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That 80s Show, Indeed
February 7, 2002
by Adversary

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 did.

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 richer.

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 already are.

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 Ideas.

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