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Deficit and Tax Cuts

It took about a day before the Liberals started attacking the Reagan agenda. The one attack that really pissed me off was the following from the respected economist J. Bradford Delong (one of Clinton's economic advisors)

The economic policy the neoconservatives handed him was a disaster: the tax cuts made America a more unequal place, and the deficits slowed economic growth in the 1980s significantly--as even Larry Lindsey's numbers show. The best you can say about social policy is that it was a tremendous waste: a lot of misery could have been prevented had not fears of alienating the base kept the Reagan administration from reacting swiftly and intelligently to the coming of AIDS.



I am sorry, but this is just ridiculuos and totally out of line. Like a typical closed minded individual, he is narrowing his focus and then pronouncing judgments within that narrow range of probing.

He starts his diatribe with an assault on the tax cuts, which is pretty scary when you think about it. Does he really wish to maintain that 70% tax rates on top income earners with no indexing to inflation wasn't a serious problem to be dealt with? Are you kidding me? To martial evidence to support this assertion, I call upon another liberal economist: Paul Krugman.

The tax rate on the top bracket and what we're finding is that if that moves back and forth between 28%-40% which is roughly the range we're talking about, it doesn't seem to matter very much for the economy

Well J, the tax rate in 1980 was 70%, which was a clear market distortion. The other problem you seem to have with Reagan is purely value laden. Reagan believed that government was too big and too overreaching in its purpose. He also believed in a strong stance against the soviets, a policy success you give him very little credit for. Reagan came into office with 3 goals: to lower taxes, to buildup the military to help speed along the demise of the evil empire, and to balance the budget. As the W. Post obituary states, he sacrificed the latter to accomplish the former. The deficit and debt may have significantly increased and it may have adversely impacted growth (the extent of which I do not want to pronounce, since you do not link to any sources), but it was considered a price worth paying to defeat the soviet empire.

In the long term, the deficits did not turn out to be as bad as they seemed at the time. Policy moves by the Bush I administration, the Clinton Administration, and a deadlocked congress helped to balance the budget (through spending decreases and minor tax increases).

The real reason that you do not like Ronald Reagan is that he is a conservative, someone whose philosophy is different from yours. Admit this at the outset and then make your analysis.

1 Comments:

At ١١:٤٨ ص, Anonymous غير معرف said...

I think DeLong would have been better off if he just targeted the cut from 50% to 28% that occurred in 1987. This, coupled with the six major tax hikes hikes that Reagan pushed through (most of which pushed the tax structure regressively) is what contributed to the growth in wealth inequality.

I think the deficits were not as bad as they seemed is a retrospective assertion based on the deficit reduction planning by policymakers and the natural economic activity of the 1990s. The salient point pertaining to Reagan is that the supply-side cuts could have been modified to help prevent the deficits from having as much effect.

I don't like it when DeLong goes off like that. To me, it diminishes the superior quality of his economic scholarship.

 

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