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Death of Reaganomics......and taxes, Taxes, TAXES!

Old 10-19-09, 11:45 AM
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Death of Reaganomics......and taxes, Taxes, TAXES!

http://money.cnn.com/2009/10/19/news...ion=2009101905

"Reaganomics is dead (long live Reaganomics)
Old-school supply-sider Bruce Bartlett says America needs a tax hike - and that Republicans should fight to make sure that it's done right.

(Money Magazine) -- Bruce Bartlett was a lieutenant in the Reagan revolution. As an aide to congressman Jack Kemp, he helped write the legislation underpinning Ronald Reagan's 1981 tax cut and then worked in the Reagan and the George H.W. Bush administrations.

Bartlett still thinks low marginal tax rates fired up the '80s economy, but he laments that conservatives misunderstand Reagan's legacy, thinking of tax cuts as a cure for every ill.

His book criticizing George W. Bush got him fired from a conservative think tank in 2005. His latest, "The New American Economy," should stir up more controversy. For a start, he argues that conservatives can learn from John Maynard Keynes, the economist who argued for big government spending in times of crisis.

You were a Reagan-era tax cutter, but now you've written a book praising Keynesian economics, more spending, even tax hikes. What gives?

I wanted to show that economic ideas go through cycles. A crisis happens that the dominant thinking can't deal with, and a new theory comes along to solve the problem. When the crisis is past, that theory becomes the new all-purpose way to deal with every problem. And that leads to the next crisis.

Before John Maynard Keynes, economists had no solution to the Great Depression. They thought the government should do nothing. But after wartime spending pulled the economy out of the Depression for good, Keynes became the new conventional wisdom.

But Keynes's ideas were designed for a deflationary depression. When you apply that medicine in an inflationary situation, you get even more inflation. Keynesianism met its Waterloo in the stagflation of the 1970s.

Enter "supply-side" economics.

Almost. First the monetarists stepped in, arguing that to whip inflation we had to tighten the money supply. Supply-siders argued that we needed big tax cuts to give people incentives to work harder and get growth going. Tight money, tax cuts, and deregulation -- that was the model. Once Reagan did all that, cutting the top tax rate as low as 28% in 1986, there was nothing left to do. But armies don't disband at the end of wars. They find new ways to fight.

So are Republicans fighting the last war?

What good are tax cuts when people have no income to tax? In this crisis we've run into the same problem we had in the Great Depression: a liquidity trap. Money isn't circulating. The stimulus package may have been over-sold by Obama, but the principle was correct. We need government spending to get out of the trap.

Do you support the idea of another stimulus package?

No. The lags in implementation are so great that it would have no effect until long after the recovery is under way. And I think the makings of a fairly rapid recovery are here.

Nice to hear some optimism.

My Republican friends, to a person, think that Obama's policies are going to be disastrous and that they'll be able to waltz into the White House in 2012. I keep asking, "What if you're wrong? What's your backup plan in case the economy does recover and Obama gets credit for bringing us out of the biggest crisis since the Depression?"

What should we be worried about?

It's inevitable that we're going to have substantial inflation down the road. You know Congress and the White House will pressure the Fed to delay acting when the time comes. The longer-term problem is the aging of society and uncontrolled entitlements. When everyone realizes we have to tighten spending, it will be impossible to do because there will be so many old people, and they vote.

That leaves us one alternative: raising taxes. Conservatives view all tax increases as equally bad -- they'd rather default on the debt than raise taxes. But there are better and worse ways of raising taxes.

What's the better way?

A value-added tax. [A VAT is similar to a sales tax but easier to enforce, because it's paid every time a business makes a sale, not just on retail sales to consumers.] It's a consumption tax that has very little negative effect on incentives to work and save, meaning that you can raise a lot of revenue at relatively low economic cost. But conservatives think if we make it too easy for the government to raise revenue, then they'll raise too much, and the next thing you know we'll be like Europe.

As Larry Summers [Obama's chief economic adviser] once put it, we don't have a VAT because liberals think it's regressive and conservatives think it's a money machine. We'll get a VAT when liberals figure out it's a money machine and conservatives figure out it's regressive.

Obama is more likely to want to tax the incomes of the rich.

The mistake of the left is to assume you can raise rates on the rich and they won't react. They'll put more effort into tax avoidance and evasion. That won't do anyone any good except tax lawyers. But not raising taxes at some point isn't an option. If Republicans refuse to put anything on the table, Democrats will raise taxes in a way that suits them."

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Some interesting ideas from an insider.....
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Old 10-19-09, 08:03 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

The Republicans goal should be to make the Democrats look as bad as possible and win enough seats in Congress to force the Democrats to the middle. I cant see them doing that if they go along with tax increases.
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Old 10-19-09, 08:12 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Well, at least we know we can't reduce spending.
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Old 10-19-09, 08:22 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by kvrdave View Post
Well, at least we know we can't reduce spending.
Yea, God forbid. World Vision will have to start passing out pictures of starving bureaucrats.........
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Old 10-19-09, 11:59 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by BKenn01 View Post
The Republicans goal should be to make the Democrats look as bad as possible and win enough seats in Congress to force the Democrats to the middle. I cant see them doing that if they go along with tax increases.
Shouldnt the goal be to fix the economy and protect citizens?
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Old 10-20-09, 12:13 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by Tommy Ceez View Post
Shouldnt the goal be to fix the economy and protect citizens?
I believe that that is how you do it, given that they have no power, currently. America needs protection from Obama's ideas and proposed policies.
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Old 10-20-09, 09:45 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by Tommy Ceez View Post
Shouldnt the goal be to fix the economy and protect citizens?
I can't remember a time when that was ever the goal... why start now?
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Old 10-20-09, 11:28 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Be realistic - please!

We're going to need tax increases - even if there are not more grandiose programs that are in the pipeline.
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Old 10-20-09, 11:44 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by Tommy Ceez View Post
Shouldnt the goal be to fix the economy and protect citizens?
How quaint.

Don't you know that politics, especially for the right, is nothing more than a sporting event now, where "your team" must do everything it can, dirty tricks included, to win?! Just listen to their cheerleaders (Hannity, Limbaugh, Beck, etc.) And rank-and-file members of the party behave like little more than soccer hooligans (see the health care town hall meetings). At least BKenn01 is honest about it.
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Old 10-20-09, 11:51 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by kvrdave View Post
I believe that that is how you do it, given that they have no power, currently. America needs protection from Obama's ideas and proposed policies.
'They', the republicans, had plenty of time in power. A drunken, violent, bipolar, fool of a sailor on leave could not waste as much money and fuck up so many things on his worst shore leave as they did when they had power.

What the hell do you think 'they' would fix? Their own disaster that they created maybe?

Let's just be honest...
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Old 10-20-09, 11:53 AM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

And of course the pristine left would never engage in such things as dirty tricks - led by the trio on MSNBC.
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Old 10-20-09, 12:01 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by classicman2 View Post
And of course the pristine left would never engage in such things as dirty tricks - led by the trio on MSNBC.
I have no idea what this means, but I'm strangely intrigued.
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Old 10-20-09, 12:21 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by JasonF View Post
I have no idea what this means, but I'm strangely intrigued.
Then you haven't watched MSNBC in the evening. The trio is the liberal answer to the 3 conservatives mentioned by Numanoid.
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Old 10-20-09, 12:30 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by kvrdave View Post
Well, at least we know we can't reduce spending.
No, dear god, we can't. If the government cuts spending, our whole economy will fall apart, so fast and so hard, that it will make the collapse of the subprime mortgage market look like a day at the beach.

*btw that was not an advocation for not cutting spending. It was simply acknowledging the truth of the situation. We've really painted ourselves into a corner.

Last edited by Superboy; 10-20-09 at 12:43 PM.
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Old 10-20-09, 12:43 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by Dr Mabuse View Post
'They', the republicans, had plenty of time in power. A drunken, violent, bipolar, fool of a sailor on leave could not waste as much money and fuck up so many things on his worst shore leave as they did when they had power.

What the hell do you think 'they' would fix? Their own disaster that they created maybe?

Let's just be honest...
Honest? Okay, we do better when the power in DC is split. First 2 years of Clinton was a disaster when the Democrats controlled everything. Republicans took over the legislature and we had some stability. Then Bush was elected. And the first 2 years of Bush was a disaster that looked very similar in spending and government expansion as the first 2 years of Clinton. Then the Democrats took over and we had some stability with the legislature again. Then Obama got elected. It appears that the first 2 years of Obama will make Clinton and Bush look fiscally conservative by comparison. Hopefully this will lead to the Republicans taking over the House or the Senate. The lead in the Senate is huge for a single election, so that won't happen, and it would be tough in the House.

But if we are being honest, we are far better off when one party does not control the House, the Senate, and the Presidency. That is the truth.

Last edited by kvrdave; 10-20-09 at 12:45 PM.
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Old 10-20-09, 12:56 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Agreed.
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Old 10-20-09, 01:54 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by kvrdave View Post
Honest? ...

But if we are being honest, we are far better off when one party does not control the House, the Senate, and the Presidency. That is the truth.
It depends on what party is put where.
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Old 10-20-09, 02:06 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

A split party government, in any fashion, is better than any one party controlled government. We tend to have more Republican Presidents with Democratic congresses in the past 75 years, though.

But I would rather have a split government than the Republicans in control of everything. The Democrats in control of everything is just a bigger disaster, but they are both disasters.
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Old 10-20-09, 02:17 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

I dunno, I'd like to see REAL conservatives in charge of everything and see what happens. At the least it would be an interesting couple of years.
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Old 10-20-09, 02:18 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

I doubt it. I'd like to think so, but I think that they all turn to shit when they are given the entire purse.
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Old 10-20-09, 02:19 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

There aren't any 'real' conservatives in politics now.

But it would be nice if there were some in power.
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Old 10-20-09, 05:20 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by Dr Mabuse View Post
There aren't any 'real' conservatives in politics now.

But it would be nice if there were some in power.
If there were, they might actually conserve something.
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Old 10-20-09, 05:22 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by kvrdave View Post
A split party government, in any fashion, is better than any one party controlled government. We tend to have more Republican Presidents with Democratic congresses in the past 75 years, though.

But I would rather have a split government than the Republicans in control of everything. The Democrats in control of everything is just a bigger disaster, but they are both disasters.
I agree that a split party government always functions better, but the different government branches perform different duties.
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Old 10-20-09, 06:22 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

A whole slew of thoughts popped into my head in regards to the whole supply-side economic theory. The more I think about it, the more I realize the author might be correct. Reaganomics really wouldn't work in the present situation.

In addition to the examples he gave, there are numerous other factors that have changed. For one, we cannot expect <i>demand</i> to remain strong or constant anymore. Wholesale inventory and factory orders have been on the slide. Credit is gone, housing is bust, and the old-timers are buckling down for retirement. People are thinking twice before buying anything nowadays.....even if it costs $6 at Walmart. I don't see how boistering the supply side would help much. Demand seems to be the problem.

Another externality that would kill supply-side is offshoring. A much higher percentage of stuff is made overseas now, not here. If we tried to reinstitute supply-side, much of the capital reinvestment would probably go overseas anyway.....in emerging markets, and where labor and business are cheap. It's not like companies haven't been investing in production potential over the past 15 years......just not so much here in the U.S.
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Old 10-20-09, 06:48 PM
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Re: Death of Reaganomics......and taxes, Taxes, TAXES!

Originally Posted by BKenn01 View Post
The Republicans goal should be to make the Democrats look as bad as possible...
Yeah, the hell with actually doing anything useful.
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