AEI Ideas: Reaganomics 2.0?

reagan-library-photo

Yes, Reaganomics Needs a 21st Century Update

Pethokoukis writes:

“The GOP is debating whether Reaganomics needs an update” is a must-read piece by Washington Post reporter Jim Tankersley. One side answers the “What would Reagan do?” question by offering a nostalgic return to the 1980s Reagan agenda. Another prefers to apply the Reagan principles — a dynamic private sector, strong families and neighborhoods, upward mobility, work — to modern economic reality with different conservative policy results. Tankersley:

Leading Republicans are clashing over a signature issue the party has treated as gospel for nearly 40 years: the idea that sharply lower taxes and smaller government are enough by themselves to drive a more prosperous middle class — and win national elections. That simple philosophy has been the foundation of every GOP platform since the days of Ronald Reagan. Now, some of the party’s presidential hopefuls — along with some top conservative economists and strategists — are sending strong signals that they believe today’s beleaguered workers need more targeted help, even if growth speeds up.

reagan-obama

For some context, here are a few then-and-now stats:

1.) When Reagan was elected president in 1980, the top income tax rate was 70%. Today, the top income tax rate is 40%.

2.) When Reagan was elected, the top 1% paid about a fifth of federal income taxesToday it’s about a third.

3.) When Reagan was elected, the bottom 90% paid just over half of all federal income taxes. Today it’s around 30% with 40% of households paying no federal income taxes.

5.) When Reagan was elected, 8% of national income went to the top 1%. Today, it’s nearly 20%.

6.) When Reagan was elected, inflation had averaged nearly 9% over the previous eight years. Today, inflation is less than 2% and has averaged around 2% the past 15 years.

7.) When Reagan was elected, US publicly held debt was 26% of GDP. Today, it’s 74% of GDP with a whole lot of entitlement spending quickly headed our way.

8.) When Reagan was elected, more than 19 million Americans worked in manufacturing. Today, just under 12 million Americans work in manufacturing.

9.) When Reagan was elected, health care spending was 10% of GDP. Today, it’s 17% of GDP.

10.) When Reagan was elected, China’s GDP, in nominal terms, was 3% of America’s. Today, China’s GDP is over half of America’s and about the same based on purchasing power.

Let me also add (a) there is good reason to believe that faster GDP growth is not lifting all boats, (b) upward mobility is stagnant, (c) slowing labor force growth and productivity suggest it will be harder to generate fast growth in the future than in the past,  (d) automation has taken a toll on middle-class income and jobs,  (e) labor force participation by high school-only graduates has fallen by 10 percentage points over the past 25 years, and (f) inflation-adjusted market income for the top 1% has risen by 174% since 1979 vs. 16% for the bottom 80%.

So given all that, shouldn’t center-right policymakers, pols, and pundits at least try and think afresh about what sort of economic agenda would best promote growth, upward mobility, and economic security in the 21st century?  …(read more)

Pethokoukis Blog – AEIdeas



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.