Political Discussions
Reagan caused the current economic disaster!!!
Posted by satijournal • 6/05/09 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: politics, reagan
Or so claims Paul Krugman...
“This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot.” So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.
He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation’s significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.
For the more one looks into the origins of the current disaster, the clearer it becomes that the key wrong turn — the turn that made crisis inevitable — took place in the early 1980s, during the Reagan years.
www.nytimes.com/2009/06/01/opinion/01krugman.html
Thoughts?
Note to right-wingers: While this article is supported by facts, it is primarily an opinion piece.
User Comments
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the problems that Reaganomics caused are manifold. Chiefly the inflation that tried to offset the debt, coupled with the less understood inflationary effect of easy credit. The same problem that Jackson condemned in the 1830's
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Also the idea that deficits don't matter. The Bush administration embraced that idea:
Vice President Cheney declared, "Reagan proved deficits don't matter," he summed up an enduring argument from the former president's economic legacy.
In late 2002, Cheney had summoned the Bush administration's economic team to his office to discuss another round of tax cuts to stimulate the economy. Then-Treasury Secretary Paul H. O'Neill pleaded that the government -- already running a $158 billion deficit -- was careering toward a fiscal crisis. But by O'Neill's account of the meeting, Cheney silenced him by invoking his take on Reagan's legacy.
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.
To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.
Reagan's "economic policy . . . was a disaster," University of California at Berkeley economic historian J. Bradford DeLong wrote this past weekend on his Web site. "The tax cuts made America a more unequal place, and the deficits slowed economic growth in the 1980s significantly."
www.washingtonpost.com/ac2/wp-dyn/A26402-2004Jun8?language=printer
Reagan was a radical. One of these days we'll get our terminology straightened out. The opposite of conservative is not liberal; it's radical. And there's nothing conservative about the Republican party. -
those darned Chicago School Economists and their "positive economics"
en.wikipedia.org/wiki/Essays_in_Positive_Economics#The_Methodology_of_Posit...
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He certainly didn't help but here is another viewpoint. i am a foreign/public policy geek so I don't spend much time on the financial stuff but I read this and it is something to mull over.
www.thenation.com/doc/20090615/scheer-
Reagan didn't "do it" singlehandedly. The policy makers should have undone Reagan's gremlinery after S&L (rather that regulating looser and--under Bush II--refusing to regulate at all) however he recieves blame for his role as false profit of his false take on Laissez Faire.
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"Reagan signed legislation making it easier for people to obtain mortgages with lower down payments, but as long as the banks that made those loans expected to have to carry them for thirty years they did the due diligence needed to qualify creditworthy applicants. The problem occurred only when that mortgage debt could be aggregated and sold as securities to others in an unregulated market."
of course this HAD to be policy. Real wages dropped like a rock compared to the inflated home values (due to the same "Keep the printing presses rolling" doctrine coming from Chicago School economists then as now) such that they simply weren't going to sell without jimmy-rigging the credit hoppers wide open
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Reagan's tax cuts for the wealthy were as instrumental to the collapse of our economy as his deregulation. He lowered the tax rates on the uber-wealthy from 70% to 50%. What this did was reward greed and short term gain. The rich got richer while the middle class stagnated, and our economy paid the price. A healthy economy is the result of a healthy middle class, which is what we had during the 90s when tax rates actually increased.
Bush's tax cuts had the same effect. There is great ongoing debate about letting the Bush tax cuts expire and those on the right are calling it a "tax increase." But to get this country back on track, what we really should be doing is rolling back the Reagan tax cuts.
Not only would rolling back the Reagan tax cuts be good for our country, it would be GREAT for the sports and music industries. The greed in those industries has destroyed their entertainment value.-
you could make your own Thomas Paine "tax protest" video to counter the Right Wing revisionist one
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Reward greed, how about hard work. You think those that worked to obtain their wealth should be punished or just spread their wealth.
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Two words. Cold War-
And tax cuts during a war are appropriate?
not according to our founders -
What are you smoking agit8r? Tax cuts stimulate the economy and are what you want during a war.
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Tax cuts stimulate the economy and are what you want during a war.
Yeah, that's the ticket...
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So when you get your paycheck do you smile at the ridiculous amount of money that is taken out?
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The expense of waging a war (or an armaments equivelent of a dick measuring contest) should be borne by the generation that declares such a war.
Fundamental founding sentiment
"Each generation should be made to bear the burden of its own wars, instead of carrying them on, at the expense of other generations." --James Madison -
So when you get your paycheck do you smile at the ridiculous amount of money that is taken out?
I don't mind paying my share, as long as the money's not being wasted. And if I approved of the war in Iraq (which I don't), I would be more than willing to help pay for it. -
Why are the young people so against the war?
Because they will pay for it!
Why do young people hate Bush?
because he lied about it! -
So when you say Bush lied, you actually mean Congress which includes the Democrats who voted for it? You guys really tend to forget that part.
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The fact that the congress and the Secretary of State were fooled by the phoney yellowcake memo and the false confessions of a tortured terrorist is beside the point here, the bulk of the blame has to fall on the ones who purposely deceived for the sake of the PNAC's agenda
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And the Democrats voted right along with it like I said.
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@ Agit8r
explain how the new administration is going to cure everything. all you do is blame everyother administration. what about carter and clinton. what did they do.
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Reagan ate my hamster -
Anyone but the real culprit Mr. Clintoh Eh Sati?
Fact is, having Sati explain or give an authoritative statement on anything economic is like asking Monica Lewinsky how to remove stains.
As always, an Epic Fail.-
Typical right-wing response with the habitual personal attack.
As I noted in the OP, it was an OPINION piece by Paul Krugman, and I was asking what people thought about it. -
This is the third person in less than 24 hours here who can't be bothered---or is unable---to read what others have said before launching into an attack. The attacks address only what the attacker is thinking and feeling, but, unfortunately, they are not actual responses to whatever is being discussed.
This one is classic. The others are anticrocks two responses to my comment at www.blogcatalog.com/politics/discuss/entry/is-this-the-change-you-voted-for... and jhixon accusing me of censorship here: www.blogcatalog.com/politics/discuss/entry/is-this-the-change-you-voted-for...
New Rule: read and understand what the person says before responding to it. If you respond and get the person's ideas horribly wrong, don't expect a reply. It's just not worth it. -
Maybe we need a thread where we can log all the personal attacks -- a thread of shame.
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Typical Liberal attack: "Nice talking points from Rush and Hannity". Thats about all you can come up with.
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I am very familiar with Krugman and his economic theories, just read his Nostalgianomics book. Krugman has stated more than once that Obama is not "spending" enough. That should give you a little insight into his thoughts. -
He said the stimulus bill doesn't spend enough to be effective.
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@mark *rolls eyes*
I did not attack you. However you did call me an "unreconstructed neo con" I believe. -
I listen to Hannity on the way home from work. He says much the same thing any day. It contains a thread of truth, but he weaves it into a Christmas sweater
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Wait a minute!!! The Christmas Sweater is Glenn Beck. Hannity is more along the lines of a Velour Tee Shirt.
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lol.
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Hey look long time no see...
Anyway...
It really depends on how you look at reaganomics / trickle down theory / supply side economics. I personally do not think that this tactic is fair, but in the right conditions it actually DOES work.
This is used to build capital, to build investment in the economy. It is about increasing that supply. BUT you also have to have the demand to meet that supply to remain stable. What Reagan did worked for a short period of time. The process should have been haltered, but was not. Obviously, Bush didn't get this either.
Oh, and for all you centralized government advocates because capitalism is the devil. Bernanke is doing the same crap with our currency. End the Fed. That's what I say. I have to go but if you want more clarity on that point I actually just posted an article on this a little bit ago.
www.thelibertycast.com/
Read Top Article "Fiscal Faux Pas"-
What Reagan did worked for a short period of time.
There's no real evidence of that. Unemployment hit an historic high during Reagan's first term and while there was some recovery during his second term, that was probably due to the mini-tech boom which was occuring at the time. The personal computer was gaining in popularity, and the VCR and CD technologies were also introduced. The domestic oil industry also experienced a bit of a revival during the early 80s, especially in the south.
The deep recession of the late 80s showed that it wasn't a healthy economy, though. -
@Liberty
It doesn't help that Obama's chief economic adviser Austan Goolsbee comes from the same Chicago School of economics that Milton Friedman and his positive economics did. -
From the White House web site -
"Dealing skillfully with Congress, Reagan obtained legislation to stimulate economic growth, curb inflation, increase employment, and strengthen national defense. He embarked upon a course of cutting taxes and Government expenditures, refusing to deviate from it when the strengthening of defense forces led to a large deficit."
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"In 1986 Reagan obtained an overhaul of the income tax code, which eliminated many deductions and exempted millions of people with low incomes. At the end of his administration, the Nation was enjoying its longest recorded period of peacetime prosperity without recession or depression."
From Wikipedia -
"During Reagan's presidency, federal income tax rates were lowered significantly with the signing of the bipartisan Economic Recovery Tax Act of 1981. Real gross domestic product (GDP) growth recovered strongly after the 1982 recession and grew during his eight years in office at an annual rate of 3.4% per year. Unemployment peaked at 10.8% percent in December 1982—higher than any time since the Great Depression—then dropped during the rest of Reagan's presidency. Sixteen million new jobs were created, while inflation significantly decreased."
And one of my favorite things Reagan said was during his first inaugural address in 1980 - "Government is not the solution to our problems; government is the problem."
Remember, even Obama thinks Reagan was a great President. -
It doesn't help because why?
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Actually, the countries that embraced Reaganomics more then we did (the Southeast Asian Tigers - China, South Korea, Taiwan, Singapore, Also Ireland) experienced long-term growth right off the bat. Unliike the US circa 1980, these countries did not deal with hyper-liberal congresses. As for the "historic highs" in unemployment, it is worth noting that this was the cost to fighting out of control stagflation and that, unfortunately, when faced with that situation you must jack up your prime interest rates to 12% and push the economic reset button in order to get people to STOP spending so that the currency can reset, otherwise you will waste your resources. If we ever run out of oil, without first switching over to other resources, we will likely have to do the same thing for a short period of time. It is also worth noting that this decision was made before Reagan was in office.
After this first-term, however, you did see long-sustained economic growth with the exception of two, very minor, two-quarter recessions: one in 1991 that was mostly the result of excessive millitary spending distorting the economy, and one in 2001 that was the result of an unforeseen bookkeeping problem. The fact of the matter is that you don't need to do much to destroy an economy, even one small flaw in an otherwise perfect model can create what we have seen.
Stabilizing demand is best done with a government rainy day fund combined with a list of preapproved, prereadied infrastructure projects that can be begun immediately at the first sign of economic distress. These projects employ large numbers of people and businesses and eliminate some excess inventory by demolition in the short-run, and in the long-run increase the productive capacity of the nation, eventually paying for themselves. -
those countries engaged in both internal and external protectionism and the diminished access to the supply side of the market that goes with it. Is that how the economy of a free country ought to operate? (Albiet, our nation did for 70 or so years under Lincolnism)
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And one of my favorite things Reagan said was during his first inaugural address in 1980 - "Government is not the solution to our problems; government is the problem."
And every time they're elected to office, they proceed to f*ck everything up, and then they say, "see, the government can't do anything."
And Obama never claimed Reagan was a great president. -
@Agit8r:
They decreased the amount of that they did by far. And the sectors of their economy that were the most productive were the unprotected ones. See, it's not that the protections didn't exist as that they got rid of some, and some growth ensued, they got rid of more, and more growth ensued. -
So Obama never admired Reagan??
www.openleft.com/showDiary.do?diaryId=3263
www.politico.com/news/stories/0609/23249.html
In his book, The Audacity of Hope he said, “Reagan spoke to America’s longing for order, our need to believe that we are not simply subject to blind, impersonal forces but that we can shape our individual and collective destinies, so long as we rediscover the traditional virtues of hard work, patriotism, personal responsibility, optimism and faith.”
And on Meet The Press in October 2006, Obama said, "But I think, when I think about great presidents, I think about those who transform how we think about ourselves as a country in fundamental ways...And, you know, there are circumstances in which, I would argue, Ronald Reagan was a very successful president, even though I did not agree with him on many issues, partly because at the end of his presidency, people, I think, said, “You know what? We can regain our greatness. Individual responsibility and personal responsibility are important.” And they transformed the culture and not simply promoted one or two particular issues."
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@ Agit8r I always found that interesting choice considering his political views for the government. I actually think that Friedman was pretty smart in some degree. With this kind of a choice all I can say is at least Obama didn't pick a student of Murray Rothbard. Personally I have to say I think we would be in a lot better shape if we actually paid real attention to the teachings of Mises, Hayek, etc.
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yes, I'm a fan of Hayek's take on Austrian School. More the pragmatist than Mises.
The Chicago School is more activist/mercantilist... at least in practice -
Yes, but Friedman did have some positive insight in regards to social economic theory. That was my point.
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It's probably more a matter of how other economists interpret it. his son David has taken it in the other direction from where Goolsbee took it
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Is that the same Austrian school where they teach people to speak Austrian, like Obama was talking about?
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They spend the day saying, "Caaaaliiforniaa."
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Oh! I get it - "cal-ee-vorn-ya"
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Scheiße, cal-eeee-vorn-yaaa........
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