Friedman vs. Keynes
New York’s senior Senator Chuck Schumer, a democrat, recently pronounced the death of “Reaganomics.” To be fair, he also went as far as to lament that the bedrock of his party’s socio-economic agenda, “the New Deal,” as basically suffering an equal defeat.
His quote, from the NY Daily News’ “Daily Politics Blog” on 11/28/2006:
"We're in better shape than [Republicans] are, because they don't realize that Reaganomics is dead, that the Reagan philosophy is dead," he said. "We realize that New Deal democracy, which is still our paradigm, which is sort of appeal to each group ... that doesn't work any more."
While I do not care to speak to the latter—I take serious issue with the former.
With all due respect, sorry Chuck, you are dead wrong on this one (as well as many others discussed previously in this blog, mainly the “China Tariff”).
For those unfamiliar with the policy, “Reaganomics” is defined by lowering taxes, cutting social spending, increased defense spending and the deregulation of American markets. The Reagan philosophy that Senator Schumer referred to was the President’s belief in limited government, which aptly dovetails with the economic schemata.
While clearly President George W. Bush is no Ronald Reagan—it is very true that he is strongly committed to the economic ideals and principals of his policy, the exception being —cutting social spending (this has actually increased under President Bush). But let’s take a step back first, shall we?
President Reagan inherited an economy plagued with double digit unemployment and inflation, dubbed “stagflation” for its seemingly inability to shake the maladies of the Carter administration’s economic policies and the OPEC crisis.
By reducing the top marginal tax bracket from 70% (yes, 70%) to 35%, presiding over the largest military buildup in history and curtailing the spending extravaganza of the democratic controlled congress (rubber stamped by President Peanut Farmer)—the United States awoke the sleeping the economic giant within.
These policies encouraged risk taking. Small businesses emerged as lending rates made loans less like highway robbery and more like a bedrock that could serve as a beginning to a return on capital. It was under the Reagan administration that markets opened to many of these small companies, some which you may have heard of: Microsoft, Intel, Dell Computer and Wal-Mart, just to name a few.
Needless to say, inflation and unemployment plummeted, GDP soared and morale was restored—the “can-do” attitude that once pervaded the social fabric of our fine country was back.
It was during the 1990’s that many of these companies founded with seed capital during the Reagan years went public, which fed into the technology revolution—sending the Dow above 10,000 and the NASDAQ to 5000. These companies not only led to a stock market boom, they literally changed the way we did business. For starters, the internet made business increasing global, as well as improved the supply chain for every industry. As productivity increased, inflation decreased. Business became efficient.
Flash to today. While social spending continues to grow unchecked, the economy has been resilient in the face of many calamities, not to mention 9-11, Hurricane Katrina, record energy prices—as the Bush Tax Cuts (combined with provisions for accelerated amortization and depreciation) have back-stopped our infrastructure. President Bush has also presided over one of the largest military buildups in history, which has created countless higher-paying jobs in the aeronautical and defense industries; requiring copious amounts of resources (metals, oil, gas, etc.) which has led to a boom in the minerals industry as well.
So sorry Chuck, Reaganomics are alive and well. And by the way, they work.
His quote, from the NY Daily News’ “Daily Politics Blog” on 11/28/2006:
"We're in better shape than [Republicans] are, because they don't realize that Reaganomics is dead, that the Reagan philosophy is dead," he said. "We realize that New Deal democracy, which is still our paradigm, which is sort of appeal to each group ... that doesn't work any more."
While I do not care to speak to the latter—I take serious issue with the former.
With all due respect, sorry Chuck, you are dead wrong on this one (as well as many others discussed previously in this blog, mainly the “China Tariff”).
For those unfamiliar with the policy, “Reaganomics” is defined by lowering taxes, cutting social spending, increased defense spending and the deregulation of American markets. The Reagan philosophy that Senator Schumer referred to was the President’s belief in limited government, which aptly dovetails with the economic schemata.
While clearly President George W. Bush is no Ronald Reagan—it is very true that he is strongly committed to the economic ideals and principals of his policy, the exception being —cutting social spending (this has actually increased under President Bush). But let’s take a step back first, shall we?
President Reagan inherited an economy plagued with double digit unemployment and inflation, dubbed “stagflation” for its seemingly inability to shake the maladies of the Carter administration’s economic policies and the OPEC crisis.
By reducing the top marginal tax bracket from 70% (yes, 70%) to 35%, presiding over the largest military buildup in history and curtailing the spending extravaganza of the democratic controlled congress (rubber stamped by President Peanut Farmer)—the United States awoke the sleeping the economic giant within.
These policies encouraged risk taking. Small businesses emerged as lending rates made loans less like highway robbery and more like a bedrock that could serve as a beginning to a return on capital. It was under the Reagan administration that markets opened to many of these small companies, some which you may have heard of: Microsoft, Intel, Dell Computer and Wal-Mart, just to name a few.
Needless to say, inflation and unemployment plummeted, GDP soared and morale was restored—the “can-do” attitude that once pervaded the social fabric of our fine country was back.
It was during the 1990’s that many of these companies founded with seed capital during the Reagan years went public, which fed into the technology revolution—sending the Dow above 10,000 and the NASDAQ to 5000. These companies not only led to a stock market boom, they literally changed the way we did business. For starters, the internet made business increasing global, as well as improved the supply chain for every industry. As productivity increased, inflation decreased. Business became efficient.
Flash to today. While social spending continues to grow unchecked, the economy has been resilient in the face of many calamities, not to mention 9-11, Hurricane Katrina, record energy prices—as the Bush Tax Cuts (combined with provisions for accelerated amortization and depreciation) have back-stopped our infrastructure. President Bush has also presided over one of the largest military buildups in history, which has created countless higher-paying jobs in the aeronautical and defense industries; requiring copious amounts of resources (metals, oil, gas, etc.) which has led to a boom in the minerals industry as well.
So sorry Chuck, Reaganomics are alive and well. And by the way, they work.
