Reaganomics vs. Obamanomics

[J D the Obscure]

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[Uninformed]

The Laffer Curve itself does not say whether a tax cut will raise or lower revenues. Revenue responses to a tax rate change will depend upon the tax system in place, the time period being considered, the ease of movement into underground activities, the level of tax rates already in place, the prevalence of legal and accounting-driven tax loopholes, and the proclivities of the productive factors. If the existing tax rate is too high--in the "prohibitive range" shown above--then a tax-rate cut would result in increased tax revenues. The economic effect of the tax cut would outweigh the arithmetic effect of the tax cut.

Moving from total tax revenues to budgets, there is one expenditure effect in addition to the two effects that tax-rate changes have on revenues. Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs.

Over the past 100 years, there have been three major periods of tax-rate cuts in the U.S.: the Harding-Coolidge cuts of the mid-1920s; the Kennedy cuts of the mid-1960s; and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful as measured by virtually any public policy metric. The Link

 

[Eurocat]

The Link

 

[Uninformed]

Didn't think much of that link but the wisest people seemed to be towards the end.



Andrew Samwick, professor of economics, Dartmouth College:

"I would not hazard a guess. Even a guess requires a careful study of the data on high income taxpayers, which I have not done."

Greg Mankiw, Robert M. Beren professor of economics, Harvard University; former chairman, Council of Economic Advisors:

"My guess is that that the short-run answer and the long-run answer are quite different. For example, if you raised the top rate from 35 to, say, 60 percent, you might raise revenue in the short run. Over time, however, you would get lower economic growth, so the additional revenues would fall off and eventually decline below what they would have been at the lower rate.... I will pass on offering a specific number, as it would require more time and thought than I can offer just now, but I will opine that I think the long-run answer is actually more important for policy purposes than the short-run answer."

Edward Lazear, Jack Steele Parker Professor of Human Resources Management and Economics, Stanford University; former chariman, Council of Economic Advisors:

"Sorry, no."

Martin Feldstein, George F. Baker Professor of Economics, Harvard University, former chairman, Council of Economic Advisors:

"Why look for the rate that maximizes revenue? As the tax rate rises, the "deadweight loss" (real loss to the economy rises) so as the rate gets close to maximizing revenue the loss to the economy exceeds the gain in revenue.... I dislike budget deficits as much as anyone else. But would I really want to give up say $1 billion of GDP in order to reduce the deficit by $100 million? No. National income is a goal in itself. That is what drives consumption and our standard of living."

 

[Lake_Travis_Horn]

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[saahorn]

Care to explain the 90's Lake Travis?

I wish the Republicans would make up their mind. When they are in charge, all they due is unbalance the budget by cutting taxes and increasing spending. Now Obama does it and they can't hardly walk down the street without tripping all over themselves in outrage. Personally, I favor a Bill Clinton style approach myself. Cut spending a bit, trim the deficit through a moderate tax hike on a those who won't even notice, and then watch the dollar strengthen, and the stock market go.

But let's not talk about THAT economic boom.

Seriously though, Why does Reagan get a pass on deficits and debt? I really want a serious answer.

 

[TexasGolf]

that "boom" was the dot.com bubble

 

[GT WT]

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[Uninformed]

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[GT WT]

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[Lake_Travis_Horn]

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[Uninformed]

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[majorwhiteapples]

One can google any US Tax Revenue link and you will notice a trend, after every major tax cut in this country there is a clear rise in Tax revenue. Pick whatever link you want they all show sharp increases in tax revenue, going back to the 20's, 60's and 00's. Almost every major tax increase has stymied tax revenue, why one might ask?

Something you don't learn in a bubble, you change the taxes and you change behavior.

The 90's was very similar to the 20's with the amount of speculation. The Dot.com bubble was pure speculation. A few companies have merged but everyone in the back of their mind knew that a company that was generating that much interest in an IPO with little to on revenue was going to burst.

Three times in history a president has carte blanche to do what they want and what was created, SS, Medicare and Obamacare.

 

[saahorn]

So, what about the deficit? They don't matter?

 

[hornpharmd]

Raise individual tax rates, lower corporate ax rates, stop allowing corporations hide money offshore to prevent themselves from paying taxes.

 

[Bevo Incognito]

If I borrowed and spent the way Reagan did, I'd be able to convince my neighbors that I was in the middle of "a long peacetime expansion," too. But one day the pigeons would come home to roost.

It's sad to see "conservatives" on this BBS praising Ronald Reagan, given that he oversaw dramatic increases in both the debt and the size of government.

I think they truly want to be liberals.

 

[TxStHorn]

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[Uninformed]

Obama's economic initiatives have been a disaster. Not just conservatives realize this. Fiscally minded Democrats realize it as well. They pine for the Clinton days and probably won't vote for a Republican but they will put forth halfhearted support of Obama. He probably won't need them as he is well funded from unions and his base, but none the less the reality is that Obama is no friend of the US economy.

 

[Lake_Travis_Horn]

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[Lake_Travis_Horn]

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[rivet]

Information on Reagan from previous discussions:

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Under Reagan, however, the federal deficit expanded from 2.6% of GNP to 5.3% in 1986 (before falling somewhat in 1987), adding more than $1 trillion in red ink to our national accounts. Worse, this growth took place not during wartime or depression but in a period of peace and prosperity. That's when the national debt is supposed to shrink.
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Reagan came to Washington promising to cut taxes and federal spending. He cut taxes. But spending rose both in absolute terms and as a share of GNP. Was it Congress's fault? Nope, says Friedman: total government outlays between 1982 and 1987 averaged only $15 billion a year more than what Reagan requested. That accounts for only 8% of the accumulated deficits.
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In the past, the government financed its deficits mostly by selling bonds to American investors. This time it has borrowed from the rest of the world. The result: by the end of 1987 the United States had completed a fast transition from the world's largest creditor to the world's largest debtor, owing foreign investors roughly $400 billion. What made the borrowing possible was high interest rates, which themselves may have been caused by the big deficits (see "On Deficits and Interest Rates," page 3). With foreigners happy to snap up high-yielding American assets, the dollar remained high, making imports cheap and damaging the competitive position of U.S. manufacturers. We therefore ran up huge trade deficits and provided overseas investors with ever-increasing quantities of dollars to lend us.


www.inc.com/magazine/19881001/5989.html

 

[Gadfly]

When we talk about the 90s, the economic success of the decade was driven by the private sector. There was no government program that invented the PC (although the government did invent the internet for security interests). It is insulting to give the government any credit for the economic boom of the 90s. (The TV and Kitchen appliance for the boom of the 50s, and the car for the boom of the 20s)

We can credit the government for running surpluses, but this cannot be attributed to Clinton or Reagan. Bush Sr. was in charge when the pay-go rule was signed (he also had to fall on a sword to raise taxes), and the reason our debt skyrocketed shortly after the turn of the century is because the pay-go rule was allowed to expire. Bush Jr took the Reagan philosophy of spending without the Reagan philosophy of taxation. Military went back up to Cold War levels, of course, as a result of 9/11, but huge Medicare expansions occurred which will ultimately destroy Medicare.

Why do you think the government wants to take over healthcare? Currently, they insure the oldest and sickest patients in the country. They want the control so they can control costs and save Medicare. If you run a business where you only get the high cost customers, and everyone else gets the “safe-bets”, you will go bankrupt. Fanny Mae failed because of this – and hadn’t learned a damn thing, either.

 

[Oilfield]

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