War on Reaganomics! Part One: The Economy

Since I'm snowed in and have nothing better to do, I will beat up an old punching bag: the Reagan Years. Although to myself it's pretty obvious how disastrous the 1980s were on many economic and social fronts, I never ceased to be amazed when I meet republicans who say with a straight face "I think everyone, no matter what party, can agree that Reagan was a great president. Probably the best of the 20th century."

Excuse me, what?

He was a nice guy, I'm sure (although we never had the pleasure of meeting) but his policies sucked.

In today's installment we will tackle economic policy. The Reagan presidency was marked by two main economic ideologies: trickle down econ and supply-side economics. Not only are these two ideological policies economically unsound for a variety of reasons, they had disastrous results.

1. The 1980s saw massive budget deficits (supply-side economics called for cutting taxes but not reducing spending because it assumed tax cuts would actually generate increased tax revenue)
2. While average income rose 11% during this period, 70% of that growth was concentrated in the top 1% income group; the median income rose by only about 4% for the decade; and the poorest 40% actually saw their incomes decline. Child poverty rates also increased greatly.
3. Private investment rates declined as a result of three factors: declining private savings rates (which surprised those who predicted tax cuts would increase savings); rising government deficits (see above); and growing trade deficits.

The end result is that the 1980s saw budget deficits, growth that was average in comparison to the 1970s (despite claims that it would be much better with less government control), and far greater income inequality (a trend which continues today). In fairness, much of the economic developments under Reagan's presidency (just like any other presidency) were largely or entirely outside of his control but it's striking because he promised so much and what he did have control over he did not improve. The main problem of the 1980s is that it is a lesson unlearned. History repeated itself as it tends to do when Bush II repeated the failed lessons of Reaganomics with similarly unfavorable results.

Much of my analysis has been inspired by a book I'm currently reading by nobel prize winner (in economics) and a "centenary professor" at the LSE, Paul Krugman called "Peddling Prosperity" about economic policy in the 1980s