Introduction to Reaganomics
After the recessions of the 1970’s, Republican Party candidate Ronald Reagan was elected president in 1980. He was faced with many problems, and among them was finding a much needed solution to the economy. President Reagan took on the mindset that the problem with the economy was the over-taxing by the government. One of his most famous quotes was “In this present crisis, government is not the solution to the problem; government is the problem.” The plan called for massive tax cuts in order to stimulate investments and `trickle down` to the workers. He cut government expenses by $40 billion and created a three year tax cut plan for income taxes. The tax cut was the largest in history and was expected to jump start the economy. Some say his tax cuts did not work, and caused a heavy downfall in the economy. Others say it eventually helped and set the stage for modern-day functional economic conservatism, as he lowered interest rates, unemployment rates, and the inflation rate. Whatever it may have caused, “Reaganomics” was and continues to be a controversial topic in American history.
Debate on Reaganomics
Reaganomics: It Worked
Reaganomics, or also commonly known as Trickle-Down Economics, has remained a controversial topic since its reintroduction to the American people during the presidency of Ronald Reagan. Reagan rightfully believed that taxes were slowing down business and the rest of the economy. And while some believe that Reaganomics did not work, it would have to be said that they are just simply ignorant of the facts.
The economic plan during Reagan’s presidency first centered itself around tax cuts. Reagan reduced the top marginal tax rate from 70% when he entered office, all the way down to 28%. He cut all the other income tax rates by 25% across the board. Now, some people look at this and accuse its lenience on the wealthy. It did, no doubt, reduce taxes for the wealthy. However, the reduction of taxes not only cut taxes for the wealthy, but for business as well. Business is no doubt the cornerstone of capitalism. But when government taxes it and subsidizes it (don’t get me wrong, they do mean well) business can simply not grow in the way it needs to. At a 25% marginal tax rate, the producer keeps three-fourths of his production. If that rate is increased to 50%, the producer keeps only half of what he produces, reducing his reward for production and output by a significant margin. Consequently, incentives are slashed for savings, investment, work, business expansion, business creation, job creation, and entrepreneurship. The result is fewer jobs, lower wages, and slower economic growth, or even economic downturn. If a government reduces the tax back down to 25%, the businessman or producer can now keep most of his production, and he/she is able to hire more workers, increase wages, and still gain more profit. Also, Out of reducing taxes, much is to be gained. With the economy gaining momentum, the dollar increases value. When the dollar increases value, oil prices drop. This starts a much-needed cycle for capitalism to expand, grow, and succeed.
Reagan faced a recession. Inflation averaged 12.5 percent when Reagan entered office, was reduced to 4.4 percent when he left. Interest rates fell six points. 8,000,000 new jobs were created as unemployment fell, and there was an eight percent growth in private wealth.
Some critics may say the major economic boom during Reagan’s presidency was simply caused by the major government defense spending and deficit. However, despite his increased military spending, Reagan reduced the GDP by over two percent by the time he left office. Reagan knew that increased government spending does in no way create economic growth whatsoever. If it did, the worst recession in a hundred years would have actually been fixed by Obama’s failed stimulus and other government spending. President Obama’s own 2012 budget is projecting a deficit for this year of $1.65 trillion dollars, a massive deficit that is increasing with spending on health care and more social security and welfare programs. Democrats often rally to punish corporations and gasoline companies for high prices. Reagan’s first executive order, in fact, eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar, the price of oil declined by more than 50%.
Taxing the “wealthy” includes business, and if the majority of the American people were thinking for themselves instead of repeating what they say and hear, they would understand. When President Reagan came to Washington in 1981, the top 1% of income earners paid 17.6% of all income taxes. In 2007 the top 1% then was required to pay 40.4% of all income taxes, close to twice their share of income.
In result, a recession.
Whether we like it or not, taxing the wealthy is not the solution to fixing an economy, let alone create one that thrives.
With the proposed taxes in 2013, Obama all the more proposes opposite economic schemes. If Reagan’s policies set the stage for a 25 year economic boom, then what will we have in store for us if Obama enacts policies that are merely opposite?
This is not a matter of alignment of political parties. If you actually examine the facts and figures, Reaganomics, without doubt, works, and in order for our country to succeed again and face the economic problems of today, the plan must be changed within the Oval Office and on Capitol Hill.
The economic plan during Reagan’s presidency first centered itself around tax cuts. Reagan reduced the top marginal tax rate from 70% when he entered office, all the way down to 28%. He cut all the other income tax rates by 25% across the board. Now, some people look at this and accuse its lenience on the wealthy. It did, no doubt, reduce taxes for the wealthy. However, the reduction of taxes not only cut taxes for the wealthy, but for business as well. Business is no doubt the cornerstone of capitalism. But when government taxes it and subsidizes it (don’t get me wrong, they do mean well) business can simply not grow in the way it needs to. At a 25% marginal tax rate, the producer keeps three-fourths of his production. If that rate is increased to 50%, the producer keeps only half of what he produces, reducing his reward for production and output by a significant margin. Consequently, incentives are slashed for savings, investment, work, business expansion, business creation, job creation, and entrepreneurship. The result is fewer jobs, lower wages, and slower economic growth, or even economic downturn. If a government reduces the tax back down to 25%, the businessman or producer can now keep most of his production, and he/she is able to hire more workers, increase wages, and still gain more profit. Also, Out of reducing taxes, much is to be gained. With the economy gaining momentum, the dollar increases value. When the dollar increases value, oil prices drop. This starts a much-needed cycle for capitalism to expand, grow, and succeed.
Reagan faced a recession. Inflation averaged 12.5 percent when Reagan entered office, was reduced to 4.4 percent when he left. Interest rates fell six points. 8,000,000 new jobs were created as unemployment fell, and there was an eight percent growth in private wealth.
Some critics may say the major economic boom during Reagan’s presidency was simply caused by the major government defense spending and deficit. However, despite his increased military spending, Reagan reduced the GDP by over two percent by the time he left office. Reagan knew that increased government spending does in no way create economic growth whatsoever. If it did, the worst recession in a hundred years would have actually been fixed by Obama’s failed stimulus and other government spending. President Obama’s own 2012 budget is projecting a deficit for this year of $1.65 trillion dollars, a massive deficit that is increasing with spending on health care and more social security and welfare programs. Democrats often rally to punish corporations and gasoline companies for high prices. Reagan’s first executive order, in fact, eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar, the price of oil declined by more than 50%.
Taxing the “wealthy” includes business, and if the majority of the American people were thinking for themselves instead of repeating what they say and hear, they would understand. When President Reagan came to Washington in 1981, the top 1% of income earners paid 17.6% of all income taxes. In 2007 the top 1% then was required to pay 40.4% of all income taxes, close to twice their share of income.
In result, a recession.
Whether we like it or not, taxing the wealthy is not the solution to fixing an economy, let alone create one that thrives.
With the proposed taxes in 2013, Obama all the more proposes opposite economic schemes. If Reagan’s policies set the stage for a 25 year economic boom, then what will we have in store for us if Obama enacts policies that are merely opposite?
This is not a matter of alignment of political parties. If you actually examine the facts and figures, Reaganomics, without doubt, works, and in order for our country to succeed again and face the economic problems of today, the plan must be changed within the Oval Office and on Capitol Hill.
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Since I tried recording the podcast 10 times, and none of them worked and got stuck on "pending" for 10 minutes each, I finally gave up and decided just to type it out, along with a youtube clip of a Reagan Speech.
"Are Obama’s economic plans ever going to work? Instead of reducing tax rates, President Obama is committed to raising the top tax rates of virtually every major federal tax. With absolutely no growth since the enacting of his policies, some are are starting to question whether it will ever work. Come to the auditorium at 7pm, where we will discuss the problems with Obama’s economic plans, and how looking to the past, mainly at Reaganomics, could help solve the current recession."
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