1981 Economic Recovery Tax Act

I'm looking at numbers on this. Let me explain, my girlfriend just started her American Government Class, and the book is called "American Government" written by James Q. Wilson, who was a member of Reagans Foreign Intelligence Advisory Board.

So I am extremely critical of this book. It says Reagan's Economic Recovery Tax Act stimulated the economy by reducing taxes and increasing spending. I heard Reaganomics failed miserably, so I decided to look at the numbers.

I found a page listing Carters unemployment rate at 11% in 1979. Then I find this page with Reagans numbers.

http://reagan.webteamone.com/unemployment.cfm

What this tells me is that before and immediately after the tax cut's (starting from the 7.0% in 1980, how it got there from the supposed 11%, I have no clue), the rate went up 2.5%. However, in years following it dropped 4.3%. Wouldn't that be a successful tax cut?

I have always heard to the contrary. Even the History Channel stated craploads of people were unemployed and impoverished in the 1980's.

The only thing I can think is that I heard Reagan cut taxes in 1982 and raised them gradually the next 6 years.

What is the deal here guys? Am I not seeing something?

mental health care funding, filling the streets the next few years with homeless crazy folks.

The 81 tax did as all forever deficit economic plans do - it raised long term interest rates (yes absolute value of long term rates were falling - but 95% of the level of long term rates is the state of the current economy - and with the tax cut the long term interest rates fell more slowly - they were "sticky" despite the economy slowing - and it had the expected negative effect on the economy - it caused the slowing economy to fall into the worse recession in our history - post the Depression - sounds like the Bush tax cuts doesn't it?).

In 82 and 84 the Senate controlled by the GOP and led by Bob Dole pushed through the 2 largest Tax increases - relative to the size of the economy - in our history. The 82-83 14 month recession then ended thanks to the tax increases. At the end of the day, Carters 4 year economic growth of 3.25% per year was matched by Reagan's 8 year average economic growth of 3.33% (but at a cost of a $1.7 trillion increase in the Natiuonal Debt). Reagan did decrease federal revenue over his 8 years to about 70% of the $'s that would have come in had Carters Tax rates been unchanged, in inflation adjusted terms - but much of that was from a higher payroll tax as Reagab shilted the tax burden from the rich to the poor and middle class.

Use rhe Gov data at bna.doc.gov and irs.gov to verify the above.

As to unemployment you are correct that Feb 81 it was 7% and at the end of Reagan Bush - on Dec 92 - it was still at 7%.

The only sucessful tax cut was JFK because the economic situation and the design of the JFK tax cut jump started demand in an economy with excess capacity. Later GOP tax cuts were designed as gifts to the rich - and only screwed the economy.

The 86 tax change was a trade off of ending special for the rich deductions and making equivalent value cuts in the tax rates the rich paid.

Hope this helps.

Oh, the nuances of the economy. To my understanding these cuts passed in 1982, was it earlier in the year? This would mean that almost immediately following the cuts the Senate raised taxes again? Makes my marginally-economics-knowlegable head hurt.

I understand that the cuts had to come from somewhere, and the mental health deal doesn't surprise me, it would be unbecoming of Reagan to drop his AID to murderous regimes or bloating defense budget, huh.

Printed it out and will give it to my girlfriend tommorow morning. Thanks.

Bob Dole saved the economy!