairs to greet the reporters who had assembled. His father, a notary public, administered the oath of office in the family's parlor by the light of a kerosene lamp at 2:47 am on August 3, 1923; Coolidge then went back to bed. He returned to Washington the next day, and was re-sworn in by Justice Adolph A. Hoehling, Jr. of the Supreme Court of the District of Columbia, as there was some confusion over whether a state notary public had the authority to administer the presidential oath.

Although a few of Harding's cabinet appointees were scandal-tarred, Coolidge announced that he would not demand any of their resignations, believing that since the people had elected Harding, he should carry on Harding's presidency, at least until the next election. Coolidge signed the Immigration Act later that year, which was aimed at restricting southern and eastern European immigration, though he appended a signing statement expressing his unhappiness with the bill's specific exclusion of Japanese immigrants. Just before the Republican Convention began, Coolidge signed into law the Revenue Act of 1924, which decreased personal income tax rates while increasing the estate tax, and creating a gift tax to reinforce the transfer tax system.

During Coolidge's presidency the United States experienced the period of rapid economic growth known as the "Roaring Twenties". He left the administration's industrial policy in the hands of his activist Secretary of Commerce, Herbert Hoover, who energetically used government auspices to promote business efficiency and develop airlines and radio. With the exception of favoring increased tariffs, Coolidge disdained regulation, and carried about this belief by appointing commissioners to the Federal Trade Commission and the Interstate Commerce Commission who did little to restrict the activities of businesses under their jurisdiction. The regulatory state under Coolidge was, as one biographer described it, "thin to the point of invisibility."

Coolidge's taxation policy was that of his Secretary of the Treasury, Andrew Mellon: taxes should be lower and fewer people should have to pay them. Congress agreed, and the taxes were reduced in Coolidge's term. In addition to these tax cuts, Coolidge proposed reductions in federal expenditures and retiring some of the federal debt. Coolidge's ideas were shared by the Republicans in Congress, and in 1924 Congress passed the Revenue Act of 1924, which reduced income tax rates and eliminated all income taxation for some two million people. They reduced taxes again by passing the Revenue Acts of 1926 and 1928, all the while continuing to keep spending down so as to reduce the overall federal debt. By 1927, only the richest 2% of taxpayers paid any federal income tax. Although federal spending remained flat during Coolidge's administration, allowing one-fourth of the federal debt to be retired, state and local governments saw considerable growth, surpassing the federal budget in 1927.

Wiki Coolidge Administration

http://en.wikipedia.org/wiki/Coolidge_administration - Presidency_1923.E2.80.931929

Herbert Hoover was the 31st President of the United States (1929–1933). Hoover, a globally experienced engineer, believed strongly in the Efficiency Movement, which held that the government and the economy were riddled with inefficiency and waste, and could be improved by experts who could identify the problems and solve them. He also believed in the importance of volunteerism and of the role of individuals in society and the economy. Hoover, who had made a small fortune in mining, was the first of two Presidents to redistribute their salary (President Kennedy was the other; he donated all his paychecks to charity).

Wiki Herbert Hoover

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

FDR, was the 32nd President of the United States (1933–1945) and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic depression and total war. The only American president elected to more than two terms, he facilitated a durable coalition that realigned American politics for decades. With the bouncy popular song "Happy Days Are Here Again" as his campaign theme, FDR defeated incumbent Republican Herbert Hoover in November 1932, at the depth of the Great Depression. Energized by his personal victory over paralytic illness, FDR's unfailing optimism and activism contributed to a renewal of the national spirit.

Wiki Franklin Roosevelt

http://en.wikipedia.org/wiki/Franklin_D._Roosevelt

Possibly several important factors allowed the Great Depression to end.

Between 1929 and 1933. real GNP declined 35 percent. Between 1933 and 1937, it rose 33 percent. In 1938 the economy suffered another 5 percent fall in real GNP, but this was followed by an even more spectacular rise in real GNP of 49 percent between 1938 and 1942.

Franklin Roosevelt devalued the dollar.

Flight of gold from Europe to the United States increased the money supply as Hitlermania began to spread throughout Europe in the late 1930s and early 1940s.

And aggregate demand stimulus in the form of monetary policy was crucial to the economic recovery by 1942. The basic theory is that if you stimulate the economy through spending, demand will increase and therefore supply must increase.

What Ended the Great Depression? http://www.nber.org/papers/w3829.pdf?new_window=1

Franklin Roosevelt had more plans for the new Deal after WWII, but he died in 1945. President Truman was dedicated to implementing the sweeping changes Roosevelt planned such as universal healthcare, housing for everyone, and meaningful employment guarantees. Southern Democrats and Republicans joined forces to derail Truman’s efforts.

So, if Harding had placed the national economy on a straight road to eternal prosperity, why did the economy crash in 5 years after Coolidge and Hoover? It suggests Republicans did not know how to manage the economy.

Jed is a Millionaire

http://www.youtube.com/watch?v=X3qLeSbwwuo&feature=youtu.be

[-] 0 points by darrenlobo (204) 2 years ago

The Depression ended with the demobilization after WW II. They were cutting taxes & spending & the economy boomed.

Hoover's blunders don't invalidate the cure for the Panic of 1920. Harding cut taxes & spending & the economy quickly recovered. Later, Hoover increased spending, taxes, & govt intervention in the economy & turned a recession into the Great Depression. FDR just built on Hoover's mistakes:

“When it was all over, I once made a list of New Deal ventures begun during Hoover’s years as Secretary of Commerce and then as president. . . . The New Deal owed much to what he had begun.” --Rexford G.Tugwell

"When we all burst into Washington. . . we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself. The essentials of the NRA, the PWA, the emergency relief setup were all there. Even the AAA was known to the Department of Agriculture. Only the TVA and the Securities Act was drawn from other sources. The RFC, probably the great-est recovery agency, was of course a Hoover measure, passed long before the inauguration" --Raymond Moley

[-] 2 points by ThomasKent (131) 2 years ago

Is there a myth being created about Warren G. Harding economics? The Panic of 1920 was technically the Recession of 1920, an effect on the economy caused by the end of World War I, troops returning home, industry retooling for peacetime, Federal Reserve raising interest rates, and high unemployment.

President Warren Harding convened a President's Conference on Unemployment at the instigation of then Commerce Secretary Herbert Hoover as a result of rising unemployment during the recession. About 300 eminent members of industry, banking and labor were called together in September 1921 to discuss the problem of unemployment. Hoover organized the economic conference and a committee on unemployment. The committee established a branch in every state having substantial unemployment, along with sub-branches in local communities and mayors' emergency committees in 31 cities. The committee contributed relief to the unemployed, and also organized collaboration between the local and federal governments.

Economists argued that, as there existed massive distortions in private markets due to government economic influence related to World War I, an equally massive "correction" to the distortions needed to occur as quickly as possible to realign investment and consumption with the new peace-time economic environment.

The Harding administration raised revenues in 1921 by expanding the tax base considerably at the same time that it lowered rates. Harding's tax cuts gave maximum benefit to the rich. He showed his lack of humanity in approving discriminatory legislation cutting off immigration of "the rabble" from Europe. Harding's "efficiency" measures were more than counter-balanced by graft and corruption on a scale unprecedented in American history. In the Veterans Bureau alone, a money-hungry Harding appointee cost the taxpayers an estimated $200 million in crooked contracts. Harding himself gave blind approval to the notorious Teapot Dome swindle, in which private oil interests, after bribing the secretary of the interior, were given secret permission to plunder government oil reserves.

HardingTrivia

http://www.trivia-library.com/b/u-s-president-warren-g-harding-pros-and-cons-of-presidency.htm

Harding was president from 1921-1923. He died in California from a heart attack while on a speaking tour. Sadly, the main thing Harding’s administration will be remembered for is the Teapot Dome Scandal. I think Harding's experimentation with laissez-faire speaks for itself.

Harding Scandals

http://www.presidentprofiles.com/Grant-Eisenhower/Warren-G-Harding-Scandals-and-illness.html

In the early 20th century, the U.S. Navy largely converted from coal to oil fuel. To ensure the Navy would always have enough fuel available, several oil-producing areas were designated as Naval Oil Reserves by President Taft. In 1921, President Harding issued an executive order which transferred control of Teapot Dome Oil Field in Natrona County, Wyoming, and the Elk Hills and Buena Vista Oil Fields in Kern County, California from the Navy Department to the Department of the Interior. This order was not implemented until 1922, when Interior Secretary Fall persuaded Navy Secretary Edwin C. Denby to transfer control.

The Teapot Dome scandal was a bribery incident that took place in the United States from 1922–1923, during the administration of President Warren G. Harding. Secretary of the Interior Albert B. Fall leased Navy petroleum reserves at Teapot Dome and two other locations to private oil companies at low rates without competitive bidding. In 1922 and 1923, the leases became the subject of a sensational investigation by Senator Thomas J. Walsh. Fall was later convicted of accepting bribes from the oil companies.

If Hoover was doing such a great job why wasn't he reelected? How did Roosevelt and the Democrats win presidential elections 4 times from 1932 through 1944?

The demobilization after WW II could have resulted in a recession identical to the Recession of 1921 after WWI for the same reasons. The reason it did not is because Harry S. Truman was President, a Democrat.

The Truman program, given to Congress on Sept. 6, 1945, called for full employment, increased minimum wages, private and public housing programs, a national health program, aid to education, Negro job rights, higher farm prices and continuation of key wartime economic controls.

Truman's Achievements http://www.nytimes.com/learning/general/onthisday/bday/0508.html