Saturday, July 16, 2011

The belief in Reaganomics doesn't make sense

Back in my Republican era, I believed that lower taxes unleashed the mighty economy and created jobs.  I thought the benefits of Reaganomics were obvious to all but the ideologically blind. 

Reagan cut taxes.  Here were the tremendous numbers that proved the economy boosting power of Reaganomics:

REAGAN'S economy from 1980 to 1988:

  • After 4 years 
    • 6.3 million new jobs
    • 6.8% increase in jobs
  • After 8 years
    • 16.5 million new jobs
    • 18% increase in jobs
    • 12% rise in the median family income
What more proof was needed? Reagan lowered taxes and reduced regulation, and look at the tremendous economic growth and prosperity!


Clinton raised taxes.  And the economic numbers were even better:

CLINTON'S economy from 1992 to 2000:
  • After 4 years
    • 11.8 million new jobs
    • 11% increase in jobs
  • After 8 years
    • 20.6 million new jobs
    • 18.6% increase in jobs
    • 12% rise in the median family income
And, oh yes, George W Bush lowered taxes, just like his model Reagan did.  And reduced regulation.  What was the tremendous increase in new jobs? 

BUSH'S economy from 2000 to 2008:
  • After 8 years
    • 1.6 million fewer jobs
    • 2.7% decline in median family income

So, what does all of this prove?  That tax levels don't have much to do with job creation or economic growth and prosperity.  

I'm sure that we could find the same kind of data that show the contradictory effects of Keynesian stimulus spending.  Obama's stimulus package, where he spent more on liberal pet projects than was spent on national defense, produced ... not much actually.

Other factors have tremendous influences on the economy. Tax cutting and stimulus spending probably have a little bit of an effect, but compared to other things (inflation rates, development or lack thereof of new industries, wars, attacks on cities, the growth of toxic bubbles like the .com and housing bubbles, rising competition of third world countries, globalization of labor markets, etc., etc.) these government actions aren't all that influential.

The theology of the right wing Reaganite tax cutters is simply a fantasy.  I think the same can be said of the theology of the left wing Keynesian stimulus spenders.  The economy is way too complex for government action to control. 

The government needs to do many things to make sure the economy is healthy and competitive, but the theologies of tax cutting and stimulus spending are false promises.  Or so it seems to me.