{"id":438,"date":"2010-12-15T13:44:26","date_gmt":"2010-12-15T11:44:26","guid":{"rendered":"http:\/\/fascinating-america.com\/blog\/?p=438"},"modified":"2015-04-27T22:32:10","modified_gmt":"2015-04-27T20:32:10","slug":"reaganomics-for-beginners","status":"publish","type":"post","link":"http:\/\/fascinating-america.com\/blog\/reaganomics-for-beginners\/","title":{"rendered":"Reaganomics for beginners"},"content":{"rendered":"

I’ve said it before<\/a>, and I’ll say it again: Barack Obama<\/b> is making a mistake.<\/p>\n

He has this strange tendency to get involved in fights that don’t concern<\/span> him. This started when Henry Louis Gates, Jr., was arrested (leading to Obama’s famous \u201cbeer summit<\/a>\u201d). Then Obama stepped too far into the health-care<\/span> debate (leading some to believe he was dictating the legislation<\/span>). Now he’s gotten involved in a debate about taxes, when he should just let the Democrats and Republicans fight it out<\/span>, as they always have.<\/p>\n

The debate is over whether to let two sets of tax cuts<\/b>, passed by Republicans under George W. Bush<\/b>, expire<\/span> at the end of this month. Interestingly, no one is arguing over<\/span> the central idea \u2014 that they mainly benefit<\/span> the very rich. Instead, the Left says that the rich should be taxed more, because they can afford it and society needs their support. The Right says that the rich are already taxed unfairly.<\/p>\n

The Senate is expected to approve<\/span> the extension today. The House of Representatives is expected to reject<\/span> it in the coming weeks.<\/p>\n

What makes this newsworthy<\/span> is the fact that it is happening at a time when the seams are coming apart on<\/span> the American economy. The Congressional Budget Office estimates that extending the tax cuts<\/b> until 2020 would add $3.3 trillion<\/span> to the national debt.<\/p>\n

Both parties agree that the debt<\/span> is already big enough to be a structural problem, and that the government can’t just give away money. Obama himself asked Americans to pull together<\/span> and tighten their belts, back in 2009 when he was feeling like Franklin Roosevelt<\/b>. Now he’s in favor of extending the tax cuts and seems to be feeling like Ronald Reagan<\/b>.<\/p>\n

Roosevelt vs. Reagan<\/h2>\n

Both of those presidents faced<\/span> a major economic crisis. Roosevelt’s solution<\/b> in the 1930s was to massively tax corporations and the rich, bringing in a lot of revenue<\/span> that the government then used to employ millions of people. Reagan’s solution<\/b> in the 1980s was to significantly lessen the tax burden<\/span> on the corporations and the rich, making capital available to the captains of industry<\/span> for investment, expansion and hiring.<\/p>\n

The theory was \u201ctrickle-down economics<\/b>\u201d. Like snow melting on a mountain, capital in the hands of investors would eventually<\/span> bring benefits<\/span> to the common man. To some extent<\/span>, this did happen: allowed<\/span> some flexibility, the markets were able to experiment. Reagan foresaw<\/span> the demise<\/span> of the (mainly unionized<\/span>) manufacturing industry and the growth of the (mainly non-unionized) service industry.<\/p>\n

The problem was that the mountain was a mountain of debt. The administration’s mantra \u2014 and that of Republicans until this year \u2014 was that \u201cdeficits don’t matter<\/b>\u201d. Journalists laughed at this and called it \u201cReaganomics<\/b>\u201d. George Bush, Sr., even called it \u201cvoodoo economics<\/b>\u201d until he was offered the vice-presidency and shut up about<\/span> it.<\/p>\n

A surprising turn<\/h2>\n

Now, just two and a half weeks ago, the architect of Reaganomics<\/b> \u2014 Reagan’s budget director, David Stockman<\/b> \u2014 said that Reaganomics was only meant to be temporary<\/a>: “That was one of the unfortunate legacies<\/span> of the 1980s that I don’t think was really intended. After 1985, the Republican Party adopted<\/span> the idea that the tax cuts had solved the whole problem and that therefore in the future deficits didn’t matter and that tax cuts would be the solution of first, second, and third resort<\/span>.” Today, Stockman said, “we’re literally printing money to pay the government’s bills, and there’s no case in history where that’s worked for very long.”<\/p>\n

Obama must not have seen that interview. I suspect<\/span>, though, that as usual a shrewd<\/span> political calculation<\/b> lies at the root of this. First, he got Republicans to agree that in exchange<\/span>, they would allow unemployment benefits<\/span> to be paid longer. Second, he’s now got the support of independent voters \u2014 precisely those whose votes he will need for re-election in 2012. We’ll see then whether it was a mistake or not.<\/p>\n","protected":false},"excerpt":{"rendered":"

I’ve said it before, and I’ll say it again: Barack Obama is making a mistake. He has this strange tendency to get involved in fights that don’t concern him. This started when Henry Louis Gates, Jr., was arrested (leading to Obama’s famous \u201cbeer summit\u201d). Then Obama stepped too far into the health-care debate (leading some to believe he was dictating … >><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[28],"tags":[97,27,75,116,29,107,99],"_links":{"self":[{"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/posts\/438"}],"collection":[{"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/comments?post=438"}],"version-history":[{"count":5,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/posts\/438\/revisions"}],"predecessor-version":[{"id":1739,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/posts\/438\/revisions\/1739"}],"wp:attachment":[{"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/media?parent=438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/categories?post=438"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/fascinating-america.com\/blog\/wp-json\/wp\/v2\/tags?post=438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}