80s Show, Indeed
I could prattle off about a dozen different clichés in the
light of Bush's new budget. You've probably already heard
them, or thought them yourself. But the fact of the matter
is that not everyone understands exactly why the return to
Reaganomics is a Bad Idea. For the CEOs and other wealthy
people this is understandable; they have the most to gain
from this policy. However, the number of middle and lower
class citizens that remain ignorant of Reaganomics' flaws
remain staggeringly large. Factor in the fact that most discussions
of fiscal policy are fraught with political buzzwords and
insider phrases and you can see why this trend remains. So
I will attempt to break down Reaganomics in a way that the
everyone can understand.
The core of Reaganomics is tax cuts. "But wait," I hear some
people say, "tax cuts are good, right?". Unfortunately it's
not as simple as that. The taxes that you pay are a percentage
of the money you make each year; i.e. the more money you make,
the more taxes you pay. So the Smiths, a middle class family,
would pay about $2,000 in taxes, while the Fords, an upper
class family who own the company the Smiths work for, would
pay about $60,000 in taxes.
But this alwo works in reverse. After a tax cut the Smiths
would save an extra $50 on taxes while the Fords would save
an extra $1500. Makes sense, right? Well, this is assuming
that the tax cut is of an equal percentage across the board,
meaning that taxes were lowered by 2.5% for everyone.
However Reaganomics doesn't do that. Under Reaganomics the
wealthy get much larger tax cuts percentagewise than the middle
and lower classes do. So while the Smiths still get their
$50 tax cut, the Fords actually get a $2100 tax cut. If you
do the math the Fords got a 40% larger tax cut than the Smiths
I can hear some of you going, "Thats as it may be, but I
could use that extra $50 a year." That's right, you could.
But the Fords don't need that extra money. The lower and middle
classes have a host of costs to deal with that the upper classes
rarely see. Mortgages (first and second), car payments, student
loans, and credit card payments are all expenses that are
nearly exclusive to the lower and middle classes. The wealthy
already own their property outright, so they don't have to
pay the bank for mortgages. The same goes with their cars.
They pay college out of their own pockets so they aren't paying
for student loans 20 years later. And they have the money
to completely pay off any credit cards they have each month,
so they don't pay interest on them.
Now, the pitch is that the rich will take that extra money
and use it in a way that it will flow to the classes under
them. That's where you get the phrase "Trickle Down Economics".
But this doesn't work either. You see, they've already got
money, so it should already be Trickling Down. But it's not.
Instead of passing that money on to others, they're investing
it so they can make, you guessed it, more money. So that $2100
tax break that the Fords just got isn't going to benefit the
Smiths at all. Instead, it'll be invested to make the Fords
The companion component to the tax cuts in Reaganomics is
increased spending. So not only will the government be earning
less money through taxes, it will be spending more money.
Let's go back to our friends the Smiths and the Fords for
a second for an analogy. Mr. Ford decides that he's going
to cut everyone's hours at the plant, so suddenly the Smiths
are making less money. Then, later on that week, little Jimmy
Smith falls off his bike and breaks his arm. Not only are
the Smiths making less money, now they have to pay the hospital
bills for little Jimmy, driving them deeper in debt than they
That's the situation that Reaganomics puts us in. Our country
will be making less money, and spending more money. Our contry
is already trillions of dollars in debt from the first round
of Reaganomics. Now instead of paying off that debt like we
were under Clinton, Bush wants to increase that debt. Speak
with any banker and they'll tell you that it this is a Bad
Idea. And that's where we're going; back to the Era of Bad