What is Reaganomics?

Reaganomics – Explained

Have you wondered whatever happened to Reaganomics? This was Ronald Reagan’s big idea, to achieve broad-based prosperity through supply-side tax cuts. How did that all work out? Let’s take a look at the evidence.
The notion, that lower tax rates will bring in more tax revenue, does not seem to make sense. It’s based on the Laffer curve, which shows the relationship between government revenue and the tax rate. At a 0% tax rate, there would obviously be no tax revenue. As the tax rate increased, so would revenue, until it maxed out at a sweet spot. Beyond that point, the burden of the high tax rate would depress the economy so much that tax revenue would actually decrease until it zeroed out.

Arthur Laffer was an economist on Reagan’s advisory board who argued that the top tax rate at the time - of 70% - was choking the economy – putting us to the right of the sweet spot. By reducing this tax rate, we would unleash a boom in corporate profits and personal incomes so that government tax revenues would actually increase bringing us back to the sweet spot.

The Laffer curve was an appealing notion to the wealthy because it provided a justification for cutting their taxes. This would be a win-win-win: lower taxes, a stronger economy, and a shrinking budget deficit. As the money flowed downstream, the rising tide would lift all boats. It was almost too good to be true. And, to be honest, not everyone agreed. Some even called it a Ponzi scheme. Let’s turn to the history books to see who was actually correct.

The first visible impact of the tax cuts was, disappointingly, a huge loss of government revenue, and an immediate spike in the federal deficit, which skyrocketed, quickly topped out at nearly $200 billion and remained unacceptably high throughout Reagan’s term, only to swell even more under his Republican successor, George Bush, Senior. As a solution to Carter’s $80 billion budget deficit, [boxing in the bars here] Reaganomics was a miserable failure.

As for the Laffer curve, most available evidence now suggests that the sweet spot happens at a top tax rate of 70% the very spot we started at before the first Reagan tax cut. The Laffer principle, then, that cutting tax rates increases tax revenue, the anchoring principle of supply side economics turns out to be a laugher.

[robertsteinbuch]

As we look at this at the end of 2024, I see some problems: the deficit is out of control, government spending is too high, and corporate stores are closing

[kristentan]

hi! i'm doing a research paper on reaganomics for my u.s. history class and this video was really helpful! is there any way you could provide a source list for your numbers and graphs and things?

[vancedrapor]

Great video man, I was surprised by the lack of attention this Channel has, good educational content, keep it up!

[EliasGarcia-ctvb]

I wish you put your sources. I’d love to find your charts and numbers for my own research.

[logangrimnar]

All I'm taking from this is that it is an effective system and government spending is still awful enough to ruin it. It successfully grew the economy, but then the admin started borrowing money to bankrupt the Soviets. It sounds like it works in practice. But not with increased government spending.

[thomaspayne]

Why blame Reaganomics for credit cards?

[rdalemd]

The video fails to mention the Unprecedented Growth of the Dow Jones during Reagan’s second term. The drop in the unemployment rate of about 2%. Yes, Reaganomics was controversial but some economists have stated that Reagan's policies were an important part of bringing about the third longest peacetime economic expansion in U.S. history. His so called “Star Wars” program was brilliant and the Russians attempt to keep up with our Military Spending bankrupted the Communist Government. This former “B” movie actor with his so called controversies was a true American Patriot. And one of the last most recent Presidents who experienced the World Wide horrors of World War II. This man doesn’t get the credit he deserves in American History.

[waytoobiased]

ARE YOU UNHAPPY GIIIIRL IN THIS CONFUSING WOOOORLD

[techwasklie]

At 70% TAX, I'd quit my job and go on government assistance and some fools that still prefer to work at 70% tax can support me. Who the heck would work 8.5 months out of the year for nothing?!?! How's that for a sweet spot!
People do not like paying taxes. The people are better off keeping more of what they earn, not taking as much as possible from them.
Yes, tax breaks help companies, that doesn't mean the middleclass suffers. Companies compete for business to maximize profit. The easier it is to make a profit, the cheaper it is to produce goods and services. A rising tide does lift all boats. Everyone wins when burdens are low. Tax whoever high, it's everyone that absorbs the pain of it. The "rich" just pass the tax down to the consumers to get back to the profit margin they were at before. Double the tax on the rich/companies, expect prices to double and everyone pays for it. People don't notice how far we've come in the past 100 years. We are, including the poor, are extremely wealthy in comparison! What we call the "poor" in 2024 is living far greater lives than that of millionaires 100 years ago. The quality of life index is skyrocketing. The issue that people are seeing is the comparison between themselves and the very fortunate individuals that own private planes and yachts. The rich are getting rich faster than the bottom, yes, but the bottom is getting richer as well. "The poor is not getting poorer, " that's ridiculous. If that was the case, our housing would be getting worse. We would have worst cars, not better. We wouldn't have inexpensive TV's to choose from, or internet access on a smartphone that has literally have millions of dollars worth of information and knowledge at our fingertips. We wouldn't have access to Amazon and other resourceful entities that make everyday life exponentially better.
The reason why the deficit got worse under Reagan was because of the drastic increase in Cold War military spending. His tax cuts actually saw more revenue than before with the top 1% ironically paying more taxes to the government because of economic growth. I have to mention, Bush Sr. created a 10% wealth tax on luxurious items and the government lost revenue. So yea, raising peoples taxes doesn't help. That wealth tax stopped the rich from spending money on items they otherwise would have bought if that tax hadn't been in place. I have have real world experience with that living in CT. My friend was going to buy an $80, 000 car but backed out of the transaction because CT has a special luxury tax on cars over 50k. Therefore, money wasn't spent, money wasn't earned, the state missed out on regular sales tax revenue and the guy selling and my friend were both at a lose lose.

[lisalove]

I'll pay you back on the 33rd ....

[jean-pierredevent]

There is some common sense in these ideas but why not first tax as usual and then, when the company/investor proves to have created jobs, give back accordingly???

[jerrymoostache]

why's this guy wearing a lab coat to talk about economics? to appear more authoritative to dummies?

[aarone]

Seems extremely unbiased. Just kidding. I’ve seen Floyd Mayweather boxing matches less one sided than you.

[mwredfern]

Still confused. Your a doctor of something. Just not economics. And yet you’re talking about economics. 🤦🏻‍♂️

You’re high Nate.

You completely overlooked and ignored what was going on during the years of Reagan. No mention of shoring up and eliminating foreign threats ignored by your uncle Jimmy Carter. No mention of the military buildup, which led to increased government spending. And that’s just the beginning.

People didn’t make less because their employers paid them less. But your video leads in that direction. People got paid less because your uncle Jimmy left Reagan with inflation rates that were staggering. Inflation that takes years to correct. Reagan fought inflation off by lowering taxes on corporations, so the corporations could borrow more to increase productivity and eventually pay.

You fail to show that not only did Reagan use the trickle down method. But so did your uncle Bill Clinton. Except Bill used this with home loans, by allowing mortgage lenders to go unregulated. Something not Bush or Reagan pushed.

The biggest bullshit of your video is 1) you’re not an economist. And 2) you fail to mention that reform doesn’t fix itself overnight. And certainly not in 8 years. This is why economies are predicted to make radical resets every 10-12 years. Usually in the manner of a crash. Did they not cover that in your economics 101 class?

Stick to being a doctor of something. And leave economics to economists. Cause you suck at it. 😁