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| Author: | Amity Shlaes, Senior Fellow for Economic History |
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July 17, 2008
Bloomberg
July 17 (Bloomberg)—Is this the end of Republicans and their Reaganite philosophy? That’s how many Americans are subtitling the financial drama unfolding before their eyes.
A typical analysis came from an op-ed writer in the Springfield, Missouri, News-Leader: “The present economic crisis with its multifaceted negatives originated from Reagan’s ‘trickle-down economics,’ also known as ‘supply side economics.’ ”
The Fannie Mae and Freddie Mac story is huge. The losses in the mortgage-finance system are already worse than those of the savings-and-loan crisis. Fannie and Freddie will doubtless cost taxpayers as well. But to assign responsibility to Reaganomics, or Republicans alone, is worse than crisis revisionism. It is absurd.
The reality is that Reaganism is a broad, common-sense movement in which Democrats have also long participated. What’s more, Reaganism hasn’t always delivered what it promises. You can even argue that the current challenges are a result of not too much Reaganism, but too little.
Recall the period this one is coming to resemble, the 1970s. Oil-price spikes, rising inflation, stubborn unemployment. Economists, including Reagan advisers, talked about it all in macroeconomic terms—aggregates, demand, and yes, supply.
But a lot of the trouble then was at the individual level. Sometimes that individual had no job. Sometimes the job wasn’t rewarding enough: The top income tax rate was 70 percent.
Even people with taxable income of $50,000 paid in the 50 percent range. While that money translates to $168,000 today, even people at that income level now don’t pay the top tax rate of 35 percent.
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America Between the Wars explores how the decisions and debates of the years between the fall of the Berlin Wall and the collapse of the Twin Towers shaped the events, arguments, and politics of the world we live in today.
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