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The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Archive for September 9th, 2010

FLASHBACK – The Reagan Economic Record

Posted by iusbvision on September 9, 2010

With the upcoming elections and a slew of tax increases that will hit us starting in January, it seemed prudent to take a look back in time and remind us just what the real Reagan economic record was. The left has to destroy Reagan’s success and the entire concept that you know how to spend your money better than the government does for their vision of prosperity through their divine wisdom and central planning can be believed by those who don’t know better.

A commenter, Mike from San Francisco wrote the following:

A few thoughts…

Anyone who didn’t support an administration who explode the deficit, increase the size of government and shrink the wealth of the middle class raise your hand. (Remember, you need to of NOT voted for Reagan, Bush and Bush to raise your hand)

If tax cuts increase revenue would eliminating them all together make the increase of revenue unlimited?

The fact is, your voodoo economics does not work and the numbers after the tax cuts and the numbers tax increases prove it.

 

So I, your handy dandy IUSB Vision Editor, who by the way has passion for economics as a field, decided to respond and enlighten our new friend from San Francisco:

This is a classic example of how the left does not understand basic economics and recent history. So lets take what you had to say here point by point shall we?

Let us start with verifiable facts – 8 of the top 10 economic endicators under Reagan improved greatly and it was the longest continued expasion of the economy since the post WWII boom.

Take a look right here – http://www.cato.org/pubs/pas/pa261.pdf

The problem with deficits under Reagan had nothing to do with tax cuts. Government revenue nearly doubled (599.3 billion in 1981 to 1,032 billion in 1990) after the Reagan tax cuts. Examine the following graph which shows inflation adjusted dollars:

Revenue under Reagan tax cut vs Bush/Clinton tax increases.

So when revenue doubles and deficits continue to go up that indicates a spending problem, not a revenue one. Anyone who has ever had a checking account understands this clearly.

NOTE: The tax cut resulting in increased government revenue was also demonstrated in Clinton’s second term. Revenue from the capital gains tax exploded after the rate was cut under Clinton/Gingrich which was largely responsible for the late second term budget surplusses (welfare reform and the tech boom/bubble also contributed to that brief surplus). The cut in the capital gains rate had a sunset provision thus was only temporary, the tech bubble did pop causing a stock market crash, and new energy regulations caused a spike in energy prices, so the benefits of the cut in capital gains tax rates was short lived. This lead to the recession of 2000-01 which was made worse by the September 11th attacks. If the capital gains rate cut did not sunset and had the expensive new energy regulations not been imposed the 2000-01 recession would have been much milder.


 

After the Democrats took back the House under Reagan they spent 1.83 for every new dollar that came in. Reagan was out to ruin the Soviet economy and bring it down, he did this using many techniques including added defense spending in real dollars, but as a percentage of GDP defense spening only went up .2% under Reagan so the far left narrative of  “the deficits went up cause Reagan spent it all on defense” is dishonest.

Defense spending under Reagan as a percentage of GDP

The problem with deficits is that the Democrats in Congress, just like the Democrats have now, went nuts with social spending and welfare entitlements. This was during the zenith of the cold war with the nuclear tringle operating 24/7. Under such circumstances shutting down the government to battle Democrats out of control spending was not practical and would have been out of the question.

Keep in mind that recent history shows this pattern of behavior. The last year the GOP had budgetary control was 2007 and the yearly deficit was a only $211 billion. When Democrats took over yearly deficit spending went over $1.3 TRILLION per year.

Obama/Pelosi deficits
SOURCE: CBO, White House Office of Management and Budget | The Washington Post – March 21, 2009

Your assertion that we could lower tax cuts and send revenue to eternety is as foolish as saying that tax increases would forever increase revenue. The architect of the Reagan economic recovery is Economist Art Laffer who penned a formula/graph called the Laffer Curve. This curve shows how far you can lower tax rates and increase revenue until you start to lose revenue from too much tax cutting. Here is a simplified version of it.

Laffer Curve Simplified

After the Reagan tax cuts the middle class exploded with wealth, unemployment dropped considerably, production skyrocketed, economic growth was higher than under Bush/Clinton. You cannot have the economy go almost to full employment and the GDP quarterly growth go up for that long and claim the middle class went poor. This is not opinion, these are verifiable facts that could be submitted as evidence in any court of law and appear in any textbook. The facts are crystal clear and easily verified.

But just to rub it in….
Change in real family incomes under Reagan

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Posted in 2012, Chuck Norton, Economics 101 | Leave a Comment »

TOTALLY AWESOME VIDEO: Governor Christie Takes on Teachers Union Hack at Town Hall

Posted by iusbvision on September 9, 2010

Posted in 2012, Campus Freedom, Indoctrination & Censorship, Chuck Norton, Economics 101 | 1 Comment »