On Reaganomics

It's no surprise to anyone that this election is a battle of economics, specifically about who has the best way to improve the economy.  It seems like every Republican candidate's idea is that Reaganomics is the way to do this.  The core policies of Reaganomics are:

1. Reduce government spending

2. Reduce income tax and capital gains tax

3. Reduce government regulation

4. Control money supply to reduce inflation

The first point is pretty easily agreed upon by almost everyone: if we want to have more money, we need to stop spending as much.  It's like making a savings account for yourself.  One of the few things I agree with the Republicans on fiscally is reduced government spending, although where those cuts would be made is a matter of contention that I may address another time.  It should be obvious, however, that if we continue spending more than we have, then we cannot improve our economic condition

That is where my agreement ends, however.  The next point essentially says reduce government revenue.  How does that improve our economy? It means we are making less money.  It can be argued that if we are spending less, then we don't need to make as much either.  But why cut taxes and slow the recovery time when they can be left alone to speed up the process?  I will agree that in order to decrease the number of people below the poverty line and increase the number of citizens spending money, taxes on certain low income levels should be cut.  I am not going to choose what the cutoff point should be, because to be honest, if I did it would be completely arbitrary.  However, on the opposite end of the spectrum, there is a certain point where taxes need to be raised as well.  No one needs to be making billions of dollars every year.  The high end of incomes like that should be taxed extraordinarily, because really it isn't hurting them that much.  Even Warren Buffett agrees.

Regulations are another issue I don't entirely agree upon.  Most of the Republican candidates are in favor of smaller government, with Representative Ron Paul leading at the extreme.  However, although decreasing regulations will make it cheaper for corporations to use domestic labor, they are, for the most part, there for a reason.  There are almost certainly some superficial regulations that could be eliminated (although I don't claim to know what they are) but most of them are necessary.  We need regulations on corporations because those corporations are run by people, and people are not inherently ethical beings.  Environmental regulations are some of the most expensive, but if we eliminate those then we reduce the time we have to enjoy any economic benefits that would result.  Other regulations, like protection of workers' rights such as a minimum wage, are necessary so that the domestic labor gets paid enough to live on and treated well.  Both Newt Gingrich and Rick Santorum made a specific point of cutting the corporate tax rate.  Speaker Gingrich specified reducing it from the current 35% to 12.5% in an effort to encourage corporations to bring labor back to the United States.  However, what they seem to ignore is that corporations are exploiting loopholes in the tax code to avoid the 35%, in some cases actually profiting off of taxes.  What then, would encourage them to pay 12.5% instead of pay 0% or even less?

Finally, controlling the money supply to avoid inflation is important, but not in the way some look at it.  Most notable on this issue is Ron Paul, who wants to revert to the gold standard.  This is more control than I tend to see fit.  Of course we shouldn't just keep printing money to try and make the recession go away, that won't work.  But there are times where an extra boost of currency is exactly what we need, and the gold standard prevents that.  Many even argue that the gold standard played a role in prolonging the Great Depression.  The Federal Reserve could not increase the amount of money or decrease interest rates because of the gold attached to the currency.  We do need to know when to increase the money supply and when not to.  In fact, inflation can even work to our benefit when used correctly.  Franklin D. Roosevelt inflated the value of gold during his presidency in order to increase the amount of money goods cost, which therefore increased the income of everyone selling those goods.  We need to be able to manipulate our money supply, but only at the right times and not on a whim.