Having worked in DC, I think it's naive to think that the Administration unknowingly released bad data. They knew exactly how accurate or pure the data was. They were just hoping to get away with it while everyone else was distracted by the proto-Marxist health care bill.
I voted for Reagan twice, and I would again if he ran against Carter (1980) and Mondale (84). The article you cite to "show" that the Reagan tax cuts were so good is totally biased and takes such a narrow view, I find it to be useless as a serious analysis. Who is William A. Niskanen? Right-Leaning Policy Won a Nickname: Reaganomics (washingtonpost.com) You could not have found a more biased source. Cato is a libertarian bunch that favors limited govt., and the author of the paper was playing a major role in the Reagan administration. Is he going to put HIS policies and the Reagan record in any light but the most favorable? No. That paper is a propaganda piece. The comparison is to the Ford/Carter years which were a transition time for the economy where it lost the tailwind on defense spending on the Vietnam war (and when big wars end, inflation usually follows), and the economy was slammed by the oil shock of the 70's and two oil embargos by OPEC (can you say gas lines?). The second comparison is the Bush I/Clinton first term, which is a comparison to the continuation of Reagans tax cut policies under Bush I which clearly were no working out in the longer run, the deficit was mounting finally forcing Bush I to reverse Reaganomics and break his campaign promise and raise taxes. The article is very narrow and incomplete, as it would imply that all results on economic activity stem from tax policy. There is NO discussion of any other policies or events that may have had an impact in the economy, which in the 80's is certainly a gross oversight. There is no mention in the article of Paul Volker, Fed Chairman originally appointed by Carter, who finally whipped inflation where both Nixon and his Wage and Price Controls had failed, and Ford and his WIN buttons, (Whip Inflation Now) had failed, and Carter had failed so he appointed Volker who controlled the money supply and raised interest rates until he choked off inflation and economic growth and created the recession of 81-82. It was painful in the short run (2 years), but it lead to price stability for the next two decades. The death of inflation was huge to sustained economic growth in the 80's. In the 80's, oil prices fell from 35 a barrel to 10 a barrel. This decimated the economies in Texas and La., but it was a boon to the rest of the nation, anyone who shipped goods, and to the US automakers who were not as good at small cars as the Japs. There is no mention in the article about the invention of the PC and its widespread deployment as a productivity tool following its legitimization by IBM with its first PC in 1981. Secretary positions began to vanish as folks typed their own memo's, mailroom staff dwindled as email became widespread, staff's of keypunch operators vanished, rooms full of draftsmen were downsized by 80% as AutoCad took over, and engineers could accomplish in a week what took them months to do in prior years, at a small fraction of the cost of larger old mainframe computers (I am a mainframe dinasour). There were tremendous transformations in the 80's that had nothing to do with the Reagan tax cuts, and to write an article comparing the gross results of the 80's economy just on the basis of tax policy is irresponsible. It's an incomplete treatment, grossly incomplete. That said, I agreed with the Reagan tax cuts. When you are in a recession, such as 81-82, you need to stimulate spending. That can be done in a number of ways, but it should be done. The Reagan tax cuts also had some negative effects, namely the budget deficit went up, and the total national debt skyrocketed. It continued to skyrocket under Bush I, eventually forcing him to raise taxes. This is NOT what Reagan and his economic team had forecast with their "Supply Side Economics" theory, which Bush I had called "Voodoo Economics" when he was running against Reagan for the presidency in 1980. Reaganomics - Wikipedia, the free encyclopedia By the way, I don't agree with the number 3 trillion in the post above, I though the national debt was 2 trillion when Reagan left office. However, at 2 trillion, Reagan would have TRIPLED the national debt in 8 years which was a massive policy shift to deficit spending, the like of which we had not seen since the end of WWII. So, the Reagan policies resulted in huge explosion of govt. deficit spending and it never came back in control the way the supply siders forecast that it would, not even with the other positive factors from technology, lower interest rates resulting from Volker killing the inflation of the 70's, and oil price falling by 70% to put wind in the sails of the economy. That is what forced Bush I to raise taxes in 91, to try and deal with the excessive size of the govt. deficit.
This is a great viewpoint. If everyone held this view, the nation would be in better shape. My hat's off to you BB for a great post. I try to find the truth since I am an investor. I need to know the truth about the economy, in the past since it yields clues about what will happen if similar situations present themselves in the future. From an investor point of view, I have to look at basic business conditions, corporate competitive advantages, government policy, interest rates, currency levels and future directions, consumer sentiment, leading economic indicators, views from prominent economists and private economists, biases of people making statements in the press (is a mutual fund manager "talking his book", or is a fed chairman not able to really say the truth such as Bernanke and Greenspan in 2006 they had to know the situation was much worse than they said). When investing, it does not pay to believe republican nor democrat propaganda. One reason I rail against the repub side now is they have the most pervasive propaganda network, with Fox News, Rush, Glen Beck, Ann Coulter, Michael Savage, and all of what they put out is propaganda. It is incomplete, slanted, and not applicable for investing purposes. It is to my advantage to know what is wrong with their arguments, as well as those at MSNBC.
