Blackhatgk's Home

More and more I hear people talk about Reaganomics and the effect it had on this country. Being a generation x’er, I was not old enough to vote or care during Reagan’s term so I had no real arguing point on this subject. Of course, the people I usually debated this subject with were of my own age and they didn’t really have any facts to base there opinions on either. Because of the lack of information on the actual subject, I decided to actually start doing my own research and thinking into the area. Below is what I have come to believe and feel in the discussion of Reaganomics…

********

From my understanding, Reaganomics is the belief that steep tax cuts will stimulate the economy and help the economy grow. While in principle, you are putting alot of money into the hands of the American public as a whole, on a paycheck to paycheck level, there is very few extra money in the average americans pocketbook, maybe enough to buy an extra chocolate bar and help stimulate the Nestle Companys economy, but definatly not enough to improve your chances to buy a new car or any other major manufactured good.

Now in theory, Tax Cuts can help the economy. You are putting money into pockets that will be spent back into the economy, no matter how trivial the amount it. The problem with Reaganomics is though the price of the Tax Cuts. The Tax Cuts that Reagan dished out also created an immense deficit in funds. This deficit in turn made investors and banks a bit stand offish on american debt and as such they increased there “Safety Margin” on there interest rates causing the cost of debt to rise to the average american household and also eating up more money than the tax cuts generated.

So the problem with Reagans tax cuts is that they did put more money in the economy, but they caused a deficit which lowered confidence and in turn hurt the economy more than it was attempting to help the economy. Later presidents, Bush 41 and Clinton 42, discovered how important a balanced budget was and worked to lower spending and increase taxes so that there was an even budget and and even a surplus budget. This improved confidence and thus improved the economy.

******

On a more recent, related issue, this is the problem with Bush’s Tax Cuts. They do not improve confidence in the economy and put very little real money back into the system. Furthermore, they have once again caused a defecit and will hurt confidence and bring us back where we all started.