JohnEngelman
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In his title to Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity, Brian Domitrovic claims that supply-side economics “restored American prosperity.”
Prosperity for whom? According to Congressional Budget Office numbers for after tax income, in 1980 the richest fifth of our country had eight times the income of the poorest fifth. By 1989 the ratio was more than twenty to one. According again to the CBO, the greatest increase in after tax income went to the best paid one percent of the United States. After tax income for the bottom 60% declined.
In the first chapter of Econoclasts Brian Domitrovic wrote, “The economic results that supply-siders foresaw at the time [the late 1970’s to 1980] did in fact come to pass.”
Not really. During his 1980 debate with President Carter Reagan, who had spent much of his political career condemning deficit spending, claimed that his economic policies would balance the budget by 1983 “If not sooner.”
In 1980 the budget deficit was $74 billion. In 1983 it had grown to $208 billion.
By the time President Reagan left office the national debt had grown from approximately $907,701,000,000.00 to more precisely $2,602,337,712,041.16.
In Chapter Five Domitrovic wrote, “the inflation crisis was in full swing before the OPEC shock of late 1973…In the 12 months before the OPEC announcement consumer prices in the United States increased by 8 percent.”
In October the Organization of the Petroleum Exporting Countries announced that it was raising the price of its oil to punish the United States for helping Israel in the Yom Kipper War. In October 1972 the inflation rate was 3.7%. The average for 1972 was 3.2% The average for 1973 was 4.4%. The average for 1974 was 11.0%.
Domitrovic sees the rise in the price of petroleum as a result of the stagflation of the 1970’s, because he wants to blame the government and Keynesian economics. Let’s see which came first. In 1972 the price of a barrel of petroleum was $3.60. In 1973 it was 4.75. In 1974 it was $9.35.
In 1972 the inflation rate was 3.2%. In 1973 it was 6.2%. In 1974 it was 11.0%.
In 1972 the unemployment rate was 5.2%. In 1973 it was 4.9%. In 1974 it was 7.2%.
When we keep in mind that the OPEC Oil Embargo did not begin until October 1973, it should be clear that the increase in the price of oil preceded the increase in inflation and unemployment. The rise in the price of petroleum was not a result of the stagflation; it was the cause.
Republicans like to blame Keynesian economic policies for the stagflation of the 1970’s. For the four decades from the inauguration of President Roosevelt in 1933 to 1973, Keynesian policies resulted in reasonably steady job growth, growth in the per capita gross domestic product (GDP), and milder recessions. Republicans never liked Keynesian policies because they shifted wealth, power, and prestige from the business community to the government.
Republicans do not want blame the increase in the price of petroleum that followed the OPEC Oil Embargo, and the Iranian Revolution of 1979 for the stagflation because they do not want to acknowledge that foreigners they dislike had considerable control over the U.S. economy.
Keynesian economic policies were designed to fight the Great Depression. During the 1930’s the problem was not inflation, but deflation. Moreover, Keynesian economic policies were not designed to respond to a shortage in a natural resource essential to the U.S. economy.
The legacy of supply side economics has not been a restoration of the broadly based prosperity Americans enjoyed from the end of the Second World War to the inflationary recession of 1974. The legacy has been chronic deficits, a growing national debt, and economic inequality as great as the United States experienced right before the Stock Market Crash of 1929.
At the end of the Second World War in 1945 the national debt as a percentage of Gross Domestic Product was 114%. By the end of the administration of President Carter in 1980 this had declined to 32%.
During this time the top tax rate was as high as 94%, and never got below 70%. During the Reagan administration the top tax rate declined to 28%.
At the end of the Reagan administration the national debt as a percentage of GDP had grown to 50%. Four years later, when President George H.W. Bush left office it had grown to 61%. It declined briefly during the Clinton administration, and it was 129% when Trump left office in 2021.
From 1945 to 1980 national debt as a percentage of GDP continued to decline during the wars in Korea and Vietnam.
During the Reagan administration military spending increased from $143.69 billion, during the last year of the Carter administration in 1980 to $325.03 billion during the last full year of the Reagan administration.
This was unnecessary and provocative. The United States was at peace. The Soviet Union was losing its war in Afghanistan. The Soviet Union was collapsing from within. It was dangerous to provoke the leaders of the Soviet Union with a nuclear arms race when they felt their country, and hence their power, disintegrating.
During the Carter administration there was a six month recession. Unemployment reached 7.8%. During the Reagan administration there was a sixteen month recession. Unemployment reached 10.8%.
An average of 2,600,000 jobs were created every year during the Carter administration. During the Reagan administration this declined to an average of 2,000,000 jobs created every year.
The rise in inflation that followed the Iranian Revolution of 1979, and which subsided after 1982 was caused by fluctuations in the world price of petroleum over which neither President Carter nor President Reagan had much control.
If you want to learn what really happened during the Reagan administration, do not read "Econoclasts." Read "The Triumph of Politics: How the Reagan Revolution Failed, by David A. Stockman."
https://www.amazon.com/gp/customer-...=cm_cr_getr_d_rvw_ttl?ie=UTF8&ASIN=1610392779
Stockman was Reagan’s Director of the Office of Management and Budget from 1981 to 1985. Stockman makes it clear that, contrary to what Ronald Reagan claimed during the 1980 presidential campaign, it never was possible to cut taxes, raise military spending and balance the budget without making cuts in domestic spending the vast majority of Americans would have opposed, including a large minority of Republican voters. Farm and business subsidies would need to be completely eliminated. Social Security and Medicare would need to be substantially reduced.
Stockman ended his book by writing, “we’re spending 24 percent of GNP, compared to raising only 19 percent of GNP in taxes…The Republican Party should not have told the American electorate in 1984 that we don’t have to raise taxes. It wasn’t true.”
Prosperity for whom? According to Congressional Budget Office numbers for after tax income, in 1980 the richest fifth of our country had eight times the income of the poorest fifth. By 1989 the ratio was more than twenty to one. According again to the CBO, the greatest increase in after tax income went to the best paid one percent of the United States. After tax income for the bottom 60% declined.
In the first chapter of Econoclasts Brian Domitrovic wrote, “The economic results that supply-siders foresaw at the time [the late 1970’s to 1980] did in fact come to pass.”
Not really. During his 1980 debate with President Carter Reagan, who had spent much of his political career condemning deficit spending, claimed that his economic policies would balance the budget by 1983 “If not sooner.”
In 1980 the budget deficit was $74 billion. In 1983 it had grown to $208 billion.
By the time President Reagan left office the national debt had grown from approximately $907,701,000,000.00 to more precisely $2,602,337,712,041.16.
In Chapter Five Domitrovic wrote, “the inflation crisis was in full swing before the OPEC shock of late 1973…In the 12 months before the OPEC announcement consumer prices in the United States increased by 8 percent.”
In October the Organization of the Petroleum Exporting Countries announced that it was raising the price of its oil to punish the United States for helping Israel in the Yom Kipper War. In October 1972 the inflation rate was 3.7%. The average for 1972 was 3.2% The average for 1973 was 4.4%. The average for 1974 was 11.0%.
Domitrovic sees the rise in the price of petroleum as a result of the stagflation of the 1970’s, because he wants to blame the government and Keynesian economics. Let’s see which came first. In 1972 the price of a barrel of petroleum was $3.60. In 1973 it was 4.75. In 1974 it was $9.35.
In 1972 the inflation rate was 3.2%. In 1973 it was 6.2%. In 1974 it was 11.0%.
In 1972 the unemployment rate was 5.2%. In 1973 it was 4.9%. In 1974 it was 7.2%.
When we keep in mind that the OPEC Oil Embargo did not begin until October 1973, it should be clear that the increase in the price of oil preceded the increase in inflation and unemployment. The rise in the price of petroleum was not a result of the stagflation; it was the cause.
Republicans like to blame Keynesian economic policies for the stagflation of the 1970’s. For the four decades from the inauguration of President Roosevelt in 1933 to 1973, Keynesian policies resulted in reasonably steady job growth, growth in the per capita gross domestic product (GDP), and milder recessions. Republicans never liked Keynesian policies because they shifted wealth, power, and prestige from the business community to the government.
Republicans do not want blame the increase in the price of petroleum that followed the OPEC Oil Embargo, and the Iranian Revolution of 1979 for the stagflation because they do not want to acknowledge that foreigners they dislike had considerable control over the U.S. economy.
Keynesian economic policies were designed to fight the Great Depression. During the 1930’s the problem was not inflation, but deflation. Moreover, Keynesian economic policies were not designed to respond to a shortage in a natural resource essential to the U.S. economy.
The legacy of supply side economics has not been a restoration of the broadly based prosperity Americans enjoyed from the end of the Second World War to the inflationary recession of 1974. The legacy has been chronic deficits, a growing national debt, and economic inequality as great as the United States experienced right before the Stock Market Crash of 1929.
At the end of the Second World War in 1945 the national debt as a percentage of Gross Domestic Product was 114%. By the end of the administration of President Carter in 1980 this had declined to 32%.
During this time the top tax rate was as high as 94%, and never got below 70%. During the Reagan administration the top tax rate declined to 28%.
At the end of the Reagan administration the national debt as a percentage of GDP had grown to 50%. Four years later, when President George H.W. Bush left office it had grown to 61%. It declined briefly during the Clinton administration, and it was 129% when Trump left office in 2021.
From 1945 to 1980 national debt as a percentage of GDP continued to decline during the wars in Korea and Vietnam.
During the Reagan administration military spending increased from $143.69 billion, during the last year of the Carter administration in 1980 to $325.03 billion during the last full year of the Reagan administration.
This was unnecessary and provocative. The United States was at peace. The Soviet Union was losing its war in Afghanistan. The Soviet Union was collapsing from within. It was dangerous to provoke the leaders of the Soviet Union with a nuclear arms race when they felt their country, and hence their power, disintegrating.
During the Carter administration there was a six month recession. Unemployment reached 7.8%. During the Reagan administration there was a sixteen month recession. Unemployment reached 10.8%.
An average of 2,600,000 jobs were created every year during the Carter administration. During the Reagan administration this declined to an average of 2,000,000 jobs created every year.
The rise in inflation that followed the Iranian Revolution of 1979, and which subsided after 1982 was caused by fluctuations in the world price of petroleum over which neither President Carter nor President Reagan had much control.
If you want to learn what really happened during the Reagan administration, do not read "Econoclasts." Read "The Triumph of Politics: How the Reagan Revolution Failed, by David A. Stockman."
https://www.amazon.com/gp/customer-...=cm_cr_getr_d_rvw_ttl?ie=UTF8&ASIN=1610392779
Stockman was Reagan’s Director of the Office of Management and Budget from 1981 to 1985. Stockman makes it clear that, contrary to what Ronald Reagan claimed during the 1980 presidential campaign, it never was possible to cut taxes, raise military spending and balance the budget without making cuts in domestic spending the vast majority of Americans would have opposed, including a large minority of Republican voters. Farm and business subsidies would need to be completely eliminated. Social Security and Medicare would need to be substantially reduced.
Stockman ended his book by writing, “we’re spending 24 percent of GNP, compared to raising only 19 percent of GNP in taxes…The Republican Party should not have told the American electorate in 1984 that we don’t have to raise taxes. It wasn’t true.”
