| Council Member Join Date: Sep 2005 Location: Michigan, Near Detroit Posts: 1,029 Level up: 50%, 101 Points needed |  |  Quote:
Originally Posted by Jefferson  You're wrong on many counts...
First of all, Reagan took office after the HUGE mess Carter left: 20% inflation and most operating loans were at least 18%.
Reaganomics worked because they removed the overwhelming tax burden on American businesses. Less income, in the short-term, was happening while the American economy was rebounding. As the economy began to boom, tax income began coming in at record rates. It took time.
Can you begin to understand basic economics?
Let me make it very, very simple: If I spend $3,000 to buy a good mower, to go into the mowing business, my immediate bottom line looks VERY bad. I'm $3,000 in debt! However, if using that $3,000 mower enables me to make $10,000 per year, the initial $3,000 debt is not a bad deal, is it? Of course, the "bottom line" does not turn around IMMEDIATELY.
Can you begin to understand this? | Yes, I understand the economic theory that investing more into the economy earlier pays off later, and I agree that we should operate under some amount of deficit. But that deficit can't be as large as the ones Reagan and Bush Sr created, or we'll be paying for it in the end. The deficit can only be large enough that your Debt to GDP ratio stays the same.
Look again at the first graph in this link: http://zfacts.com/metaPage/lib/National-Debt-GDP-L.gif
The line in that graph should remain relatively flat. If the line goes up, that means your debt is increasing faster than your GDP, and each year that happens, a larger percent of our budget intake goes toward paying off debt. If we keep that up, eventually we'll have to dedicate our entire budget toward paying off debt.
What I mean is, the sort of mass-spending that Reagan and Bush Sr did is unsustainable. While Reagan and Bush Sr might have seen a short-term economic boost from spending like crazy, today we have to allocate a larger percent of our budget toward paying off debt.
So like I said, the line in that graph should generally be flat. Now, in a time of recession, we can give the economy a boost by cutting taxes and increasing debt. This causes the line to go up. But sooner or later, someone's going to have to bring the line back down again. We can't keep making it go up, or our budget will eventually be overwhelmed by debt.
Do you follow what I'm saying? -Jaxian |