Right Wing Tax Cut Theory

I couldn’t let the “Right Wing tax Cut Theory” jab a few posts ago slide, so…..

Right wing (AKA Correct wing in this case) tax cut-theory absolutely works…You can disagree with this, but I will have to ask, what planet are you from…or better yet, how would you say the economy is doing right now? For that matter, how has the economy been for the last couple of years? The undeniable, un-spinnable truth is that we have record low unemployment, The DJIA is near all time highs, home ownership levels (especially for  minorities) have sky rocketed recently and the Fed is concerned that the economy is doing so WELL that they have to continue raising interest rates to ward off inflation.

 As everyone knows, the effects of any administrations policies lag for a few years. A perfect example of this is how GWB got handed a bag of shit when he stepped into office. Remarkably we had a very short lived Bear market which started in 2000 (while Clinton was still in office) and one that G. W. Bush was able to get a handle on quickly…mostly via Tax-cuts. As I said earlier the results are best proven by going back to hard data so lets go back to the last administration with heavy tax cuts.

 Ronald Reagan concentrated on economic issues his first six months in office. Reaganomics was the name given to the supply-side economic theory which Reagan based his economic plans. It operated on the belief that the economy was struggling in large part because of…..EXCESSIVE TAXATION. With more money going to taxes, individuals and corporations were unable to invest capital to stimulate growth. The plan called for massive tax cuts in order to stimulate investments. The economic growth would then “trickle down” to the workers. Supply-side economics also called for budget cuts to counteract the loss of revenue from the tax cuts. Reagan followed this model in creating his budget plan in 1981. Reagan put together legislation that cut government expenditures by $40 billion and created a three year tax cut plan (the largest ever) for individual and corporate income taxes.

In no year following the tax cuts did revenues decline.  They increased in fact in almost a straight progression from pre-Reagan years. The Cold War budgets did increase, and of course the happy fact was that this led to the end of the Cold War itself, as the Soviet Union recognized it could not outspend the U.S. But those military budgets were not significantly larger than during the 70s, and were smaller than in the Kennedy and Johnson years.  It was actually domestic spending, and particularly entitlement spending, that grew enormously under the Democrat congress. 

”Between 1980 and 1981 the top capital gains rate was cut from 35 percent to 20 percent and revenues soared by 90 percent in real terms between 1978 and 1985.After Congress lifted the rate to 28 percent in 1986, capital gains revenues declined by 20 percent by 1990 The average annual growth rate of real gross domestic product (GDP) from 1981 to 1989 was 3.2 percent per year, compared with 2.8 percent from 1974 to 1981 and 2.1 percent from 1989 to 1995. The 3.2 percent growth rate for the Reagan years includes the recession of the early 1980s, which was a side effect of reversing Carter’s high-inflation policies, and the seven expansion years, 1983-89. During the economic expansion alone, the economy grew by a robust annual rate of 3.8 percent. By the end of the Reagan years, the American economy was almost one-third larger than it was when they began When Reagan took office in 1981, the unemployment rate was 7.6 percent. In the recession of 1981-82, that rate peaked at 9.7 percent, but it fell continuously for the next seven years. When Reagan left office, the unemployment rate was 5.5 percent. Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years Source -Cato Institute     The first rebuttal to this post will likely be an unwarranted pro-Clintonian, pro tax pump up , however, not factored into any liberal equation is that at the time Clinton took office (in fact, long before the election) the economy was growing briskly again, the brief G. H. Bush recession having ended in March 1992.  Moreover, the end of the Cold War led to massive cuts in military and Defense Department budgets, a reduction in the size of government that Clinton and Gore had the audacity to claim as their achievements. In summary, some of Reagan’s Tax Cut benefits were:

Inflation averaged 12.5 percent when Reagan entered office, was reduced to 4.4 percent when he left.

Interest rates fell six points.

Eight million new jobs were created as unemployment fell.

An eight percent growth in private wealth.   Right Wing Tax Cut THEORY???? What Theory?

You have every right to pay more taxes…if this is your prerogative, please be my guest!