This observer reeled during the Hillary Clinton/Donald Trump presidential debates when Mrs. Clinton poo-poo'ed the fiscal philosophy commonly termed "Reaganomics", calling it "Voo-Doo Economics", and saying, in effect, "Everyone knows it never worked." More recently, Nancy Pelosi echoed this belief, criticizing President Trump's tax reduction plan.
Simply stated, "Reaganomics" is a term applied to the philosophy that a decrease in marginal tax rates will lead to two positive outcomes:
1) To a more productive economy, and;
2) To even greater tax revenues than would otherwise be collected under prior, higher rates.
In my mind, both Clinton and Pelosi are dead wrong. That the Reagan tax cuts did work - spectacularly - was well documented by Newt Gingrich in his 2010 book, To Save America.
Moreover, it was missed by Democrats Clinton and Pelosi, and seldom acknowledged by Republicans or Democrats, that it was John Kennedy, not Ronald Reagan, who first articulated this philosophy in a December 14, 1962, speech before the Economic Club of New York. Here are some excerpts from that historic speech:
".an economy hampered by restrictive tax rates will never produce enough revenues to balance the budget - just as it will never produce enough jobs or enough profits."
"In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise revenues in the long run is to cut taxes now."
"And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment."
"The purpose of cutting taxes today is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
Alas, President Kennedy did not live to see his tax cutting philosophy enacted by Congress. But soon after his assassination, President Lyndon Johnson took up the Kennedy mantle in spearheading the February 26, 1964, Tax Reduction Act; said to be the largest tax cut in our nation's history.
Here are a few statistics, per Google searches:
- In the five years preceding the Kennedy/Johnson tax cuts, unemployment averaged 5.8 percent, while in the five years after the cuts, unemployment averaged 3.98 percent.
In the five years preceding the Kennedy/Johnson tax cuts, economic growth averaged 5.76 percent per year, while in the five years after the cuts, it averaged 8.32 percent.
In the five years preceding the Kennedy/Johnson tax cuts, total personal and business tax collections (in millions) averaged $66,606, while in the five years after the cuts, they averaged $95,317.
In the five years preceding the Kennedy/Johnson tax cuts, median household incomes rose an average of $1,079 per year, while in the five years after the cuts, they averaged. $2,032 per year. It worked!
Marv Thomason studied Economics and Political Science at Drake University, graduating in 1965, and went on to study International Business and Economics at the American University in Washington, DC. His career field for over 50-years has been real estate development and investments, both in Colorado and Iowa. Thomason attributes his credentials in economics and taxation to personal observations, underscored by ongoing studies of investments, tax law, economics, and history. (Feedback - firstname.lastname@example.org)