HERE'S everything I know about Economics: 1) it's often called "The Dismal Science" after Thomas Carlyle, who was only half right; 2) it seeks to understand the use of resources and of production, though, alone among the "sciences" it does so by eschewing adequate description for naked acquisitiveness; 3) Bertrand Russell and George Barnard Shaw both dropped its study as undergraduates, one because it was too difficult, and the other because it was too easy, but I can never remember which was which; 4) The artificial excitement generated by the awarding of the Nobel Prize for Economics to Milton Friedman for his seminal unification of the theories of Charles Ponzi and Willie Sutton led to precisely the sort of thing anyone familiar with a college faculty would have predicted. In fact, it had the same effect on Economics that the whole, comparable, Superstar Chef thing has had: a slight reduction in the prison population coupled with someone's greasy fingerprints all over your business; and 5) and this is more an opinion that a fact, it turns out we should have done the theoretical work on the atom bomb at White Sands, and dropped the thing on the University of Chicago. Hindsight's 20/20.
Anyway, Arthur Laffer's still with us; I'm not sure whether this should be added to Economics' list of unpardonable sins, or chalked up to the same slackjawed American credulity which kept James Doohan in the public eye for thirty-five years.
For 16 years prior to Ronald Reagan's presidency, the U.S. economy was in a tailspin—a result of bipartisan ignorance that resulted in tax increases, dollar devaluations, wage and price controls, minimum-wage hikes, misguided spending, pandering to unions, protectionist measures and other policy mistakes.
But enough about Nixon.
No, really, I'm sure Laffer demonstrates this somewhere, though here isn't that place. Having lived a good chunk of my unlettered life during that period, including an abortive launch into the American economic system, I have to say that my own vertiginous reaction to those times seemed to have mirrored what was going on behind them, and that, for example, the Cold War, the hot War in Indochina and the two Oil Embargoes seemed to play a supporting role. Not to mention the gradual loss of US global economic hegemony as the Second World War receded in the rearview, but then, whadda I know? The early 60s saw the publication of Silent Spring and Unsafe at Any Speed; the later 60s saw the growing concern over the crap culture of Saturday morning kiddie teevee, the safety record of nuclear power, and the toxic effects of cigarettes and Tab™ (separately, let alone together). These are the sorts of values that economists typically do not fit on cocktail napkins.
It's the dawn of the environmental and consumer movements. It is, conversely, the dawn of the anti-environmental and anti-consumer movements, funded by corporate shells with names like Americans for Responsible Cyclamate Consumption. It's the beginning of a decade-long effort by Detroit to avoid making safer, more fuel-efficient cars, and if the track record there doesn't tell you everything you need to know about the fight over evil government regulation I think there's a seat on the Americans for Responsible Voluntary Childseat Use board of directors with your name on it.
In the late 1970s and early '80s, 10-year bond yields and inflation both were in the low double digits. The "misery index"—the sum of consumer price inflation plus the unemployment rate—peaked at well over 20%. The real value of the S&P 500 stock price index had declined at an average annual rate of 6% from early 1966 to August 1982.
Compare, of course, the 180 years previous, with no ignorant tax increases, dollar devaluations, wage and price controls, minimum-wage hikes, misguided spending, or pandering to unions, when the stock market did nothing but go up. Are you even trying, Doc?
For anyone old enough today, memories of the Arab oil embargo and price shocks—followed by price controls and rationing and long lines at gas stations—are traumatic. The U.S. share of world output was on a steady course downward.
Q.E.D. For those of you not old enough to remember, we saved a little gas for you. Though for those of you both young and curious, all the superstar economists and all the world's cocktail napkins mostly conspired after this to keep US petroleum consumption at or above 50% of the world's total, by, for example, screaming bloody murder when Jimmy Carter mentioned conservation.
Then Reagan entered center stage.
Okay, whichever one of those Brits dropped economics because it was too simple, I'm with him.
His first tax bill was enacted in August 1981. It included a sweeping cut in marginal income tax rates, reducing the top rate to 50% from 70% and the lowest rate to 11% from 14%. The House vote was 238 to 195, with 48 Democrats on the winning side and only one Republican with the losers. The Senate vote was 89 to 11, with 37 Democrats voting aye and only one Republican voting nay. Reaganomics had officially begun.
Yes, and what a glorious almost thirteen months it was, until he was forced to sign the Tax Equity and Fiscal Responsibility Act of 1982, the first of four tax increases marking the rest of his term, designed to counteract the bracing effects of Reaganomics!, such as the 25% stock market decline in the interim.
Changing tax rates changed behavior, and changed behavior affected tax revenues. Reagan understood that lowering tax rates led to static revenue losses. But he also understood that lowering tax rates also increased taxable income, whether by increasing output or by causing less use of tax shelters and less tax cheating.
Moreover, Reagan knew from personal experience in making movies that once he was in the highest tax bracket, he'd stop making movies for the rest of the year.
Ahem. Though we will admit, when you don't wanna do something, bullshit's as good a reason as any.
And so it was with his tax cuts. The highest 1% of income earners paid more in taxes as a share of GDP in 1988 at lower tax rates than they had in 1980 at higher tax rates.
Q,E.D.! Jesus Christ, does this shit really fly in Economist circles? Or do they just have a good laugh about it while snorting blow from the bungholes of catamites?
By 1988 that top 1% of income earners had collected sixty fucking percent of the wealth created during the Reagan years; the top 20% got 99%. Were they paying that much more in taxes? Because that would make it a wash.
On the regulatory front, the number of pages in the Federal Register dropped to less than 48,000 in 1986 from over 80,000 in 1980.
And it took only 1.4 million new Federal bureaucrats to handle the reduced work load! Y'know, somebody, sometime--I nominate Mitch Daniels--needs to explain to me why simple is always better than complex, except when they decide it isn't. You don't go to a mechanic who can only work on flathead Fords. You don't go to a doctor who stopped studying surgery when anesthesia was introduced. If this were just proposed as an ethical argument that would be one thing, and bad enough at that. But it's not; it's supposed to be a declaration of apodictic certainty even though the facts say otherwise. Incontinent deregulation has been a decidedly mixed bag, which even Republicans are willing to admit if we're talking about Jimmy Carter. Our fucking food supply is at risk thanks to "Reaganomics", which, incidentally, somehow managed to confuse "simplifying regulations" with "letting major industry donors write, and enforce, their own safety regulations". Today, thanks to incontinent deregulation, I can choose any of a dozen telecom providers to hand my personal information over to the Feds, warrant-free (Efficiency!), and use whatever crappy phone/plan combination I deem least offensive to call my Poor Wife and explain why I'm stuck at the airport waiting for some deregulated sub-carrier to show up and cram me onto a flight. In exchange, some bozo selling crooked and unregulated derivatives gets to steal my life savings without missing any work days due to incarceration.
With no increase in the minimum wage over his full eight years in office, the negative impact of this price floor on employment was lessened.
Thank you, sir, for removing the negative impact of a price floor from my employment so I can watch my wages decline for a lifetime. May I have another?
The results of the Reagan era? From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since.
Okay, where do we begin, exactly? According to the Bureau of Labor Statistics, the combined Reagan/Bush I jobs creation number is 18.5 million, considerably less that Clinton's 23.1 million, which is, in itself, larger than those imaginary 82-90 numbers. Second, did Reaganomics end in 1990? I guess I missed the ceremony. Always interested when I hit an unexpected bump. Is it 1990 because that's when Bush I had to raise taxes (again, after St. Ronnie did it seven times) to deal with the overwhelming success of Trickledownism?
Finally, there's that "added since", which incorporates the eight horrible years of Reagan Lite. Without attribution.
And none of this is really, ultimately meaningful, except that we may note that the whole Reaganomics game comes a cropper when simply compared (honestly) to his successor, not to mention once we note the steady decline in real wages for 80% of the population since that glorious day when Ronald Reagan entered center stage, a good quarter century after he should have been reduced to playing the Nelson's befuddled neighbor with the pruning fetish.