The Cult of Reaganomics

[Psychic Robot]

There are no words to adequately express my emotions.

Link.

...If you look at regulations, the third pillar of Reaganomics-supply side economics-what he did for regulations, not just taking that big stack of papers of the Federal Registers-do you remember that? Do you remember when he dropped it, the thump that went on the table? I mean, it was a phenomenally impressive thing, not only for him to have lifted it, but also for him to have reduced it. I don't know which one was the greater challenge, but both were Herculean.

Today, because of Ronald Reagan, the minimum wage in the United States-the minimum wage relative to the average wage in the United States is the lowest it's been in 50 years. It doesn't get any better.

But let me tell you that today, because of Ronald Reagan, the minimum wage in the United States-the minimum wage relative to the average wage in the United States is the lowest it's been in 50 years. It doesn't get any better. As all of you know, the minimum wage is the black teenage unemployment act. It is the guaranteed way of holding the poor, the minorities and the disenfranchised out of the mainstream is if you price their original services too high. Ronald Reagan recognized the deleterious affects of that and really did not allow that minimum wage to rise.

Another one that he did on regulations: do any of you remember the air traffic controllers? [Applause.] Do you remember what he did? He fired them. And he wouldn't let them work for government again. Since that time, union membership in the United States has gone from well above 30 percent to down around 12 to 14 percent. [Applause.] That is Ronald Reagan's legacy. The third pillar was regulations.

The fourth pillar, which I really want to talk to you tonight because it's a critical pillar of Reaganomics and supply side economics, and it is one of the issues that Ronald Reagan wanted to solve more than anything, and that has to do with the United States economy in the global economy. The United States is a nation located in the global economy and we get enormous, enormous benefits from dealing with foreigners.

Ronald Reagan wanted free trade more than anything. If you look at this issue today, in 1930, we passed-the United States passed with Herbert Hoover as President, and signed into law-something called the Smoot-Hawley Tariff. That tariff put tariff duties on imported products at the highest level they have virtually ever been. It was the precursor of the Great Depression. If you follow that legislation, it goes through the House Committees and the Senate Committees, you can see the stock market collapses. Those tariffs were the highest they've been. Since the Smoot-Hawley Tariff passed, in this country we have reduced tax rates on traded products and Ronald Reagan was a major reducer of those taxes on traded products. In fact, it was Ronald Reagan, as you all know, who sponsored NAFTA. We couldn't get it passed, but we sponsored NAFTA. It took Bill Clinton to switch and go against his own party, against the unions, to push that through. But Ronald Reagan pushed for NAFTA and pushed for lowering tariffs. Today in the United States, customs duties per dollar of import are the lowest they have been in a thousand years because of Ronald Reagan-literally the lowest.

You know, if you saw a store that sold you high quality products at low cost, is your first thought, "How can I boycott that store?" [Laughter.] I don't think so. You know, trade is an integral part of the U.S. prosperity and the U.S. position in the world economy is critical. You know, without China there is no Wal-Mart and without Wal-Mart there is no middle class and lower class prosperity in the United States. [Applause.]

In addition to free trade on products and free trade is essential for supply side economics and Reaganomics, in addition to trade on products, is outsourcing. There are some things we do better than Indians, and there are some things they do better than we do. We and they would be foolish in the extreme if we didn't do those things for them that we do better than they do, and they do those things for us that they do better than we do. We win and they win. It's a plus-plus for the world. [Applause.] And just remember, every dollar we spend on outsourcing is spent on U.S. goods or invested back in the U.S. market. That's accounting.

...Outsourcing is not new. Immigration is not new. Not only are these people the life's blood of America, they are, but let me just say to you tonight, on economic terms, the illegal immigrants are also the life's blood of this society. And I'm going to be hard core with you. They produce high quality labor at low cost and they cheat on their taxes. It doesn't get any better.

I'm having fun with you tonight as well, but let me just tell you that the California economy without immigrants would be a very different-you can't believe how much of what you buy and what you see and what you do is influenced by immigration in this wonderful, wonderful country of ours.

The last one I want to do on trade with you, and then I'll stop, is the trade deficit. You hear these mongers of fear tell you about the trade deficit and how it's ruining the world, it's the United States consuming way beyond its means with a credit card philosophy and literally putting into bondage our children in the future by the huge debt we're owing to foreigners. You all know this story, don't you? You've heard it from Warren Buffet and you've heard it from Pete Peterson, you've heard it from Bill Gates, you've heard it from everyone there that the trade deficit is a huge problem. Let me assure you it is not.

The United States today is the only developed growth country in the world. We are the only one. Living on the legacy of Ronald Reagan and those who have followed him, the United States is the only growth country in the world that is also a developed nation.

The United States today is the only developed growth country in the world. We are the only one. Living on the legacy of Ronald Reagan and those who have followed him, the United States is the only growth country in the world that is also a developed nation. It's just like a growth company. Do growth companies lend money or borrow money? They borrow money. Growth countries borrow money too. If you're a global investor for your own family, I don't care where you live, you want to have a large portion of your portfolio located in the United States.

How much do you want in Hugo Chavez's Venezuela, or in Argentina where you can get 30 cents on the dollar, or in the Middle East? Or how would you like to have it in Putin's Russia-you name it-or France, where they have a two percent wealth tax; that's a real attractive one. When you look at the world, everyone in the world who cares about his or her family wants to have a major portion of their assets in the United States because we are the growth country and the freedom loving country.

How do foreigners generate the dollar cash flow to buy U.S. located assets? There are only two ways they can do it. They've got to sell more goods to us and buy less goods from us. The U.S. trade deficit is one in the same as the U.S. capital surplus, and I want to put it to you seriously. Think of it in capital terms. Which would you rather have, capital lined up on your borders, trying to get into your country or trying to get out of your country? We are the capital magnet of this planet and we are the savior for not only people, for not only freedom, but also for capital.

The trade deficit is the capital surplus and don't ever think of having a capital surplus as being a bad thing for our country.

Good God. We let the man who created these policies run the country for eight years? This is horrifying. It's like he's utterly divorced from reality. Completely and utterly divorced from ethics and morality. He's cheering as the rich rape the poor. He's doing a little jig and celebrating low minimum wage, fewer unions, free trade, big corporations, illegal immigration, outsourcing, trade deficits, and everything that's fucking America up.

My God. I knew Reagan was bad, but I never knew he was this bad. Maybe he wasn't an intentional monster--maybe he didn't know he was doing evil, maybe he believed what he was doing was right--but this man, Laffer, an economist. He knows what he's doing. He's got a suit and a tie and a grin on his face as he rapes us again and again. All the corruption inside him is pouring out like vomit, and people are applauding, toasting, cheering him on. My God. What is this?

How can we save our glorious nation if men like these are in charge?

[Zinegata]

Pffft. Reagonomics isn't why America's economy is falling apart. Blame the service-based economy idiots instead.

Countries can survive varying levels of taxation. But no country can survive in the long-term if it does not produce any tangible goods that can be used to trade for other tangible goods.

[Username17]

For that matter, the economic "miracle" that we constantly get told about never actually happened. Here is the government's actual revenue from Nixon, through Carter, and out through Reagan:



See, what the Supply Siders tell us happened is that Reagan jump started the economy with the tax cuts and that the lost revenue was made up with additional revenue from a hotter economy. But if you look at the actual numbers, that isn't what happened at all.

Taxes were lowered and revenue of course fell. And the economy continued rising (in fits and starts what with the recessions and everything) at basically the same overall rate in the 80s as it had the previous decade. So with a lower tax rate and a growing economy, revenue yes eventually caught up. But in precisely the same way as if the tax cuts had had no effect whatsoever.

And yet, when two decades later Bush Jr. tried the same thing...


Still nothing!

The Supply Siders keep getting opportunities to do their magic, because their magic supposedly operates by giving giant piles of money to wealthy campaign donors. But it does not ever work. Every time they sacrifice a cow, we have one less cow, and the volcano seems no more or less appeased than before.

-Username17

[Zinegata]

Pffft. Frank is confusing government fiscal prosperity with people feeling they were prosperous.

Disclaimer: Nobody ever said people were smart.

[Juton]

People claim that these Chicago school economists are 'experts', but there policies don't seem largely wrong, they seem almost completely wrong. If they where monkeys randomly choosing policies they'd be correct more often. So is it that they worship a faulty ideal, of unregulated laissez-faire capitalism, or is it they deliberately want to sabotage any nation that listens to them.

[Psychic Robot]

They can get rich off of these policies, so they support them.

[Lago PARANOIA]

The Chicago school would mostly be amusing in a 'what the hell is wrong with you fuckers' kind of way if it wasn't for the whole Chile experiment.

That crossed the line from 'ha ha, you're so silly' to 'holy shit, you guys are monsters'.

[Absentminded_Wizard]

It's the continuation of the standard right-wing BS from the guy who got it all started with some really horrible speculative math. Sadly, he's joining the chorus of conservatives insisting that the Bush tax cuts increased revenue and that spending increases (especially on social programs) must be offset while tax cuts never have to be. I keep hoping one of these days they say something so outrageous that ordinary people catch on, but I'm not holding my breath.

[Username17]

The Free Trade thing is interesting. Trade is on the balance a good thing, and protectionist tariffs are on the balance a bad thing. Outsourcing is actually part of a balanced breakfast as long as you do a comparable amount of insourcing at the same time.

Comparative Advantage is a real thing. So to an extent, having some of our jobs done over seas and doing some of the jobs for overseas economies here could come with an increase overall efficiency. You lay off a million workers who were working in industries that are more efficient in some other country and you make a million more jobs of something that is more efficient here than elsewhere. The net result is that resources are more efficiently utilized and global production has increased, so everyone is richer. Right?

Well... no. While the math on that works out very pretty, the reality is that math relies on every involved country being at full employment. That is, that the driving reason for not creating one million modern and efficient jobs is that there aren't a million jobless people to fill them. And in a recession (like right now, or the beginning of Reagan's term), that's explicitly not true. There are thirty million jobless people right now. Throwing a million more people out of work isn't going to spontaneously cause investors to make new factories.

In fact, the reason why people don't make new factories and fill them with the unemployed people we already have is because they already have factory capacity they aren't using. And they have that because there is a backlog of products on the shelves that haven't been sol yet, and thus no need for an increase in production. So if you throw a million people out of work, they'll be even less able to buy the stuff on the shelves and the impetus to make new jobs will be less - even as the number of people competing for jobs is even higher.

The whole rant about the Smoot-Hawley Tariff is especially bizarro world. Smoot-Hawley was passed in 1930, Black Tuesday was in 1929. How could a bill passed in 1930 as an emergency (and ill-advised) response to The Great Depression have caused it the previous year? Obviously, it could not.

But even if it had preceded the Depression, the fact is that all a tariff does is increase the cost of trade, which reduces the efficiency of productive labor within the economy an thus makes society less wealthy as a whole at whatever level of employment you happen to have. It doesn't reduce your level of employment. So if idle factories and idle workers is your problem, and it's the problem all over the world, then trade isn't a magic bullet to solve anything.

Yes, sometimes a country can export its way out of hard economic times, but that is rather obviously not a solution for the entire planet at once. The Free Trade portion of the speech is fascinating, because it displays a lack of even a highschool level of understanding of either history or economics.

-Username17

[RandomCasualty2]

They can get rich off of these policies, so they support them.

Exactly. It's not about the economy, it's about lining their own pockets and trying to sell it to the people in some way that doesn't make them seem like the greedy money hungry bastards they are.