As a conservative tide has risen in the United States, so has the acceptance of conservative economic theory as the solution to economic woes from inflation to unemployment. Ever since Pres. Ronald Reagan brought supply-side economics to the White House in 1980, a large portion of America has found it to be a compelling idea that could lead to the flourishing of our country. Coming into Reagan's tenure as president, the American economy was lagging due to rising inflation and unemployment. However, once Reagan took office, economic indicators seemingly responded to his implementation of supply-side theory, cutting taxes for the wealthy and deregulating business in order to increase investment and grow the economy. While a superficial glance at data suggests the success of supply-side economics, a more thorough look reveals the shortcomings of what George H.W. Bush called "voodoo economics."
Reagan was elected in 1980 on the promise of shrinking the government and reducing the double hit of inflation and unemployment known as "stagflation." Seemingly, Reagan's supply-side policy worked wonders, dropping the inflation rate from 13.91 percent in 1980 to only 4.05 percent in 1988 (according to a piece on multpl.com). Despite the drastic drop, a closer look reveals that inflation had spiked in 1980 and began to decline, dropping over 2 percent from 1980 to 1981 when President Carter was still in office, suggesting that
Another piece of evidence that is often cited as a success for Reaganomics is the period of rapid growth that the U.S. economy underwent in the middle of Reagan's term when growth skyrocketed to above 8 percent, according to the website tradingeconomics.com. While clearly a strong piece of evidence for the potential of supply-side economics, there are also numerous examples of periods where the same theory of less taxation and regulation has plunged the U.S. into recession. Most notably, during the financial crash of 2007 and 2008, deregulation under the Bush Administration led to the bursting of the housing bubble and the failure of many large banks. The growth during parts of the 1980s can be easily attributed to Reagan's supply-side economic policies, but at the same time periods of recession and GDP contraction can be traced to the same theory.
Although the Reagan Administration oversaw a period of sustained economic growth, its implementation of supply-side economics caused the greatest percentage increase in the debt in recent history. By cutting taxes, leaving entitlement programs, and greatly ratcheting up defense spending, according to figures from the Congressional Budget Office, Reagan caused a debt increase of 188 percent from 1980 to 1988. During the years Reagan was in office the total debt held by the public soared from $711.9 billion to $2,190.7 billion while government revenues only increased from $517.1 billion to $991.1 billion despite rapid growth. In contrast, under the first three years of the Obama Administration, according to skymachines.com, the debt has increased only 41 percent, suggesting that an eight year total would amount to a little over a 100 percent increase, only about half the debt growth that Reagan caused.
There is promise for supply-side economics. President Reagan's use of the theory, while successful at growing the economy, reducing inflation and reducing unemployment 1.6 percent in eight years (according to econlib.org), had inherent flaws. Trickle-down theory relies on the wealthiest people in the country reinvesting the money they get back from conservative policy, a practice that not enough of the beneficiaries of trickle-down economics actually take part in. If supply-side economics was modified to force people to invest a part of their profits back into the economy, the wealth could actually trickle down to everyone.
As election season rolls in, the airwaves are bound to be crowded with people putting forth competing economic proposals. Mitt Romney sincerely believes in the power of supply-side economics to alleviate the stunted growth of the economy. However, Romney sees the economy through the tinted lens of a wealthy businessman. Although he totes his business experience as qualification to hold the highest office in the country, Romney's years at Bain Capital have brought about a skewed understanding of the economy. Because trickle-down economic policies have benefited him, Romney has developed the idea that they will benefit everyone.
During the 1980s, President Ronald Reagan's use of the trickle-down theory of economics oversaw a period where the U.S. economy grew and stagflation slowed. However, while Reagan's economic policies oversaw these positive changes, it isn't obvious that they caused all of them. At the same time, the national debt ballooned almost 200 percent from 1980 to 1988. While there is a possibility that a modified supply-side economic theory could be a real boon to the U.S. economy, Reagan's Administration implemented a largely ineffective version of it that hurts more than it helps; a system that we can't afford to return to.
Sam Gartenstein is a junior from Brattleboro Union High School.