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Reaganomics, 25 years later

Is it still morning in America? Yes, according to this OpinionJournal editorial:
bookjacketThe heart and soul of Reagan’s economic agenda were sound money (making the dollar "as good as gold," as Reagan used to put it) and lower tax rates. On monetary policy, Reagan has won a resounding victory. Today, nearly all economists agree with Reagan’s then-controversial belief that the sole purpose of monetary policy should be to keep prices stable. Double-digit inflation is a distant memory unlikely to recur anytime soon.
On tax policy, Reaganomics has also carried the day, if somewhat less completely. Tax rates in the U.S. are on average half as high now as they were in the 1970s, and almost every nation has followed the Reagan model of lower tax rates. Even Bill Clinton only dared to raise the top marginal income tax rate back to 39.5%, not 50% or 70%.
Nonetheless, tax cuts still stand in disrepute among most of the media, academics and Democrats in Congress, albeit for shifting reasons. When Reagan proposed his 30% across-the-board tax-rate cut, his critics howled that this would cause demand to rise and lead to hyper-inflation. In fact, supply rose faster than demand, and inflation fell to 4% from 13% and has fallen even lower since. When the economy went into a deep recession in 1981-82, Reagan’s adversaries (and some of his own advisers) declared his tax cuts a failure. Reagan said stay the course, and the moment the final leg of the tax cut took effect, in January of 1983, the economy roared to life with an expansion that lasted more than seven years.
 Hat tip: Peaktalk

  1. anonimo
    21 gennaio, 2006 alle 10:27

    E’ sempre bello leggere un articolo in difesa di Ronnie (il primo presidente americano che ricordi: una sorta di imprinting). Ricordo un saggio del Cato Institute, credo ancora reperibile sul sito, che sfatava dieci miti (negativi) sulla Reaganomics. Me lo sono letto con amore, anche se non sono un’economista. E così ho imparato a difendermi ancor meglio.

    Daisy Miller

  2. 22 gennaio, 2006 alle 12:24

    Ricordo che nei primi anni anni ’80 ebbi una discussione con uno studente americano mentre si era in coda per prendere i biglietti al Teatro La Fenice di Venezia. Parlava e parlava dando per scontato che io fossi d’accordo su un fatto: che Reagan era semplicemente “stupido”. Quando gli chiesi “ma davvero sei convinto che sia uno stupido?” rimase interdetto, come se stesse pensando “ma com’è che questo, italiano, non la pensa come me?” La sua meraviglia e il suo imbarazzo furono uno spettacolo di poco inferiore a quello che mi accingevo a godere dentro il teatro (Karl Bhoem che dirigeva un paio di sinfonie di Mozart, e scusa se è poco …).

  3. anonimo
    25 gennaio, 2006 alle 13:25

    eh già, incredibile come lo abbiano sottovalutato…mio padre, invece, un semplice commerciante, l’ha capito subito che Reagan avrebbe cambiato le cose per sempre. Ricordo ancora delle liti in famiglia (anni ’80, ero piccola) sull’argomento, e mio padre che diceva ai miei zii comunisti “Reagan vi prenderà presto a calci nel sedere”. Capisci bene che con un padre così io non potevo che venir su bene :-))))


  4. 11 aprile, 2006 alle 16:20

    Reagan’s policies were hated because they forced people to face uncomfortable realities. Lest we forget that Clinton presided over one of the most incredible economy in the post-war era thanks to the lasting effects of Reganomics. It did not take a genius to understand what he was doing. I was in my teens and living in Canada when he came into power. Interestingly, his election may have influenced Canada to elect the Conservatives under Mulroney and along with Thatcher they changed the economic landscape of the anglo nations in the G7. It turns out they were right in their thinking. It is somewhat odd to read people still talk of Reagan as though he was an inept crazy man (his political machinations did not help I suppose) – mostly artists and Hollywood types. Like a teenager who benefits from the stern discipline of a parent, these people remain ungrateful because they were told to do so. The way they acted with Reagan they are repeating with Bush – while America advances they stand still in a vortex of impossible idealism. Led by questionable characters like Michael Moore who espouse horrible economic thoughts that would make David Ricardo and Adam Smith cringe with disbelief. Don’t tell this to the left oriented mindset but Reagan was in the upper echelon of great American Presidents. Shhh. It’s a secret.

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