History Lesson Reganomics aka Tax cuts

[Leviathan]

https://www.thebalance.com/trickle-down-economics-theory-effect-does-it-work-3305572

When Trickle-Down Policies Work
During the Reagan Administration, it seemed like trickle-down economics worked. His policies, known as Reaganomics, helped end the 1980 recession.

Reagan cut taxes significantly. The top tax rate fell from 70 percent (for those earning $108,000+) to 28 percent (for anyone with an income of $18,500 or more). Reagan also cut the corporate tax rate from 46 percent to 40 percent.

Trickle-down economics was not the only reason for the recovery, though. Reagan also increased government spending by 2.5 percent a year. It almost tripled the federal debt, from $997 billion in 1981 to $2.85 trillion in 1989. Most of the spending went to defense. It supported Reagan's efforts to end the Cold War and bring down the Soviet Union.

Trickle-down economics, in its pure form, was never tested. It's just as likely that massive government spending ended the recession.

President George W. Bush used trickle-down policies to address the 2001 recession. He cut income taxes with EGTRRA. That ended the recession by November of that year.

But unemployment rose to 6 percent. That often occurs, because unemployment is a lagging indicator. It takes time for companies to start hiring again, even after a recession has ended.

As a result, Bush cut business taxes with JGTRRA in 2003.

It appeared that the tax cuts worked. But, at the same time, the Federal Reserve lowered the fed funds rate. It fell from 6 percent to 1 percent. It's unclear whether tax cuts or monetary policy caused the recovery.

Trickle-down economics says that the Reagan and Bush tax cuts should have helped people in all income levels. Instead, the opposite occurred. Income inequality worsened. Between 1979 and 2005, after-tax household income rose 6 percent for the bottom fifth. That sounds great until you see what happened for the top fifth. Their income increased by 80 percent. The top 1 percent saw their income triple. Instead of trickling down, it appears that prosperity trickled up.

Why Trickle-Down Economics Is Relevant Today
Despite its shortcomings, Republicans use trickle-down economic theory to guide policy.

In 2017, Republican President Donald Trump proposed cutting taxes for corporations and the wealthy. He suggested tax cuts on capital gains and dividends for everyone making less than $50,000 a year. Trump's tax plan would reduce the corporate tax rate to 20 percent. It cut income tax rates, doubled the standard deduction, and eliminated personal exemptions.The Tax Policy Center found that those earning in the top 1 percent would receive a larger percent tax cut than those in lower income levels. By 2027, those in the lowest 20 percent income levels would pay higher taxes.

He said it would boost growth enough to make up for the debt increase. But the Joint Committee on Taxation reported that the bill would add $1 trillion even after including the tax cut's impact on economic growth. It wouldn't spur growth enough to offset the cuts' loss in revenue.

In 2010, the Tea Party movement rode into power during the midterm elections. They wanted to cut government spending and taxes. As a result, Congress extended the Bush tax cuts, even for those making $250,000 or more.

 

[Leviathan]

 

[Leviathan]

https://www.google.ca/amp/s/www.was...th-trump-is-wrong-tax-cuts-dont-equal-growth/


Four decades ago, while working for Rep. Jack Kemp (R-N.Y.), I had a hand in creating the Republican tax myth. Of course, it didn’t seem like a myth at that time — taxes were rising rapidly because of inflation and bracket creep, the top tax rate was 70 percent and the economy seemed trapped in stagflation with no way out. Tax cuts, at that time, were an appropriate remedy for the economy’s ills. By the time Ronald Reagan was president, Republican tax gospel went something like this:

• The tax system has an enormously powerful effect on economic growth and employment.
• High taxes and tax rates were largely responsible for stagflation in the 1970s.
• Reagan’s 1981 tax cut, which was based a bill, co-sponsored by Kemp and Sen. William Roth (R-Del.), that I helped design, unleashed the American economy and led to an abundance of growth.

Based on this logic, tax cuts became the GOP’s go-to solution for nearly every economic problem. Extravagant claims are made for any proposed tax cut. Wednesday, President Trump argued that “our country and our economy cannot take off” without the kind of tax reform he proposes. Last week, Republican economist Arthur Laffer said, “If you cut that [corporate] tax rate to 15 percent, it will pay for itself many times over. … This will bring in probably $1.5 trillion net by itself.”

That’s wishful thinking. So is most Republican rhetoric around tax cutting. In reality, there’s no evidence that a tax cut now would spur growth.

The Reagan tax cut did have a positive effect on the economy, but the prosperity of the ’80s is overrated in the Republican mind. In fact, aggregate real gross domestic product growth was higher in the ’70s — 37.2 percent vs. 35.9 percent.

 

[lotstoplaywith]

Thanks for staying on topic Ursus!

 

[imyourpuppet]

Reagan presided over a boom period that were a direct result of his tax cuts. Not only did this help the U.S. economy, it helped the world economy. However, Reagan also presided over government spending increases which in his memoirs he expressed some regrets. He supported less government, not more. However, he felt the need to spend massively to rebuild the military and assert US dominance. That policy directly influenced the collapse of communism in the USSR and eastern Europe. Money well spend as far as I am concerned. It should also be noted that throughout Reagan's tenure the Democrats controlled the House and for the last 3 years of his term, the Senate. They would never have agreed to massive spending cuts.

In my lifetime Reagan has been by far the best US President.

 

[Leviathan]

How do you define and measure successful outcome for USA? Provide hard objective metrics - expenditures, debt, increase revenue receipt and real wage increases. Also how did fall of communism benefit USA (the people) in terms of the return on trillions of dollars in military defence spend and increasing the deficit? The “real” factors ending the Cold War has been examined exhaustively which is another big complex topic unto itself.

Reagan presided over a boom period that were a direct result of his tax cuts. Not only did this help the U.S. economy, it helped the world economy. However, Reagan also presided over government spending increases which in his memoirs he expressed some regrets. He supported less government, not more. However, he felt the need to spend massively to rebuild the military and assert US dominance. That policy directly influenced the collapse of communism in the USSR and eastern Europe. Money well spend as far as I am concerned. It should also be noted that throughout Reagan's tenure the Democrats controlled the House and for the last 3 years of his term, the Senate. They would never have agreed to massive spending cuts.

In my lifetime Reagan has been by far the best US President.

 

[imyourpuppet]

The fall of communism hasn't been without its challenges but overall it has benefited the world tremendously. Probably the biggest benefit was the sharing of knowledge and information that wasn't done prior to 1989. Also the US relied on Poland and the Czech Republic to fight the war on terror in the ME. Communism is evil.