Reaganomics Key To Economic Growth
Alan M. Webber has an op-ed in today’s USA Today comparing the disparity in Spanish soccer to the income inequality that’s resulted from Republican fiscal policies. A sample:
This year Spain’s professional soccer league almost closed down. Some 200 Spanish players weren’t paid for several months; by the time a deal was reached, they were owed roughly $70 million in back pay. And about half of Spain’s 40 professional soccer teams are in bankruptcy.
The problem? Think of it as an exercise in Republican economics. That’s right: If you want to see what’s wrong with the way the United States has been handling economic policy, tax policy and employment policy, largely under the guidance of first the George W. Bush administration and more recently the Republican leadership in Congress, you need look no further than the sad story of Spanish soccer.
Spanish soccer collects $800 million in annual revenues. Half that money goes to two teams-Real Madrid and Barcelona-while the other twenty league teams struggle to make ends meet.
Webber says this is reminiscent of growing U.S. inequality. He points to the richest 1% of American earners, whose income increased 176% from 1979-2004. The bottom 20% only saw a 6% wage increase during that period.
If we just raise taxes on the rich, all will be well. “President Clinton raised taxes on the wealthy in 1993…the rich got richer under Clinton, but so did everyone else,” Webber writes.
Raising taxes is in line with the Democratic tradition. Democratic policies help the middle class and provide a safety-net for the poor while Republicans only care about giving tax-cuts to the affluent.
That’s the standard liberal view. Webber attacks Reaganomics, the idea of cutting tax rates to expand the economy and the tax rolls. Liberals call this trickle-down economics and complain the money never trickles down.
This attack misses the point of Reaganomics entirely. Reaganomics focused on 1) cutting government spending, 2) reducing marginal tax rates on income and capital investment, 3) reducing regulations and 4) using monetary policy to squeeze inflation from the economy. It did not highlight income equality. The Bush tax cuts were in line with supply-side philosophy, the underpinning of Reaganomics.
Reaganomics has dominated Republican fiscal policy for thirty years. It helped stifle the stagflation of the 1970s and ushered in a twenty-five year period of unprecedented economic expansion. Sure income inequality grew-but that was a trade-off conservatives accepted in return for a robust economy.
Webber laments the decline of median income during the Bush years. Here, he has a point: Median income was $42,228 in 2001 , the year the tax cut was signed into law; that’s $52,005 in 2010 dollars- and $43,318 in 2003 ,the year the tax cut rates were fully put into place- $51,353 in 2010 dollars. 2010 median income fell to $49,445.
But tax receipts and the economy both grew during the Bush years (as supply-siders said they would). Tax revenue rose from $2.02 trillion in 2001 to $2.5 trillion in 2008. Unemployment during the Bush years remained under 6.3% until October 2008, a month after the financial collapse.
President Obama inherited an economic disaster, no doubt about it. Unemployment on Inauguration Day stood at 7.8%. A month later, he signed his stimulus into law. Unemployment soared to 10% by the end of 2009. It hasn’t dipped below 8.8% since.
On the bright side, the recession ended during the summer of 2009. Tax receipts jumped from $2.32 trillion in 2009 to $2.43 trillion in 2010.
This month, Mr. Obama called for tax-hikes on the rich. That must be music to liberals’ ears. But it won’t do anything to get the economy going again or help reduce unemployment.
Income inequality is a concern that Democrats make Americans aware of. But right now, economic growth should be our primary concern. It’s the only way out of the mess we’re in.
Grow the economy. Get people back to work. Increase the tax rolls.
Reaganomics has done that. Let’s worry about income inequality when it’s taken care of.