The Reagan Tax Cuts did NOT Produce an Economic Boom (nor will Trump’s)
October 23, 2017

 
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“This year is the 46th anniversary of President Reagan’s tax reform bill”, cited Mitch McConnell during Fox “news” Sunday yesterday while discussing Trump’s plan to cut the corporate tax rate from 35% (which NO ONE pays) to a mere 20%. In McConnell’s foggy mind, the Reagan tax cuts resulted in an economic boom, ergo, so will Trump’s “plan” to slash taxes on the Top 1%. The GOP has been dutifully rewriting the Reagan legacy for so long they can no longer distinguish fact from fiction and are now setting policy based on a fantasy. Ronald Reagan’s 1981 Economic Recovery Tax Act did NOT result in an “economic boom”. It was an “economic bomb” that exploded the Deficit/Debt and caused unemployment to skyrocket. The GOP has so thoroughly whitewashed Reagan’s history that even people who lived through it recall only the “fictionalized” version: “Bonzo Goes to Washington” starring Ron Reagan.

The fictionalized Reagan years that exists only in the minds of Republicans goes like this: America… disparing the malaise of the Carter Administration (fact: Carter never used the word “malaise” in his infamous “Malaise Speech“)… elected the “sunny optimistic” Ronald Reagan, who… by the sheer magnitude of his personality… struck fear into the hearts of Iran, convincing them to release the hostages the moment he was inaugurated. He slashed taxes on the wealthy on a premise dubbed “Trickle-down Economics”, resulting in an economic boom that turned America into an economic powerhouse that convinced the Russians of the folly of Communism and brought about the end of the Soviet Union. Eight years of “peace & prosperity” all thanks to a strict adherence to Conservative principles.

None of it is true of course.

Iran didn’t simply release the hostages because they were terrified of the Gipper. Carter had actually arranged their release his final months in office, which Iran agreed to (in a final insult) the very HOUR Carter left office (Carter actually flew to Germany to welcome the released hostages immediately following the inauguration.)

The Soviet Union didn’t “see the error of its ways” and relent. It went bankrupt trying to keep pace with the U.S. in a costly arms race that proved to be too much for a country with almost no industry and an economy half the size of France’s. First, they had to cut loose some of their satellite nations to save money, which opened up a ridiculously long train route from East Germany, through Eastern Europe, and back around to West Germany, rendering The Berlin Wall all but pointless and eventually allowed to fall with the collapse of the Soviet Union in 1989.

The economy wasn’t miserable under Carter as Republican efforts have convinced you to believe. 10.3 Million jobs were created in the four years of the Carter Administration (compared to 15.8 Million jobs created in eight years under Reagan.) Unemployment in 1979 (link note: you’ll need to set the start/end dates manually) actually bounced just under 6.0% throughout the year. In 1980, economic turmoil did result from a grain embargo against Russia (for their support of Iran) that hurt farmers, and a retaliatory oil embargo by Russia against the U.S. caused gas prices (and eventually all else) to spike (just as it did in 2008 under Bush.) And while unemployment peaked at 7.8% in July of 1980, it was back down to 7.4% by the time Carter left office and continued to coast down to 7.2% by April, 1981.

Then “Reaganomics” took over. Reagan’s proposed “Economic Recovery Tax Act of 1981″ [ibid top], promised to slash the top tax rate from 70% to just 50% and more than triple the base amount before the “Estate Tax” kicked in. And soon the unemployment rate started to take off. Up to 8.5% by the end of the year. The new tax policy went into effect on January 1, 1982 and by October, the unemployment rate had soared to 10.8% throughout the end of the year.

Reagan’s massive tax cut for the wealthy was NOT balanced out by any resulting “economic boom” in increased spending, creating jobs, resulting in more people paying taxes into the system the way Republicans predicted. Instead, corporations had less incentive to invest in their businesses and more incentive to just park their money in investments. The Deficit exploded due to the massive loss in tax revenue coupled with Reagan pouring money into National Defense. The problem was made exponentially worse thanks to a rash of tiny micro-wars Reagan launched throughout Central America: Panama, Nicaragua, Honduras, El Salvador, “Freedom Fighters”, “The Contras”… not to mention the growing Cold War with the Soviet Union and Reagan’s “Star Wars” missile defense program money pit (that never worked). Technology still being developed to this very day nearly 40 years later still has a less than 50% success rate (which Trump misrepresented as being “a 97% success rate (Trump was told our current technology had “a 97% chance” of hitting just ONE-of-FOUR missiles launched simultaneously.) Child that he is, Trump interpreted this as “a 97% chance” of taking out all four. (So now he has no reason to fear a retaliatory strike from North Korea.)

By the time Reagan left office, the economy had drastically improved. But he had to raise taxes ELEVEN TIMES to slow (but not stop) the hemorrhaging of cash into the National Debt… which had TRIPLED during his eight years in office. 204 years of Debt from 1776 to 1980 amounted to $800 Billion before Reagan took office in 1981. By the time he left in 1989, it was $2.4 TRILLION. Reagan even criticized President Carter for the size of the Debt during the 1980 Campaign. Unemployment reversed in large part to MASSIVE government hiring/spending. Reagan dramatically increased the size of the Federal government, from 16.3 million government employees when he took office to 17.7 million by the end of his second term, and hundreds of billions more in annual spending on government projects. We all know the story of the “$9,600 Allen Wrench” as the Reagan Administration blindly pumped hundreds of billions into the Pentagon budget, and only later as people started to take notice of the exploding Debt did anyone start investigating the spending only to uncover massive waste, fraud & abuse.

When Dick Cheney… Reagan’s former Secretary of Defense… ran for Vice President in 2000, he belittled praise for shrinking the National Debt due to the Budget Surplus under Bill Clinton by declaring “Reagan proved Deficits don’t matter.” “We don’t need to tax people so much that we start paying off the Debt!” We can (Cheney argued) tax people less and allow the Debt to grow again because “Reagan proved deficits don’t matter.

That is, until a Democrat takes office. Then the size of the Debt/Deficit is a travesty! A national disgrace that endangers our very way of life.

And this is why Republicans will NEVER eliminate the Deficit and start paying off the National Debt. Because the moment tax revenue starts exceeding government spending they will argue (just as Bush did in 2000) that is was proof Americans were being “over taxed” and deserved a tax cut.

And now we see Trump going straight down the same imaginary rabbit hole (falsely conflating his plan to give huge tax cuts to the rich with public support for tax “REFORM“), requesting a massive tax cut for the rich and declaring the “resulting economic growth… just like we saw under Reagan… will offset the loss in tax revenue due to massive tax cuts for the rich.” And WHY do the Rich need these huge tax cuts? Because (according to Republicans) we are “the most taxed nation on Earth” with a 38 percent top tax rate (side note. I find it fascinating that… according to Trump & the GOP… the rest of the world pays LESS in taxes and yet is still able to afford Healthcare for all… which according to snarky Dana Perino on Fox “news” Sunday yesterday “is something worth considering once we figure out how to pay for it.”) Trump’s explanation is bullshit of course, because thanks to all the absurd tax breaks and tax loopholes the wealthy already receive, almost nobody pays that top tax rate. Many billion-dollar corporations paid nothing at all in taxes last year. And thanks to massive corporate welfare, many Billion dollar corporations actually receive money BACK FROM the government to offset their business costs.

Hiring employees and buying property/equipment for your business are considered “business expenses” and are ALREADY tax deductible. So anyone who tries to tell you corporations need “tax cuts to grow their business” is either knowingly lying to you or is just too damn stupid to know better. Trump is (supposedly) a Billionaire businessman, but he’s also “a (bleeping) moron” and well documented liar, so I’ll let you decide if he’s just stupid or lying to you about the need for his tax plan.

And while were on the topic of Reagan’s legacy, what do you think “The Gipper” would say about the current occupant of the White House cozening up to Russia and even denying evidence of Russian interference in our democracy?
 


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October 23, 2017 · Admin Mugsy · No Comments - Add
Posted in: Economy, Greed, Jobs, Money, myth busting, rewriting history, Taxes