Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7986)	6/17/2004 6:48:27 AM
From: ChrisJP	Read Replies (1) \| Respond to of 116555

The Myths of Reaganomics lol this thing was written in 1987 ! If it had been written in 1992, it would have been very different. We live in a world of instant gratification and what that means in the world of Washington Politics is that any new idea better pay off in time for the next election -- typically less that 4 years. So the Reagan team had to tell a story that promised results much sooner than they actually would. Also -- the article was long on criticism/debunking -- extremely short on providing any real solutions to the debilitating problems we were facing. How typical ! 1. Authur Laffer was essentially correct. The upper tax rates were so high (70% ?) that enormous amounts of energy were being spent on creating shelters and tax dodging instead of putting that money to work in a way that would benefit the economy. 2. The stagflation cycle needed to be broken. This meant raising fed funds etc to the inflation rate. This caused a recession which caused tax revenues (combined with the tax cuts) to plumment which caused the extremely high deficits. But in the end -- stagflation was broken -- something that was not believed to be possible in the 1970s. 3. The reason why gov't spending went up was because of defense spending. But Reagan really did cut back civilian government bureaucracy and made it more citizen friendly. The increase in defense spending accelerated the end of the cold war and enabled our military to free Kuwait with ease. So to summarize - Before "Reaganomics": 1. It made more sense to borrow rather than invest in business/capital formation. 2. EVERYBODY went on strike every 3 years and passed the resulting pay/benefits increases on to the consumer. 3. Government kept raising taxes for questionable social/service programs and passed that on to the taxpayer. 4. Military response meant THOUSANDS of young men dying to achieve their objective. These things were all cured as a result of Reaganomics. Thanks to business friendly policies, a short lived peace dividend, and technological/productivity improvements, we actually started running budget surpluses in the mid 1990s. Ok so it took a decade longer than was promised. But the policies were still the right thing to do. Chris