Just as a broken clock can be right once a day, so a broken policy can be right once in a century. Reagan may or may not have been correct in his approach to the economy, but updating Reaganism in the way that Ramesh Ponnuru proposes is definitely not the way to go. It is not a reformation of Reaganism, but an extension of it far beyond anything Reagan would have dared to propose.
Reagan’s term began at the tail end of a long bear market, which had witnessed considerable economic growth without a corresponding rise in stock prices. His term coincided with the beginning of the micro-computer boom and the long bull market that generated. It coincided as well with the entry into the work force of large numbers of women and a consequent rise in household incomes. It also coincided with improvements in productivity accompanied by stagnant wages, and a sharp rise in immigration that brought large numbers of desperate people willing to work for the minimum wage. What Reagan’s supply side solutions achieved amounted only to greater returns to capital, and the income distribution of the typical banana republic, so we suffer from excess capacity and a lack of consumer demand.
Let’s take a close look, then, at Ponnoru’s proposal. First, he says, let’s lighten the burden of the payroll tax. Excuse me? We anticipate a social security deficit of how much, and he says we should lighten the payroll tax, how about extending the tax to all forms of income, including the economic rents, Conservatives like Ponnoru are so intent on on shielding from any form of tax. Anyone who thinks that Social Security isn’t under attack at the moment because those who have always opposed it used its trust fund as an ATM to pay for their sacred tax cuts over the past twenty years, and don’t want their taxes raised to pay that money back, is suffering from the sorts of delusions that put people in psychiatric wards.
He also proposes “changing the existing tax break for health insurance,” so that people could pocket the difference between more expensive plans and less expensive plans. As if the cost of health care were only the cost of the premium paid. By choosing less expensive plans, those who need to use them would end up even worse off than they would with an expensive plan. In health insurance, as in everything else, you get what you pay for.
After that, he begins to make sense, though I’m not so sure about making software patents less secure. We do have competition in software, that the patenting process does not impede. Just look to open source.
His argument would have been far more effective had he begun with his conclusion, reminding us of what Regan said. “IN OUR PRESENT CRISIS, government is not the solution to our problems….” What may have been true at that time is far less true today, especially with our financial and energy sectors sector having run amuck, and still no corrective action taken to bring things back into balance.
- Paul Krugman Debunks Conservative Columnist On Reaganomics(addictinginfo.org)
- Do Americans still not get Reaganomics?(salon.com)
- Updating Reaganomics(politicalwire.com)
- It’s Time to Update Reaganomics(thedailybeast.com)
- The Myth of Reagan’s Miracle(krugman.blogs.nytimes.com)
- The Social Security Situation(creditloan.com)
- National Debt vs GDP(creditloan.com)
- Krugman vs. Reagan(nationalreview.com)
- Dr. Paul Craig Roberts – Economist, Co-Founder of Reaganomics & Acclaimed Author(planet.infowars.com)