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Why does Reagonomics get such bogus credit for fiscal responsibility? Cutting taxes while also increasing spending is not fiscally responsible. Reagan was by fa

Why does Reagonomics get such bogus credit for fiscal responsibility? Cutting taxes while also increasing spending is not fiscally responsible. Reagan was by far one of the worst offenders, unlike what the author leads you to believe with a personal quote from Reagan. A simple google search for "reagan deficit spending" will show just how great this country did during his 8 years. That fallacy clarified, this isn't about democratic or republican, liberal or conservative. The author brushes this off, too, but devotes most of the article to implying the opposite. So the point is to evaluate the true cost of something. Wonderful! Except, I think the author doesn't go far enough. What of indirect costs and benefits of oil exploration vs. nuclear vs. coal mining, etc? The problem with not focusing on alternative energies is that you continue to feed an anti-imperialistic enemy that then forces you to spend trillions of dollars for the "sake of national security." Yes, please, find the true cost of coal mining, oil exploration, etc, and that means factoring not just immediate profit losses and tax subsidies. This means analyzing just how much, for example, it costs to fund wars in order to satisfy our oil demands (ie, how much this country has spent in wars bribing people, funding our veteran's health care, etc for the sake of national security, while we indirectly fund these very terrorist organisations). So it's okay to debt our way to fund such wars, but it's not okay to invest in the education and health of this country's biggest economic contributors--it's citizens? The problem isn't deficit spending/debt. Many successful startups or companies go through such phase where it makes sense to borrow, to dig yourself out of a hole. The problem is whether you reinvest this back into the country, its infrastructure, its education, its health, its green technologies, etc. FDR didn't get us out of the Great Depression. That's right. WWII did, deficit spending did. But then, unlike now the US was producing something other countries needed. Green technology (nuclear, solar, whatever, let them dish it out with some subsidies to offset initial costs) has to be the answer nowadays.

kingkongreveng_ 17y ago
> get us out of the Great Depression ... WWII did, deficit spending did. Absolutely false. Personal well being continued to fall dramatically through the war. GDP went up because the government was buying weapons, i.e. digging and filling holes. Unemployment went down because people were drafted, essentially enslaving the unemployed. The depression did not end in any meaningful sense until the war ended and government spending was reduced. Only in 1946 when you finally had the conditions that both the New Deal morons were gone and the war economy was being shut down did living standards begin to improve. > the point is to evaluate the true cost of something Only the free market can evaluate the true cost of things. A panel of human beings cannot possibly make a meaningful calculation: there is too much ambiguity and unknowable data. The things "worth the cost" win out and the things not worth the cost go bust in the market. Your points about the government subsidies to the petroleum industry are quite valid, but you seem to miss that the basic failing is government itself. If oil related businesses had to carry all security and business risk related costs themselves, that would be clearly reflected in prices and substitutes would be more competitive. The problem is that somebody in government decided geopolitical hegemony is "worth the cost."
- jswinghammer 17y ago
  Everything you said about the post WW2 recovery is accurate I believe. Keynesians at the time were convinced the depression would resume once the war ended. It is interesting to note that the modern Keynesians have turned on FDR. They always are unhappy with his trying to balance the budget after years of New Deal policy failed. They have turned on Hoover because he gave up as well after his version of the New Deal failed. They seem to forget that Keynes himself approved of what Hoover was doing. Their instance on the notion that a stimulus program is never large enough to explain their failures is a pretty old one.
- izendejas 17y ago
  It's obvious government spending had to decrease and that's what should happen after the country is somewhat back on track and growing. But did WWII and (thus deficit spending) not get us out of the great depression? It's obvious the quality of life wasn't great when you had people forgoing resources to fund an important war. The growth after the great depression came as a result of the Cold War when the US started spending on nuclear technology, missile defense, what have you. The US also invested on its citizens and education with the GI Bill among others, etc. This does not refute my point--and that is, to clarify, perhaps, that the problem isn't government spending, it's what it gets spent on. Only the market can evaluate the true cost of things? This assumes markets have all the information or that someone is willing to invest the money to obtain it--otherwise you have an inefficient market. Here's where for the good of all, some central body like a government, can put in the cost to find out or to avoid a market collapse. For example, what would have been the cost of letting AIG and major banks fail? The markets wouldn't care since every individual would be concerned with their losses in the panic. That is, the markets aren't always as rational as people make them out to be--you know this. To argue otherwise is as idealistic as well, you name it. In fact, your last point validates this point. The cost of not passing TARP and the Recovery act would have been passed on to us--and some argue, and I believe, such cost would be greater... also, assuming you can control spending when the country is back on track (due to debt). So either way, we're paying... might as well, then, ensure our financial system is stable and that we can continue to invest in education and green technology instead of risking an entire system collapse as we ensure our economy grows. When interest rates are at 0% and the country isn't growing, something has to give. Cutting government spending is stupid. If you're running a business how's a tax break going to help you? Will you keep people employed? Not very likely. So as employment continues to rise, more people freak out, and more people are let go. Is that the kind of downard spiral we want? This is when a government needs to step in and say, no.. we're keeping these jobs, we're creating some here, otherwise, who's going to take the risk? There's a psychology to this, I think, that often gets lost in "market analysis." People who are uncertain about the economy will stop spending, so how do you promote spending? By giving them a few hundred dollars without ensuring that their job isn't going to be there a year or two from now?
euroclydon 17y ago
I think most of what you are saying is overshadowed by two points that were made in the article: 1) Every bridge, road, factory, and in fact most of our economy is build on the (nearly) free energy that we get from pulling hydrocarbons out of the ground. I'm not morally justifying it, but if a couple hundred billion spent on war, allows Iraq to quadruple oil production, then we will recoup those hundred billion by using that (nearly) free energy found in those Iraqi hydrocarbons. 2) Regan's or any other era's budget deficits pale in comparison the the unfunded liabilities of Medicare and Social Security. The deficits are manageable, but the retirement and health promises are not.
- pedalpete 17y ago
  how does a 'couple hundred billion' = nearly free energy. It clearly isn't nearly free if you are paying a couple hundred billion. If US gdp is 14 trillion, a few hundred billion for access to energy is a fairly significant number.
  - euroclydon 17y ago
    Let's say the energy cost of building a new bridge is $500,000 worth of hydrocarbons. Now, let's compare that to non-hydrocarbon energy sources. Historically, this might be steam from burning wood, or a team of mules. What I am saying is that $500,000 worth of wood or mules is so much less energy than $500,000 worth of oil, that the oil is nearly free in comparison. Think about it: what other fuel is just sitting around, storing millions of years of solar energy, and waiting to be extracted and burned??? This is a key economic concept that must be understood when discussing oil.
- izendejas 17y ago
  1) what about the cost of diverting resources to finance the war? what of the health costs we incur for the health benefits of the wounded, support of their families, etc? You're not addressing my point. You're merely reinforcing it by being as short-sighted as the author of the article and not going far enough to compute the actual costs. 2) huh? did you see the debt reagan left us? and again, my issue is we're spending money on wars and cutting it from education and other vital investments, anyway. medicare and social security are a different discussion.
DanielBMarkham 17y ago
Why does Reagonomics get such bogus credit for fiscal responsibility? Bit of historical trivia: Reagan wanted to cut taxes and cut spending. The Democrats let him cut taxes but were going to give him a good thrashing if he tried to control spending. He decided he would rather be popular than have a fight, so he took the tax cuts and ran the deficit up.
- pauljonas 17y ago
  Untrue. Year after year, Reagan rejected budgets Congress allotted and always sent it back for more spending, not less.
  - DanielBMarkham 17y ago
    Reagan arrived in Washington with a full head of steam, vowing, as he put it in the major economic speech of his 1980 campaign, "to move boldly, decisively, and quickly to control the runaway growth of federal spending."...To help compensate for the tax cut, his first budget called for slashing $41.4 billion from 83 federal programs, only the first round in a planned series of cuts. And Reagan himself made known his desire to eliminate the departments of Energy and Education, and to scale back what his first budget director David Stockman called the "closet socialism" of Social Security and Medicaid....At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through immediate draconian cuts to the program. But the Senate unanimously rebuked his plan, and the GOP lost 26 House seats in the 1982 midterm elections, largely as a result of this overreach. The following year, Reagan made one of the greatest ideological about-faces in the history of the presidency, agreeing to a $165 billion bailout of Social Security. http://www.washingtonmonthly.com/features/2003/0301.green.html http://www.washingtonmonthly.com/features/2003/0301.green.ht...
    - izendejas 17y ago
      $41.4 while eliminating the department of education. $165 billion bailout of social security. Okay, that doesn't mean much. Put it in context. How much was Reagan spending on defense and other discretionary items? That's the track record I'm talking about. http://www.heritage.org/Research/Features/BudgetChartbook/Defense-Spending-on-the-Decline-Despite-War-on-Terror.aspx http://www.heritage.org/Research/Features/BudgetChartbook/De... (first plot i could find)
izendejas 17y ago
debt as a percentage of gdp: http://zfacts.com/p/318.html http://zfacts.com/p/318.html It frustrates me that people who are crying foul over our current debt praise Regan and his policies. He's not to blame only. The congress at the time has it fair share, of course. edit: didn't read the article (just view the plot, it's the first i could find)
- azgolfer 17y ago
  IIRC Reagan proposed a balanced budget, had the Grace commision recommending large cuts in government spending/programs through privatization. This was completely rejected by Congress, and Tip O'Neal said the budget was 'Dead On Arrival'.
anamax 17y ago
> Cutting taxes while also increasing spending is not fiscally responsible Reagan didn't cut taxes. He cut tax rates but revenues actually increased. You can argue that revenues would have been even higher without the tax rate cuts, but then you get to argue that people don't respond to tax rates. > FDR didn't get us out of the Great Depression. That's right. WWII did, deficit spending did. Actually no. FDR waged a war on production until WWII made that impossible. You can't have an arsenal of democracy that doesn't produce things. > Green technology (nuclear, solar, whatever, let them dish it out with some subsidies to offset initial costs) has to be the answer nowadays. Spain is finding that each green job costs more than one not-green job, and the green jobs are temporary while the not-green job losses seem to be more persistent.

kingkongreveng_ 17y ago

> get us out of the Great Depression ... WWII did, deficit spending did. Absolutely false. Personal well being continued to fall dramatically through the war. GDP went up because the government was buying weapons, i.e. digging and filling holes. Unemployment went down because people were drafted, essentially enslaving the unemployed. The depression did not end in any meaningful sense until the war ended and government spending was reduced. Only in 1946 when you finally had the conditions that both the New Deal morons were gone and the war economy was being shut down did living standards begin to improve. > the point is to evaluate the true cost of something Only the free market can evaluate the true cost of things. A panel of human beings cannot possibly make a meaningful calculation: there is too much ambiguity and unknowable data. The things "worth the cost" win out and the things not worth the cost go bust in the market. Your points about the government subsidies to the petroleum industry are quite valid, but you seem to miss that the basic failing is government itself. If oil related businesses had to carry all security and business risk related costs themselves, that would be clearly reflected in prices and substitutes would be more competitive. The problem is that somebody in government decided geopolitical hegemony is "worth the cost."

jswinghammer 17y ago
Everything you said about the post WW2 recovery is accurate I believe. Keynesians at the time were convinced the depression would resume once the war ended. It is interesting to note that the modern Keynesians have turned on FDR. They always are unhappy with his trying to balance the budget after years of New Deal policy failed. They have turned on Hoover because he gave up as well after his version of the New Deal failed. They seem to forget that Keynes himself approved of what Hoover was doing. Their instance on the notion that a stimulus program is never large enough to explain their failures is a pretty old one.
izendejas 17y ago
It's obvious government spending had to decrease and that's what should happen after the country is somewhat back on track and growing. But did WWII and (thus deficit spending) not get us out of the great depression? It's obvious the quality of life wasn't great when you had people forgoing resources to fund an important war. The growth after the great depression came as a result of the Cold War when the US started spending on nuclear technology, missile defense, what have you. The US also invested on its citizens and education with the GI Bill among others, etc. This does not refute my point--and that is, to clarify, perhaps, that the problem isn't government spending, it's what it gets spent on. Only the market can evaluate the true cost of things? This assumes markets have all the information or that someone is willing to invest the money to obtain it--otherwise you have an inefficient market. Here's where for the good of all, some central body like a government, can put in the cost to find out or to avoid a market collapse. For example, what would have been the cost of letting AIG and major banks fail? The markets wouldn't care since every individual would be concerned with their losses in the panic. That is, the markets aren't always as rational as people make them out to be--you know this. To argue otherwise is as idealistic as well, you name it. In fact, your last point validates this point. The cost of not passing TARP and the Recovery act would have been passed on to us--and some argue, and I believe, such cost would be greater... also, assuming you can control spending when the country is back on track (due to debt). So either way, we're paying... might as well, then, ensure our financial system is stable and that we can continue to invest in education and green technology instead of risking an entire system collapse as we ensure our economy grows. When interest rates are at 0% and the country isn't growing, something has to give. Cutting government spending is stupid. If you're running a business how's a tax break going to help you? Will you keep people employed? Not very likely. So as employment continues to rise, more people freak out, and more people are let go. Is that the kind of downard spiral we want? This is when a government needs to step in and say, no.. we're keeping these jobs, we're creating some here, otherwise, who's going to take the risk? There's a psychology to this, I think, that often gets lost in "market analysis." People who are uncertain about the economy will stop spending, so how do you promote spending? By giving them a few hundred dollars without ensuring that their job isn't going to be there a year or two from now?

euroclydon 17y ago

I think most of what you are saying is overshadowed by two points that were made in the article: 1) Every bridge, road, factory, and in fact most of our economy is build on the (nearly) free energy that we get from pulling hydrocarbons out of the ground. I'm not morally justifying it, but if a couple hundred billion spent on war, allows Iraq to quadruple oil production, then we will recoup those hundred billion by using that (nearly) free energy found in those Iraqi hydrocarbons. 2) Regan's or any other era's budget deficits pale in comparison the the unfunded liabilities of Medicare and Social Security. The deficits are manageable, but the retirement and health promises are not.

pedalpete 17y ago
how does a 'couple hundred billion' = nearly free energy. It clearly isn't nearly free if you are paying a couple hundred billion. If US gdp is 14 trillion, a few hundred billion for access to energy is a fairly significant number.
- euroclydon 17y ago
  Let's say the energy cost of building a new bridge is $500,000 worth of hydrocarbons. Now, let's compare that to non-hydrocarbon energy sources. Historically, this might be steam from burning wood, or a team of mules. What I am saying is that $500,000 worth of wood or mules is so much less energy than $500,000 worth of oil, that the oil is nearly free in comparison. Think about it: what other fuel is just sitting around, storing millions of years of solar energy, and waiting to be extracted and burned??? This is a key economic concept that must be understood when discussing oil.
izendejas 17y ago
1) what about the cost of diverting resources to finance the war? what of the health costs we incur for the health benefits of the wounded, support of their families, etc? You're not addressing my point. You're merely reinforcing it by being as short-sighted as the author of the article and not going far enough to compute the actual costs. 2) huh? did you see the debt reagan left us? and again, my issue is we're spending money on wars and cutting it from education and other vital investments, anyway. medicare and social security are a different discussion.

DanielBMarkham 17y ago

Why does Reagonomics get such bogus credit for fiscal responsibility? Bit of historical trivia: Reagan wanted to cut taxes and cut spending. The Democrats let him cut taxes but were going to give him a good thrashing if he tried to control spending. He decided he would rather be popular than have a fight, so he took the tax cuts and ran the deficit up.

pauljonas 17y ago
Untrue. Year after year, Reagan rejected budgets Congress allotted and always sent it back for more spending, not less.
- DanielBMarkham 17y ago
  Reagan arrived in Washington with a full head of steam, vowing, as he put it in the major economic speech of his 1980 campaign, "to move boldly, decisively, and quickly to control the runaway growth of federal spending."...To help compensate for the tax cut, his first budget called for slashing $41.4 billion from 83 federal programs, only the first round in a planned series of cuts. And Reagan himself made known his desire to eliminate the departments of Energy and Education, and to scale back what his first budget director David Stockman called the "closet socialism" of Social Security and Medicaid....At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through immediate draconian cuts to the program. But the Senate unanimously rebuked his plan, and the GOP lost 26 House seats in the 1982 midterm elections, largely as a result of this overreach. The following year, Reagan made one of the greatest ideological about-faces in the history of the presidency, agreeing to a $165 billion bailout of Social Security. http://www.washingtonmonthly.com/features/2003/0301.green.html http://www.washingtonmonthly.com/features/2003/0301.green.ht...
  - izendejas 17y ago
    $41.4 while eliminating the department of education. $165 billion bailout of social security. Okay, that doesn't mean much. Put it in context. How much was Reagan spending on defense and other discretionary items? That's the track record I'm talking about. http://www.heritage.org/Research/Features/BudgetChartbook/Defense-Spending-on-the-Decline-Despite-War-on-Terror.aspx http://www.heritage.org/Research/Features/BudgetChartbook/De... (first plot i could find)

izendejas 17y ago

debt as a percentage of gdp: http://zfacts.com/p/318.html http://zfacts.com/p/318.html It frustrates me that people who are crying foul over our current debt praise Regan and his policies. He's not to blame only. The congress at the time has it fair share, of course. edit: didn't read the article (just view the plot, it's the first i could find)

azgolfer 17y ago
IIRC Reagan proposed a balanced budget, had the Grace commision recommending large cuts in government spending/programs through privatization. This was completely rejected by Congress, and Tip O'Neal said the budget was 'Dead On Arrival'.

anamax 17y ago

> Cutting taxes while also increasing spending is not fiscally responsible Reagan didn't cut taxes. He cut tax rates but revenues actually increased. You can argue that revenues would have been even higher without the tax rate cuts, but then you get to argue that people don't respond to tax rates. > FDR didn't get us out of the Great Depression. That's right. WWII did, deficit spending did. Actually no. FDR waged a war on production until WWII made that impossible. You can't have an arsenal of democracy that doesn't produce things. > Green technology (nuclear, solar, whatever, let them dish it out with some subsidies to offset initial costs) has to be the answer nowadays. Spain is finding that each green job costs more than one not-green job, and the green jobs are temporary while the not-green job losses seem to be more persistent.