Ronald Reagan and the Economy.

[futurepres]

Why did the economy boom under Reagan?

[Negusa Nagast 🚀]

Paul Volcker

[Ban my account ffs!]

Why did the economy boom under Reagan?

The economy didn't boom for most under Reagan... Just for the upper echelons of society.  They increased the quality of life through lower taxes and capital gains... The rest stagnated or went into debt... Or saw the entrance of the wife and teenaged children into the workforce, marginally increasing household income.

[opebo]

Correct Snowguy, the economy only got worse under Reagan, and only continuing downhill since.  But the underlying secret is even the rich are worse off in this Reagan/Thatcher neoliberal economy due to massive instability and eventually deflation and falling asset prices, depression, and a downward spiral due to lack of demand. 

Sure, the rich are relatively better off when the rest of the population is truly desperate, but in absolute terms they're not.

[Phony Moderate]

I voted option two, although one could make a pretty compelling case that Carter was more "lassiez faire" than Reagan.

[republicanism]

I strongly agree with what Sowguy said

[Gustaf]

In the Reagan years they had to curb inflation by inducing a recession. That obviously doesn't make for nice times, but was necessitated by the previous mistakes of Keynesian policy.

As for Reagan's own policies, it's a mixed bag. The fiscal stuff was obviously nonsense.

[opebo]

In the Reagan years they had to curb inflation by inducing a recession. That obviously doesn't make for nice times, but was necessitated by the previous mistakes of Keynesian policy.

No they didn't, it was only 2 years, and no it wasn't.

[All Along The Watchtower]

In the Reagan years they had to curb inflation by inducing a recession. That obviously doesn't make for nice times, but was necessitated by the previous mistakes of Keynesian policy.

As for Reagan's own policies, it's a mixed bag. The fiscal stuff was obviously nonsense.

Read "Secrets of the Temple' by William Greider. The deflationary Volcker recession was an artificial, ideological move that reduced the standard of living for millions of Americans. Of course, asset holders fared far better (ie the wealthy, basically). And that's not even getting into the fact that Reagan's fiscal policies were so obviously skewed towards the wealthiest people. 

[Gustaf]

In the Reagan years they had to curb inflation by inducing a recession. That obviously doesn't make for nice times, but was necessitated by the previous mistakes of Keynesian policy.

As for Reagan's own policies, it's a mixed bag. The fiscal stuff was obviously nonsense.

Read "Secrets of the Temple' by William Greider. The deflationary Volcker recession was an artificial, ideological move that reduced the standard of living for millions of Americans. Of course, asset holders fared far better (ie the wealthy, basically). And that's not even getting into the fact that Reagan's fiscal policies were so obviously skewed towards the wealthiest people. 

In what sense was it artificial?

[tpfkaw]

lol

[Jerseyrules]

Reagan ran as a conservative, governed as a moderate.  He raised taxes, and, like all elected as conservatives, slashed taxes, but didn't to cut spending to equalize it out of fear of public backlash

[Modernity has failed us]

lol

Yeah, this.

I'm becoming a little frustrated by the right wing's obsession with Reagan, considering him a mastermind economist of some sort. He raised taxes several times and, has already been said, made life better for the rich and worse for the poor. Reagan was not the fiscal conservative that Republicans think he was.

[Ban my account ffs!]

In the Reagan years they had to curb inflation by inducing a recession. That obviously doesn't make for nice times, but was necessitated by the previous mistakes of Keynesian policy.

As for Reagan's own policies, it's a mixed bag. The fiscal stuff was obviously nonsense.

That's quite an unsubstantiated claim.  The inflation in the 1970s was caused by myriad factors.. the largest of which was the skyrocketing of oil prices, and in the case of the early-mid 1970s, a series of poor harvests, especially in the Soviet Union.

Part of the reason inflation began to rise in the late 1960s was because unions had finally been able to bargain for wages to be pegged to inflation.  The expectation of inflation became ingrained into the economy, thus there could not be natural slowing of inflation or deflation of prices and wages when Keynesian policies tried to keep the economy from overheating.

On top of that, no politician wants to be the one to cut spending and raise taxes while the economy is humming along at a brisk pace.

Nixon was a huge part in the inflation of the 70s.  He saw the rate of inflation in the late 1960s as too high and didn't recognize why they wouldn't go down in response to Keynesian tactics.  So he instituted price and wage controls, which worked to some extent.  But having lost the presidential election of 1960 due to a less than stellar economy (due to lack of action on Eisenhower's part, much to Nixons chagrin), he didn't want that to repeat itself in 1972.  So he set out to stimulate the economy by cutting taxes modestly and increasing spending... while price controls were in place.

Because of the controls, he was turning the economy into a pressure cooker.  He then, rather stupidly, eased back on the price and wage controls... and inflation began to take off again during 1973.

Then the Yom-Kippur war came along and OPECs embargo and tripling of the oil price... along with 2 consecutive bad harvests in the Soviet Union (1972/3)... and prices skyrocketed.

In 1974, Nixon was preoccupied with the Watergate scandal, and when Ford took over, he did exactly the wrong things.  Both Nixon and Ford became obsessed with balancing the budget just as the fed was raising rates to incredible new heights.  Inflation began to come back down again... but the budget-balancing compounded an already steep slide into recession.

Inflation did come back to more reasonable levels in 1975 and 1976, however... and the economy did begin to grow again, modestly.  The economy didn't do all that well from 1976-1978... but there were a lot of reforms being made that were laying the groundwork for better growth (deregulation of the railroads, for example).

Then there was the Iranian revolution, and oil prices spiked to previously unimaginable levels.  At the time, our economy was still incredibly oil-inefficient.  The amount of oil we were importing was climbing rapidly at a time when the decline in American oil production was really beginning to fall.

This led to major price inflation.  Carter's response was to push for energy efficiency initiatives and moving away from oil.  This was the "slow road" as it were... few dividends up front with big investments... but would pay off handsomely through improved quality of life down the road as efficiency increased and our reliance on oil decreased.

OR

You could raise rates so high that it induces the sharpest recession since the Great Depression, sends unemployment through the roof, and reduces our usage of oil through diminished economic activity all while strong arming nations into giving us more oil...

So no.  The sharp recession of 1981/2 was not "necessary" due to Keynesian economics being a failure.  What was necessary was for us to reduce our oil consumption.  And if Keynesian economics were used properly.. providing stimulus when needed and reigning in runaway growth when needed... we probably could have gotten through the 1970s and early 1980s with much more modest inflation (it still would have been higher than the previous 2 decades) and the continued prosperity of the American middle class.

[Yelnoc]

It boomed in the 80's?

[King]

These poll options are why economics needs to be seriously taught to the American people.

[Politico]

Reagan showed that the American people are capable of spending/investing their own income better than government bureaucrats can. He also provides evidence that strong leadership in the White House is associated with positive consumer/investor confidence. On the downside, the Reagan Administration and Tip O'Neill's Congress showed America what dreadful deficits look like (To be fair, Bush trumped Reagan, and Obama has trumped Bush, but the trumping needs to end soon). Finally, Reagan undeniably proved that allowing the Fed to operate monetary policy without political interference can lead to price stability.

[Modernity has failed us]

These poll options are why economics needs to be seriously taught to the American people.