REAGANOMICS

by  Douglas Korty

Supporters of Reaganomics claimed that tax reductions, especially on capital gains and dividends, would increase economic growth and federal revenues. The evidence clearly refutes these claims. Table 1 shows that from 1950 to 2009, four out of five Democratic Presidents saw better real economic growth rates than Reagan. Also, the two Bush Presidents, following Reagan’s policies, ranked 9^th and 10^th out of 10 in real GDP growth. Average real GDP growth for these three Republican Presidents was 2.4% vs. 3.9% for the five Democratic Presidents, 39% lower.

Given the massive deficits of these three, which are normally stimulative, their growth rates should have been much higher. If their fiscal policies would have been more intelligent, e.g. building infrastructure and expanding employment, growth rates would have been higher.

Table 1.

	AVERAGE	RANK
	REAL GDP	1950-2009
	GROWTH
Kennedy	5.3%	1
Truman	4.9%	2
Johnson	4.7%	3
Clinton	3.7%	4
Reagan	3.5%	5
Nixon/Ford	2.9%	6
Eisenhower	2.8%	7
Carter	2.8%	8
Bush I	2.0%	9
Bush II	1.5%	10

Table 2. shows that Reagan, Bush I and Bush II created huge federal debts -- $1.41 trillion, $1.04 trillion (in only four years), and a record $3.55 trillion mostly with tax cuts and military spending. Republicans take credit for 96.2% of all federal deficits in the 1950-2009 period thanks mostly to these three Presidents. Now you see why Reaganomics was called Voodoo Economics.

Table 2.

	1950-2009
	DEFICITS	% OF
	BILLIONS	TOTAL
Bush II	-$3,547	54.5%
Reagan	-$1,412	21.7%
Bush I	-$1,036	15.9%
Carter	-$253	3.9%
Nixon/Ford	-$251	3.9%
Johnson	-$36	0.6%
Kennedy	-$18	0.3%
Eisenhower	-$15	0.2%
Truman	-$5	0.1%
Clinton	$63	-1.0%
Total	-$6,510	100.0%
Total Republicans	-$6,263	96.2%
Total Democrats	-$247	3.8%

Republicans like to blame Obama for recent deficits which have been due to the serious problems – low taxes on the wealthy, financial crisis, recession, wars, etc. – that he inherited from Bush II and Republican deregulation policies. That helps them forget what went before.

John Maynard Keynes said in 1926, “The political problem of mankind is to combine three things: Economic Efficiency, Social Justice, and Individual Liberty.” Reagan had very little understanding of economic efficiency, he never cared about social justice, and he had a distorted concept of individual liberty, putting the interests of the wealthy and corporations above everyone else. Reagan is the great hero of the Right, no inconvenient facts are likely to change that or their belief that Reaganomics was a huge success.

note: Kennedy cut tax rates (Revenue Act 1964 passed after his death) and the effect was to stimulate growth but the situation was completely different. Top tax rates were high, 90% cut to 70%, and the tax cuts benefited all levels of taxpayers. The tax cuts did not increase federal deficits which were very low.

Sources: U.S. Department of Commerce: Bureau of Economic Analysis

The White House: Office of Management and Budget