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Business cycles happen. Why did Clinton increase taxes, and the economy grew year after year? Why did Obama let Bush tax cuts expire, and the economy grew year after year?
Reganomics are voodoo economics.
Surprise, surprise. Obama is Bush 2.0. The Bush tax cuts were kept in place for most people. (Obamacare added a bunch of taxes, but those just took place this year and is a separate discussion).
The crash of 2007 has NOTHING to do with reaganomics..
Do you mean theory or practice?
Reagonomics said it was to reduce spending.
Government Spending. How well did Reagan succeed in cutting government spending, surely a critical ingredient in any plan to reduce the role of government in everyone's life? In 1980, the last year of free-spending Jimmy Carter the federal government spent $591 billion. In 1986, the last recorded year of the Reagan administration, the federal government spent $990 billion, an increase of 68%. Whatever this is, it is emphatically not reducing government expenditures.
-Murray N. Rothbard, The Myths of Reaganomics
Other useful tidbits showing the colossal failure to understand the situation.
Sophisticated economists say that these absolute numbers are an unfair comparison, that we should compare federal spending in these two years as percentage of gross national product. But this strikes me as unfair in the opposite direction, because the greater the amount of inflation generated by the federal government, the higher will be the GNP.
How many times do I have to point out that financial assets grow at the rate of government obligations and spending? You can talk about iphones if ya like. However when one looks to growth in nominal GNP, they are talking about da growth in da guberment obligations.
better comparison would be percentage of federal spending to net private product, that is, production of the private sector. That percentage was 31.1% in 1980, and a shocking 34.3% in 1986. So even using percentages, the Reagan administration has brought us a substantial increase in government spending.
Best "Keynesian" president we ever had since Roosevelt , even better than LBJ who at least had the courtesy to say he was going to have paramours without sleeping around on the sly in bargain slum brothels. Don't let that stink rub off on Keynes. He just discovered uranium. Not his fault someone built bombs with it.
There has also been a fervent revival of the old left-Keynesian idea that "deficits don't matter, anyway." Deficits are stimulating, we can "grow ourselves out of deficits," etc. The most interesting, though predictable, twist was that of the supply-siders, who, led by Professor Arthur Laffer and his famous "curve," had promised that if income tax rates were cut, investment and production would be so stimulated that a fall in tax rates would increase tax revenue and balance the budget. When the budget was most emphatically not balanced, and deficits instead got worse, the supply-siders threw Laffer overboard as the scapegoat, claiming that Laffer was an extremist, and the only propounder of his famous curve. The supply-siders then retreated to their current, fall-back position, which is quite frankly Keynesian; namely deficits don't matter anyway, so let's have cheap money and deficits; relax and enjoy them. About the only Keynesian phrase we have not heard yet from Reaganomists is that the national debt "doesn't matter because we owe it to ourselves," and I am waiting for some supply-sider to adopt this famous 1930s phrase of Abba Lerner without, of course, bothering about attribution.
Golly, was that not me accusing you of being a perfect broken window paradox Keynesian several years ago , because when I scratched ya, ya bled pinko commie hypocrisy ? Con-swerve-ative to the left. Only in the case of Reagan worshipers these leftist social policies were for the wealthy . The Darwinian market system was implemented for dish washers, Walmart and YUM brand front line employees. .
But here is the real consequence annihilating your statement.
Tax Cuts. One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?
The answer, unfortunately, is no. In the first place, the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall. Not only that, but soon thereafter; when the Social Security System was generally perceived as on the brink of bankruptcy, President Reagan brought in Alan Greenspan, a leading Reaganomist and now Chairman of the Federal Reserve, to save Social Security as head of a bipartisan commission. The "saving," of course, meant still higher Social Security taxes then and forevermore.
So basically Reagan increased taxes on the poor and middle class while providing relief for the rich, just as massive amount of financial wealth was being created, meaning the disposable wealth to grab it left the middle class and went to the wealthy just at the right opportunity. That gave birth to the FIRE sector which lead to 2007.
On paper yeah . tight money supply and a balanced budget might not have resulted in any of that. Smoke it up in your pipe because that is as far as it went.
Didn't the crash of 2007 and rising inequality and poverty in America prove well enough that the "dream of the 80s" is no longer alive? I hear libertarian and conservative types and even some liberals still sing the praise of deregulation and flat taxes.
It was the right thing to do around 1980 against a backdrop of high-inflation and too much demand power vs. supply power (lower and middle class as the demand side of the economy vs. the rich as the supply side). The situation now is the polar opposite (powerless and poor masses vs. extremely rich and powerful 1%). So now we need the exact opposite political approach; higher taxes for the rich, a union movement and a regulating and massively infrastructure-investing government. The problem is most people now try to apply the same solution to the opposite problem because they know nothing else. Who does remember the New Deal and Lend-Lease that wrested us out of the Great Depression (and still has their wits and voice)?
It was the right thing to do around 1980 against a backdrop of high-inflation and too much demand power vs. supply power (lower and middle class as the demand side of the economy vs. the rich as the supply side). The situation now is the polar opposite (powerless and poor masses vs. extremely rich and powerful 1%). So now we need the exact opposite political approach; higher taxes for the rich, a union movement and a regulating and massively infrastructure-investing government. The problem is most people now try to apply the same solution to the opposite problem because they know nothing else. Who does remember the New Deal and Lend-Lease that wrested us out of the Great Depression (and still has their wits and voice)?
The problem with these people is with their rapid anti-Keynsian bias openly. They think(or say openly) Keynesian economic models means government should buy everyone a bar of soap. They do not even acknowledge that a liquidity trap can exist.
Certainly leftists, after reading a manual on how to do brain surgery, usually kill the patient by carving out pieces of brain like melon balls(creating pseudo demand and welfare). That does not mean the manual on how the brain works is wrong. Financial flows do matter, and its not a mere reflection of the goods and services economy, especially in a liquidity trap . Ricardo's financial model is BS. Finance does not fit over the goods and services economy like an extra layer of skin. Sometimes its like oven mitts.
As the the topic of this thread, I have answered that elsewhere, but I will repeat. The central point of Reaganomics was that lower tax rates will contribute to greater economic growth without decreasing federal tax revenue. Both proved true during the Reagan Administration.
How do you figure that was proved true? By Reagan's gigantic growing budget deficits? I mean, I believe things that are unintuitive all the time, but in this case the experience proves that if you slash revenue your deficits increase. The macroeconomic multiplier on tax cuts is relatively terrible even in a depression.
The problem with these people is with their rapid anti-Keynsian bias openly. They think(or say openly) Keynesian economic models means government should buy everyone a bar of soap. They do not even acknowledge that a liquidity trap can exist.
I think the issue is that the last we were in a liquidity trap is so far back (1930s) that no-one has a personal experience nor reference about it. The people who did are all dead or too old to voice it meaningfully. We have to relearn this, and seemingly every forth generation has to relearn it as this has happened quite regularly every 75-100 years. Overall, we seem to be getting better even if today's policy response still looks agonizingly slow- it is better than the Great Depression or President Jackson's depression in the 1830s and 1840s or the South Sea crisis before that.
On the flip side when confronted with the inflationary crisis of the 1970s the standard response was more New Deal - type stimulus which was the opposite of appropriate then. The people in power then feared the deflationary depression of the 1930s and applied the same remedy for the 70s. Their frame of reference always was the Great Depression and what helped them out of that was always applied for every crisis then. Now we are in the opposite situation.
I think the issue is that the last we were in a liquidity trap is so far back (1930s) that no-one has a personal experience nor reference about it. The people who did are all dead or too old to voice it meaningfully. We have to relearn this, and seemingly every forth generation has to relearn it as this has happened quite regularly every 75-100 years. Overall, we seem to be getting better even if today's policy response still looks agonizingly slow- it is better than the Great Depression or President Jackson's depression in the 1830s and 1840s or the South Sea crisis before that.
On the flip side when confronted with the inflationary crisis of the 1970s the standard response was more New Deal - type stimulus which was the opposite of appropriate then. The people in power then feared the deflationary depression of the 1930s and applied the same remedy for the 70s. Their frame of reference always was the Great Depression and what helped them out of that was always applied for every crisis then. Now we are in the opposite situation.
You know what you're talking about.
Agreed. What "discredited" Keynesian economics was that the idiot neo liberals forgot about resource rents that are not products of human labor. The US was at the mercy of an oil rentier cartel which cannot be solved with labor. The Philips curve was irrelevant. The only working stimulus would be to spend money aiming directly at conservation. They also should have tax shifted onto oil while shifting taxes off labor and capital. That would allow for some labor for oil simply by driving slower for example. By doing so they could have had a bigger economy with the same exact oil usage.
Surprise, surprise. Obama is Bush 2.0. The Bush tax cuts were kept in place for most people. (Obamacare added a bunch of taxes, but those just took place this year and is a separate discussion).
I think Obama is Bush 4.0. B. Clinton would have been 2.0. His wife will be 5.0 Just me....
...I'd choose Denmark now if I were to be born at any point in history, and while they have free enough markets, they also have a huge percentage of the population working for government and the highest tax rates in the developed world. Even in Denmark I'd be on the far left of the political spectrum.
I've only visited Denmark once (2012) and thought it was a lovely country. I was surprised at the amount of graffiti visible from passenger train from Copenhagen to Kronberg (Castle Elsinore in Shakespeare's Hamlet.) I associate graffiti with gang activity and with despair of poverty. It wasn't folk art.
My thought experiment entailed just picking a time. In my thought experiment, when you pick now (as would I), you have very little chance of ending up a Dane - Denmark is just such a tiny percentage of the world - less than 6 Million residents in a world of 7.125 Billion people. A human being born today has less than a .1% chance of being born in Denmark -- less than one tenth of one percent or so depending on your estimate of global population.
Quote:
Originally Posted by kwhitegocubs
...
I know that your post was entirely reasonable and well thought out, but the basic underlying notion of "why Capitalism works" is dubious. An uncoordinated economy is a failing economy. The moderate success of capitalism has been from government and regulatory agencies around the world creating tax and regulation policies that force capital flows toward human welfare and not toward waste.
I think we'll just agree to disagree on this. I could attempt to convince you of my point of view, but I would not be successful, just as you would not be successful attempting to convince me of your point of view. We are just worlds apart on this. I do not agree with a single thing you wrote.
In the real world, of course, Capitalism is imperfect, just as are centrally planned command-and-control economies. Governmental entities do the best they can, sometimes falling short, sometimes overreaching.
Quote:
Originally Posted by kwhitegocubs
...We slave away for consumer electronics products that create little or no additional utility or happiness or even efficiency. All because of the cognitive biases and consumer addictions that capitalist firms are inevitably driven to exploit. And so much of the labor building those houses and those goods is wasted; human lives and hours wasted creating empty wealth.
It seems to me you're substituting your judgement for that of actual purchasers that some houses and consumer goods are devoid of true value because of these cognitive biases and consumer addictions to which you refer. Surely you also acknowledge that you, yourself, have your own cognitive biases. I'll certainly agree that none of us are purely rational, calculating homo economicus. We all make mistakes, of course. I think you and I might likely agree that a teenager spending his hard earned money on a $200 pair of sneakers is a bad decision, but somehow that decision is right for that teenager.
Substituting our own judgment for that of others is a very slippery slope. It requires interpersonal utility comparisons, which of course cannot occur. All we can do is compare our own utility of $200 sneakers with the utility of alternate uses for that $200. We cannot do the comparison on behalf of that teenager.
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Why did Obama let Bush tax cuts expire, and the economy grew year after year?
