Something I heard over radio a few days ago about “voodoo economics” brought to mind this short exerpt of an article by L. Brent Bozell III, written in 1994. I decided to dig it up and republish it here, because it’s good, because I feel like it, and because – as I wrote on Monday – some things never change.
In the 1980s, there was a consensus among the members of the national media that Ronald Reagan was going to fail and that he was going to bring on economic disaster. But. . .the economy didn’t collapse. In fact, it soared to unprecedented levels.
The media stubbornly refused to admit that “Reaganomics” was responsible. The drumbeat of negative opposition to the president’s policies continued through the 1980s. By 1986. . . the ratio of negative to positive stories was seven to one. In other words, as the economy was improving, media reports on the economy were becoming increasingly negative.
One of the most common allegations in these reports was that the poor got poorer under Reagan, even though the actual number of poor declined from 14 to 13 percent during his administration, and the average income for the lowest one-fifth of Americans rose from $7,008 to $9,431. Inflation declined 48%, from 8.9 to 4.6%. Unemployment declined 45%, from 7.5 to 5.2.%. Interest rates declined 71.9%, from 21 to 5.9%. Twenty-one million new jobs were created.
The so-called “greedy ’80s” witnessed the largest peacetime economic expansion in our nation’s history, yet the media remained deaf, dumb and blind.
From “30 years of the Best Of Imprimis“.
One can subscribe to the invaluable Imprimis, a publication of Hillsdale College for free. (There’s a link off the main page). Hillsdale College was founded by Freewill Baptists in Spring Arbor, Michigan and became the first institution of its kind to prohibit in its charter all discrimination based on race, religion, or sex – in 1850.
Good cite! (From a good site). Thanks for digging that up from the dusty, musty archives.
“Consensus is what many people say in chorus but do not believe as individuals.”
As a group, they believed Reagan would fail.
The rest is history.
Reaganomics was a remarkable plan. What people tend to forget is that when President Reagan implemented his economic policy Paul Volker had been pushing the Fed funds rate to the moon.
Interest rates for a mortgage in the US had reached 19% the US economy had essentially been slammed head first into a brick wall. The economy had come to a virtual halt.
President Reagan now needed to jumpstart it and fast. The flip side of the coin is deflation. In defeating stagflation throwing the economy into a deflationary spiral would have made life far more miserable.
Deflation as it turns out is far more difficult to recover from. It took WW2 last time, to defeat the depression.
Reagans massive defence spending along with the tax cuts that enabled wealth to be created has lead to the greatest economic expansion ever.
A side benefit is the US defence dept tends to do a huge amount of R&D that leads to enormous spinoffs for the economy. A little one would be the internet. No matter what Al Gore says.
President Bush faced with deflation in late 2002 had to do something very similar.
How would all those tax and spend liberals be able to survive in world where prices decline with no way to stop it. Unemployment runs rampant. No wealth creation means no bucks for all those social welfare programs.
Canada would have been hit 10x harder. Canada has essentially no domestic economic infastructure.
Chretien had collapsed the Canuck buck and kept domestic taxes very high. What that does is create a world where any economic growth has to come from outside the country. There is no excess savings here to create any wealth.
Chretien should be kissing the ground that Bush walks on because he bet the farm on the US economy not having a deflationary problem, but instead pulling out of and having the ability to continue its consumption thereby allowing for a lot of US $’s to flow north.
Whoa! very enlightening Kate. TY for posting that. I found the pieces by Walter Williams, Ronald Reagan, and Phillip Crane most insightful. I couldn’t help but see our country in these articles. Thanks again Kate. 🙂
Great info there and something to make a person think.
Read the one from Thomas Sowell about “the building next door.”
Thanks for the great link Kate – I get frustrated with people who think that conservatives are not “intellectual”. When I started to read conservative editorials/pundits/thinkers, it was like a veil was lifted.
what the left leaning dems failed to notice was that the prosperity was time delayed and the
economic Ronnysaince lasted through their own version of Dithers , HillnBilly Clinton.
the Democratic prosperity was dotcom smoke and mirrors, the real stuff was a legacy of Ronny.
PMPMs claim to fame was deficit cutting in the economic wake of a rising US economy.Canada is merely a shore where the US money tide washes up.
Isn’t Imprimis the best? But wait for the moonbats . . . they’ll be here soon, “Reagan” and “voodoo economics” are siren songs they cannot resist. Even though GB Sr., the guy who came up with “voodoo economics”, was later converted – but no nevermind about that.
Prediction #1 – blame the 1981 recession (i.e., leftover from Carter’s admin) on Reagan’s policies that hadn’t even been passed yet. It gets worse from there. Well, have at it, fellas!
One of the basics of Economics 100 reads that if you want to stimulate economic activity, you cut taxation. The resulting increase in economic activity generates business, jobs and opportunity as it ripples through the economy. Both Reagan and Bush Jr. did this and managed to spur the US economy regardless of what their detractors have said. In both cases, actual tax dollars collected ended up rising, in spite of the lower tax rates, due to a larger base of taxable incomes. This dynamic is, of course, not instantaneous and there will be a waiting period while the effects of the tax reductions ripple through an economy and generate their effects. The danger is that the multitude of detractors will continue to howl in protest during this waiting period while there appears to be no tangible improvement in the situation. As indicated in the article here, they may well continue to howl afterwards too, but once the numbers start to turn around, these good results need to be publicized.
At this point, I can just imagine what Jack “all profit is evil” Layton would be saying about the evil corporations being allowed to escape taxation. (One sometimes wonders where he thinks jobs, etc. come from!) The fact is that Canada has the second highest corporate tax rate in the world…………that’s right IN THE WORLD!! Excessive taxation chills down economic activity and this too has a ripple effect through the economy. In spite of those Canadians who feel that the Liberal govt has done OK by the economy, I have to suggest that we could have done much better in a lower tax environment which ultimately generates more tax dollars to support the social programs we seem to like. This is not as good as it gets. Given that our corporate tax rate is so high, there is a lot of room for improvement here.
I am particularily frustrated with the situation here in Sask, where we will never get this economy going as long as the NDP, who don’t really seem to understand even the basics of economics, continue to stay in power. One positive note however can be found in the recent Vicq Report. Will any Sask. govt actually have the courage to implement it’s findings???
Reagan increased taxes TWICE (corporate and personal) in 1982 after the 1981 tax cuts. Net result was to undo 1/3 of the tax cut. As a share GDP, it was more than Clinton’s increase in ’93.
The Reagan Administration also increased payroll taxes with the 1983 via the Social Security Reform Act. It basically undid the entire tax decrease for low- and middle-income families. In fact, by 1988 the total federal tax burden on middle-income families with children increased by an estimated 0.7 percentage points.
Given the impact of the business cycle, the drop in the price of oil and the effects of monetary policy it’s unclear if Reaganomics had an impact one way of another on real per capita GDP growth.
Soviet: did the rich also get richer and the poor get poorer?
No Meg. All income strata increased (though some more than others). But if taxes effectively *increased* (or, being generous, stayed the same) for low- and middle-income households, how was it that supply side economics could have effected such growth?
All I’m saying is that other factors, many of which have nothing to do with fiscal policy (or any government policy for that matter), come into play.
Tax cuts which are accompanied by massive increases in government spending are not the hallmarks of economic genius, they’re the hallmarks of a politician who is determined to win an election today, even if it means that future generations will be poorer.
And it isn’t just the principle and interest on the debt which must be paid down the road. Practically very dollar that the government spends is used to pay someone to do unproductive work, or to not work at all. The people who live off government salaries today will be living off government pensions tomorrow. They and their children become un-used to the concept of working and struggling in a competitive free market, but they become mighty used to the idea of a bi-weekly, inflation-adjusted government cheque.
“Interest rates for a mortgage in the US had reached 19% the US economy had essentially been slammed head first into a brick wall. The economy had come to a virtual halt.”
As painful as the high interest rates were at that time, the real damage was done to the US economy in the 1960s and 70s with the Democrats’ *and* the Republicans’ twin-barreled deficit financing of massive military spending and a whole raft of commie welfare programs. The same thing was happening up in Canada.
If you want to learn something about real economics, better consult a real economist:
I’m sorry to say, but most “real economists” have their heads up their asses, so they don’t really know all that much.
Paul Krugman is a perfect example of this.
“most “real economists” have their heads up their asses, so they don’t really know all that much”
Why is that? Just curious.
I remember reading somewhere that Hillsdale College is one of the few colleges in the US that does not take any federal funding at all. That speaks well for it’s integrity and non-partisanship.
“Even many of us who believe in free enterprise have fallen into the habit of saying when something goes wrong: �There ought to be a law.� Sometimes I think there ought to be a law against saying that there ought to be a law. . . . It is difficult to understand the ever-increasing number of intellectuals in the groves of academe, present company excepted, who contend that our system could be improved by the adoption of some of the features of socialism.”
Ronald Reagan
Wow, thanks Kate! Never heard of Hillsdale College.
Do they accept 40 year old freshmen.
Sadly I’ve come to the conclusion that the MSM does not report on “what happens”; the MSM shapes “what it wants to happen”.
Jeff, to second your disgust of the MSM under Liberal influence, allow me to suggest the first summary list of Liberal party *Low Points* finally showed up in the Toronto Sun on January 22nd.
Is anyone aware of any such similar list available to Toronto readers before that?
One day before voting is hardly enough time for the list to sway voter opinion.
In contrast, the *fear Harper* scam had been on-going for over a year. It was firmly lodged in the sub-concious of every voter. TG