Those Wonderful Reagan Years – Part I, The Economy

I write this with some trepidation.  There are Reagan lovers and haters.  I’m lean toward the side that there was an enormous gap between the Reagan promises and what actually happened.  One thing can not be denied- Reagan clobbered Mondale in 1984, so he was very popular, at least in 1984.

Part I will be the economy.  Reagan came through with his promise to take government off the backs of the American people.  Lower taxes allow more spending, so there’s more prosperity.

Sorry- but it really didn’t work that way at all.   Economists like to look at the debt to GDP numbers.  Remember Reagan was president from 1980 to 1988.

https://en.wikipedia.org/wiki/National_debt_of_the_United_States#/media/File:FederalDebt1940to2012.svg

But you can look at it anyway you want, it still went up:

https://en.wikipedia.org/wiki/National_debt_of_the_United_States

But, what about taxes, didn’t Reagan cut taxes.  He did, then imposed one of the largest tax increases in history:

Conversely, Congress passed and Reagan signed into law tax increases of some nature in every year from 1981 to 1987 to continue funding such government programs as Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Social Security, and the Deficit Reduction Act of 1984 (DEFRA).[139][140] Despite the fact that TEFRA was the “largest peacetime tax increase in American history”,[140][141][142][143] gross domestic product (GDP) growth recovered strongly after the early 1980s recession ended in 1982, and grew during his eight years in office at an annual rate of 7.91% per year, with a high of 12.2% growth in 1981.[144]

While the deficit was increasing and taxes were going up,  so our economy was improving.  Reagan lovers by the way, do not accept this.

https://en.wikipedia.org/wiki/Ronald_Reagan

So, was Reagan a real tax cutter, or tax cutter phony?  The tax hikes took back about 1/2 to 1/3 of the tax cuts.

Reagan was a firm believer in keeping government out of business, except of course when business was collapsing.  The Savings and Loan collapse begins with deregulation laws passed when Carter was president, and more laws passed under Reagan.

The market share of S&Ls for single family mortgage loans went from 53% in 1975 to 30% in 1990.[40] U.S. General Accounting Office estimated cost of the crisis to around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government from 1986 to 1996.[2] That figure does not include thrift insurance funds used before 1986 or after 1996. It also does not include state run thrift insurance funds or state bailouts.

https://en.wikipedia.org/wiki/Savings_and_loan_crisis

Reagan the conservative, was the first with the billion dollar bailouts, followed by  President G.W. Bush.

It is certainly true, that economic trends take time to be recognized and then  changed, and  a lot depends on the will of Congress.  The collapse of the housing market in 2007-8, dates back to deregulation legislation signed into law by Clinton, just before leaving office.

The stock market crash of 1987  (Black Monday) was pretty bad.  I remember 1986-1987  well, as I was working for an oil company, and decided not to take any vacation, as I was scared I wouldn’t have a job if I took 2 weeks off.  Oil prices crashed in 1986, and it was a terrible time to work for an oil company.

https://en.wikipedia.org/wiki/Black_Monday_(1987)

I won’t win any friends from the Reagan lovers, but hopefully,  you won’t label me a Reagan hater.  If you look at  the economy from the day Reagan began to the day he left, the economy by most measures improved, but was this because of his conservative philosophy, or because he took action contrary to this philosophy?

I believe supply side economics is much better left as a theory, rather than a reality.  No one expands there business because they have receive a tax break.  They do it because there is more demand for whatever they are producing.

Stay tuned,

David Lord

 

 

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