Lectures in History: Reaganomics

[00:00:05] This week on the lectures in history [00:00:06] podcast, Brigham Y Young University [00:00:08] historian Grant Madson examines the [00:00:11] supply side economic agenda of the 40th [00:00:13] [music] President Ronald Reagan. [00:00:15] Policies that came to be known as [00:00:16] regonomics. Reganomics was an economic [00:00:19] approach championed by Ronald Reagan [00:00:21] that emphasized tax cuts, deregulation, [00:00:24] and reduced government spending to spur [00:00:26] growth by boosting private investment [00:00:28] and job creation. More in a moment. [00:00:35] All right, welcome to class and today [00:00:38] we're going to be talking about [00:00:39] regonomics. So, uh, what we're really [00:00:42] going to talk about and we say [00:00:43] regonomics is this combination of what [00:00:45] policy prescriptions Ronald Reagan [00:00:47] advocated as well as what was going on [00:00:49] with the economy during the 1980s. So, [00:00:52] anticipate a little bit about both of [00:00:54] those things as we talk. Now, this is a [00:00:57] history class and so like we always do [00:00:59] that means I am going to take a step [00:01:01] backwards before we move forward. So, [00:01:04] the question is what was going on in the [00:01:06] economy in the 1970s? In other words, [00:01:08] what was happening before Ronald Reagan [00:01:10] took office? Well, this is something [00:01:12] that you probably remember from last [00:01:14] week. This is a combination of the [00:01:15] inflation rate and the unemployment [00:01:17] rate. Uh people at the time referred to [00:01:19] the combination of these two things as [00:01:21] the misery index. So all of the bad [00:01:23] things going on in the economy. And as [00:01:25] you can see through 77 up to 1980, both [00:01:28] inflation and unemployment were quite a [00:01:30] bit higher than what the targets would [00:01:33] have been. And this is in other words a [00:01:37] um rebuttal or a contradiction of what [00:01:40] we talked about a little bit earlier the [00:01:41] Phillips curve. So remember policy [00:01:43] makers before this had said there's a [00:01:45] tradeoff between unemployment and [00:01:47] inflation. But if we look at the stats [00:01:50] here you can see inflation just kept [00:01:52] going up and unemployment would sort of [00:01:53] go down but then go back up. So it [00:01:56] refutes in other words the whole kind of [00:01:58] policy prescription of the 1960s and7s [00:02:03] and so we should in other words we [00:02:05] should not see both unemployment [00:02:07] inflation increase at the same time [00:02:08] according to the Philips curve and this [00:02:10] forced a bit of a re-evaluation of [00:02:12] macroeconomic theory across the board [00:02:15] what should government do to rectify a [00:02:17] situation like this most people don't [00:02:19] remember now but that was probably the [00:02:21] worst economic situation the United [00:02:23] States had been in since the Great [00:02:25] Depression of the 1930s, [00:02:27] >> inflation was roaring. Interest rates [00:02:30] were going up. People couldn't afford to [00:02:32] buy homes. A lot of people remember very [00:02:35] clearly if they were old enough to drive [00:02:36] a car then you couldn't buy gasoline. No [00:02:39] matter how much money you had, [00:02:44] >> we had a hostage crisis in Iran. [00:02:48] People were getting worried. [00:02:51] >> All right. All right. So you can see a [00:02:52] lot of things were going wrong [00:02:53] particularly in the economy and that's [00:02:55] the situation that was you know existing [00:02:58] when Reagan took over. So Reagan came [00:03:00] into the office uh basically trying to [00:03:03] say how can we think of things [00:03:05] differently? What's a different [00:03:06] approach? Well, summarizing a lot of the [00:03:07] stuff we've talked about so far, most of [00:03:10] what we've talked about since we started [00:03:11] talking about John Maynard Kanes has to [00:03:14] do with demandside economics, right? A [00:03:17] lot of us, particularly in the 60s, [00:03:19] Walter Heler, the Kennedy tax cuts, [00:03:21] Lynen Johnson, all of those things, the [00:03:23] Great Society, they were all framed as [00:03:26] ways to maintain high demand. So, we [00:03:28] would call that demandside [00:03:31] economics. [00:03:32] By contrast, Reagan uh sort of latched [00:03:35] on to a theory from a professor Arthur [00:03:38] Laugher who said the issue isn't demand, [00:03:41] the issue is supply. The problem with [00:03:43] the American economy is that there's too [00:03:45] much demand, there's not enough supply. [00:03:48] And then said that a lot of what [00:03:50] government does, it doesn't just affect [00:03:52] aggregates, it also shapes incentives. [00:03:55] So the question that he raised is how do [00:03:57] we create more incentive for people to [00:04:00] supply? Well, okay. The idea is [00:04:03] basically this. Demand won't work if [00:04:06] people are incentivized not to work. And [00:04:09] his basic theory is something like high [00:04:12] taxes in particular creates an incentive [00:04:15] not to work. Well, how does that make [00:04:17] sense? Well, it's now famously called [00:04:19] the laugher curve and it looks something [00:04:22] like this. And the idea is if okay so on [00:04:25] your y ais that is the tax rate and on [00:04:28] the x axis that's tax revenue. So in [00:04:33] theory, if the well not in theory, but [00:04:35] in practice, if you can think about [00:04:36] this, this makes sense to us. At a 0% [00:04:39] tax rate, the government is going to [00:04:41] take in 0% taxes, right? If doesn't tax [00:04:44] anything, there's no tax revenue. But [00:04:46] also, if the government taxed at 100%, [00:04:50] it would take in 0% revenue. Why is [00:04:53] that? Well, if you knew that everything [00:04:55] you earned just went to the government, [00:04:58] would you bother working? Right? And so [00:05:01] if the answer is pretty much well no, [00:05:03] I'm not going to work just to give all [00:05:04] my money away. So the theory was [00:05:06] something like there are certain tax [00:05:08] rates when they get high enough people [00:05:11] are less inclined to actually work [00:05:14] because they know that their money is [00:05:15] actually just going to go to the [00:05:16] government. So you can imagine here we [00:05:18] have that point A that's far enough [00:05:20] along the curve where if the government [00:05:22] actually increased the tax rate, its tax [00:05:25] revenue would decline. The goal is [00:05:28] rather to be at what I'm calling point B [00:05:29] here or it's M on this graph. The idea [00:05:32] is that's the rate at which government [00:05:34] can maximize revenue because it's not [00:05:36] disincentivizing work. Anything above [00:05:39] that rate will disincentivize work. [00:05:42] Okay. So depending where we are on this [00:05:44] curve, this does create a really [00:05:47] seductive claim, which is if we're up at [00:05:50] point A, [00:05:51] tax cuts should theoretically pay for [00:05:54] themselves. By reducing the tax rate, [00:05:57] government could actually take in more [00:05:59] money in tax revenue. And this all fit [00:06:02] within Reagan's broader claims about the [00:06:04] size of the government. And so the [00:06:06] laugher curve, the laugher's argument [00:06:09] ended up having a lot of influence on [00:06:11] Ronald Reagan. [00:06:12] >> Reconomics literally is, as far as I'm [00:06:14] concerned, uh it is the provision of [00:06:17] incentives to the marketplace to allow [00:06:19] [music] the economy to perform its [00:06:22] functions properly. [00:06:23] >> Dr. Lapper, would you draw your curve [00:06:25] for me and explain how it works? [00:06:28] >> Sure. In a very simple sense, if you tax [00:06:30] people who work and you pay people who [00:06:33] don't work, don't be surprised if you [00:06:36] find a lot of people not working. Hello, [00:06:38] is that so complicated? [00:06:40] >> I mean, if you tax rich people and give [00:06:42] the money to poor people, you're going [00:06:44] to have lots and lots of poor people and [00:06:46] no rich people. [00:06:47] >> All right, so there you go. That's [00:06:48] Laugher kind of explaining the essence [00:06:50] and it's all about incentives. Now, you [00:06:52] also heard him bring up welfare. The [00:06:54] idea is in an expanded welfare state [00:06:56] once again the government is creating [00:06:58] incentives not to work. What you if you [00:07:02] add the two things together in other [00:07:04] words government policy is shrinking the [00:07:07] incentives to create more supply. And so [00:07:10] his basic premise is if government cuts [00:07:13] taxes but also cuts welfare pay spending [00:07:16] then the result will be greater supply [00:07:18] and u maybe ironically greater [00:07:21] government revenue. Tax cuts will not [00:07:23] only pay for themselves, but it will [00:07:24] solve the problems of inflation by [00:07:27] driving up production and will increase [00:07:29] overall prosperity. Okay. So, well, once [00:07:32] in office, after Reagan won in 1980 and [00:07:35] took office, he made tax reduction the [00:07:38] key focus of almost all he did. [00:07:42] The Carter administration had made a [00:07:44] terrible mistake by sending up so much [00:07:46] legislation in their first 100 days that [00:07:48] [music] [00:07:49] the focus became very diffused. We [00:07:51] didn't make that mistake. [music] I [00:07:53] said, "Look, our 100 day plan says we [00:07:55] are to have three uh priorities and [00:07:58] those three priorities are economic [00:08:00] recovery, economic recovery, and [00:08:01] economic recovery. And that's what we [00:08:03] ought to focus on for the first 100 days [00:08:05] and carry out our plan." [00:08:07] >> All right. So, you see that was that's [00:08:09] uh Jim Baker. He was uh chief of staff [00:08:11] and very important Reagan adviser [00:08:13] talking about those first months in [00:08:14] office. And so, Reagan did he went uh [00:08:17] went and lobbyed Congress. Really made [00:08:19] it the focus of everything he did. Okay. [00:08:21] One of the things that's interesting [00:08:23] about this particular moment um in you [00:08:26] know fiscal policy is that uh policy [00:08:30] makers became aware of a phenomena [00:08:32] called tax or excuse me bracket creep. [00:08:35] And so you're asking yourself what is [00:08:36] bracket creep? Well it goes something [00:08:38] like this. Inflation is a general rise [00:08:42] in prices but it usually also means a [00:08:44] general rise in wages. Now, those wages [00:08:48] can't buy anymore as they're going up, [00:08:50] but they are going up. Well, the way the [00:08:53] tax code was written, it went something [00:08:55] like this. If you earn, let's say, [00:08:57] $1,000, you paid this percentage of your [00:09:00] income in taxes. If you earned $5,000, [00:09:03] then it would be a higher percentage of [00:09:04] your income in taxes, $10,000, and so [00:09:06] on. So, with each incremental rise in [00:09:10] wages, you paid a higher percentage of [00:09:14] your income. Well, as you can imagine, [00:09:17] in an inflationary environment where my [00:09:19] wages are going up, but so are prices, I [00:09:23] am nevertheless moving from one tax [00:09:25] bracket to a higher tax bracket, not [00:09:27] because I'm earning more in real terms. [00:09:29] I'm earning more in nominal terms. And [00:09:32] so, you can kind of capture this in this [00:09:33] chart I have over here on the right. So, [00:09:35] the top tax rate was for top tax payers [00:09:38] 70%. Right? So the marginal amount they [00:09:41] you know on the margin they were paying [00:09:43] 70% of their income and you can see that [00:09:46] the percent of personal income going to [00:09:48] taxes there would be a change like in [00:09:50] 1970 it changed from 71.75 down to 70 [00:09:54] and so the tax as a percent of personal [00:09:55] income declined but over time it would [00:09:58] climb back up and then they would make a [00:09:59] change and it would drop but then it [00:10:01] would climb back up. So by 78 79 once [00:10:04] again 80 a higher percentage 81 of [00:10:06] people's income is going to taxes not [00:10:09] because they're earning more in real [00:10:10] terms. It's just that their income is [00:10:12] going up because of inflation but so are [00:10:14] their costs but their tax burden was [00:10:16] also climbing. So, one of the things [00:10:18] that Reagan also wanted to tackle in tax [00:10:21] reform was not just reducing taxes, but [00:10:23] making sure that the government couldn't [00:10:25] didn't have it's essentially taking away [00:10:26] an incentive for the government to run [00:10:28] inflation uh throughout the economy as a [00:10:31] way to capture more tax revenue. Right? [00:10:34] Does that make sense? So, it's a it's an [00:10:35] incentation was an incentive government [00:10:37] the government had an incentive to [00:10:39] create inflation in order to get more [00:10:41] tax revenue. All right. Well, as it [00:10:43] turned out in 1980 through the [00:10:44] elections, many Democrats had also [00:10:46] campaigned and endorsed tax reduction. [00:10:49] They all had different ideas about what [00:10:51] they wanted cut, but generally speaking, [00:10:53] there was bipartisan support for a tax [00:10:56] bill. and Reagan took advantage of that [00:10:58] and so worked with Democrats to a [00:11:00] certain degree to build what ultimately [00:11:02] became the Economic Recovery Tax Act, [00:11:05] ERTA for those at the time, that's the [00:11:06] acronym, which made it through Congress [00:11:09] and became law in August of 1981. Like I [00:11:12] said, it passed with bipartisan support [00:11:14] and it included cuts for both businesses [00:11:16] and individuals. It had a ton of [00:11:19] itemized tax credits and reductions. [00:11:21] This is part of what happens when you [00:11:22] run a tax cut through Congress. [00:11:24] everybody has something they want [00:11:26] protected and so those all got added to [00:11:28] the final bill. And the most important [00:11:31] thing for uh you know Reagan I think was [00:11:34] probably that it index well maybe not [00:11:35] the most important but one of the [00:11:36] important things is that it it index tax [00:11:38] brackets to inflation so that bracket [00:11:40] creep wouldn't happen. Josie you've got [00:11:42] a question. [00:11:42] >> Yes I do. Um I was just wondering if we [00:11:45] should like how these tax cuts like do [00:11:48] they relate to Keynesian economics? [00:11:50] >> Yeah. Right. So this is a really good [00:11:52] question and I think it's one of those [00:11:54] things that economists would still [00:11:56] debate. The rationale for the tax cuts [00:11:59] was very different. Remember for canes [00:12:01] the rationale is always going to be we [00:12:03] need more demand that money isn't [00:12:06] getting used. Right? This whole thing we [00:12:08] talked about liquidity traps where money [00:12:10] is trapped in savings and isn't [00:12:11] recycling back through the economy. Of [00:12:13] course in 198081 the problem is the [00:12:15] opposite. There's too much money getting [00:12:17] recycled too quickly. That's what's [00:12:18] driving inflation. So the justification [00:12:20] would be very different. Now is the [00:12:23] effect that it had Keynesian. That's a [00:12:25] much more controversial question. I [00:12:26] don't know the answer to that. I think [00:12:29] uh that's the kind of thing where I [00:12:30] think economists still are arguing about [00:12:31] it. But uh but it is a good question [00:12:33] we'll have to kind of think about. Yeah. [00:12:34] Hey, [00:12:35] >> so how close to Laugher's theory was the [00:12:38] tax form in actuality? Like did it did [00:12:40] Congress modify it at all for their own [00:12:42] interest or how did that work? [00:12:43] >> Yeah. Right. So this is also [00:12:44] controversial. Good question. Um I would [00:12:48] say in spirit it is pretty close to what [00:12:50] Lafer was saying. My sense is uh from [00:12:53] what I've understood he said [00:12:55] subsequently to really be effective you [00:12:57] have to take in account of not just what [00:12:59] the federal government is taxing but [00:13:00] also what state governments are taxing. [00:13:02] So you'd have to mix both all so the [00:13:04] total tax bill as it were for for [00:13:06] individuals. Uh but by contrast um so [00:13:10] there's a guy David Stockman. He was the [00:13:12] budget director for Ronald Reagan during [00:13:14] this period and he was a little bit [00:13:15] disillusioned with the consequences of [00:13:17] the tax cuts. And he sort of famously [00:13:19] said, and I'm going to approximate his [00:13:21] quote, but he said something like supply [00:13:24] side theory had as much to do with this [00:13:26] particular tax cut as love has to do [00:13:28] with an orgy. Uh, in other words, uh, [00:13:32] you know, uh, it would be an accident if [00:13:34] that was the case. And so, anyway, [00:13:36] Sarah, I know you're all snickering. [00:13:37] It's a BYU professor saying the word [00:13:38] orgy. Uh let me just be on the record of [00:13:41] saying this. I am in no way advocating [00:13:42] for that. I am just quoting uh what [00:13:46] David Stockman had to say at the time. [00:13:48] All right, let's keep going. All right, [00:13:50] so the what what did it actually [00:13:52] include? What did Erda have? So it [00:13:54] dropped that top rate that we looked at [00:13:55] before from 70% to 50%. And it phased in [00:13:59] overall just about everybody got a tax [00:14:01] cut about 23% for all taxpayers. This is [00:14:04] one that's really important for [00:14:05] business. It accelerated depreciation [00:14:07] deductions. So if you're investing, you [00:14:10] can get a tax cut by virtue of [00:14:12] investment. So this is a good way. [00:14:13] Again, this fits that supply side [00:14:15] theory. We want more production coming [00:14:18] out of business. As I mentioned, it [00:14:20] indexed individual income to inflation [00:14:22] so that you wouldn't get pushed into a [00:14:23] higher tax bracket just because of [00:14:25] inflation. And uh it started this [00:14:27] practice. We could start doing IAS, [00:14:28] which I know doesn't matter to all of [00:14:29] you because you were young and not even [00:14:31] thinking about it. For people like me [00:14:32] who are contemplating retirement, this [00:14:35] is an important innovation. Yeah. [00:14:38] Jordan. [00:14:39] >> So is this also Keynesian in the sense [00:14:41] that you're pulling instead of the [00:14:43] government having to spend more, you're [00:14:44] getting the investment side of it [00:14:45] because appreciated accelerated [00:14:48] appreciation deductions and also [00:14:49] establishing IAS puts more money in for [00:14:52] investment. So is that also the [00:14:53] Keynesian side of this or [00:14:55] >> Yeah. Right. So you're this is exactly [00:14:57] right. This is one of those questions we [00:14:58] have. I mean in a sense it's like [00:15:00] Keynesian economics but again it wasn't [00:15:02] the rationale. So whether it had a [00:15:04] Keynesian effect we'll have to answer [00:15:06] that in about 15 slides when we see what [00:15:08] happened next. And I think you could [00:15:09] make the argument this is just Keynesian [00:15:11] stimulus but again the justification was [00:15:14] on the supply side. That's at least the [00:15:16] argument. All right so let's keep going. [00:15:18] So in the meantime and this is something [00:15:19] we've talked a lot about. uh in 79 Paul [00:15:24] Vulkar became the chair of the Federal [00:15:26] Reserve and had already decided to take [00:15:28] action on inflation even before Reagan [00:15:30] took office right and that meant mostly [00:15:33] shrinking the money supply or I [00:15:34] shouldn't say not shrinking but [00:15:36] shrinking the growth in the money supply [00:15:38] trying to hold you know the stock of [00:15:40] money in check and did that in part by [00:15:42] raising interest rates dramatically and [00:15:45] so there were already anti-inflationary [00:15:48] measures being implemented even before [00:15:50] Reagan took office, right? And this [00:15:52] actually had the consequence of pushing [00:15:53] the economy into a really severe [00:15:55] recession in 1982, just about the moment [00:15:58] that the tax cuts got passed. [00:16:00] >> In 1979, Vulkar was appointed chairman [00:16:03] of the Federal Reserve Board of [00:16:04] Governors. The Fed tries to avoid [00:16:07] inflation because it causes many [00:16:09] problems. Businesses don't know where [00:16:11] prices are headed and can't plan for the [00:16:14] future. Individuals tend to spend their [00:16:16] money faster before it loses even more [00:16:18] value. and they tend to save less. [00:16:22] >> If you're going to build more factories, [00:16:24] if you're going to buy some machines, [00:16:25] you have to have some savings. But [00:16:27] there's no incentive to save. If you see [00:16:30] your savings going up in smoke, so to [00:16:33] speak, because prices are rising. What's [00:16:35] the use of saving $10 this year if it's [00:16:38] going to cost you $15 next year [00:16:42] uh for what you didn't buy this year? [00:16:44] One fear was that inflation could spiral [00:16:47] into hyperinflation as it had in [00:16:49] Argentina when the government kept [00:16:51] printing more and more currency. At one [00:16:53] point, Argentina's inflation got so out [00:16:56] of control that consumers rioted against [00:16:59] rising prices. So in 1979, the Fed was [00:17:03] forced to take strong action. [00:17:06] inflation can only persist with big [00:17:08] growth in the money supply that feeds [00:17:11] and and supports the inflationary uh [00:17:15] process. So what the Federal Reserve [00:17:17] does fundamentally is control the money [00:17:19] supply and we finally reached a point [00:17:21] where we said look we're just not going [00:17:22] to permit an increase in money supply to [00:17:24] support this inflation. [00:17:25] >> All right so there's Vulkar explaining [00:17:27] some stuff we've already talked about. [00:17:28] One way to capture this is okay, you can [00:17:30] see in the yellow that's the inflation [00:17:33] rate. White is the interest rate that [00:17:36] was prevailing in the country. My [00:17:37] father-in-law tells this kind of [00:17:39] nightmare story. He and my mother [00:17:40] uh-in-law bought uh their the house [00:17:43] there in still in I think 1981 and he [00:17:46] felt lucky that he got 18% interest [00:17:49] rate. Right. Today you can see the signs [00:17:52] when you're driving along I-15 offering [00:17:54] interest rates for 30-year mortgages and [00:17:55] they're like around 5.96% [00:17:58] something along those lines. Right? So [00:18:00] three times higher interest rates at [00:18:02] this point. I mean I think he was lucky [00:18:04] to be able to afford a house at that [00:18:05] interest rate. Right? So anyway this had [00:18:08] a obviously a real impact on the economy [00:18:11] generally and drove the country into [00:18:13] recession. But you can see by the time [00:18:15] we get to like 198283 [00:18:18] that inflation rate was coming down and [00:18:20] so then the interest rates started to [00:18:21] follow that down. All right. So uh we [00:18:25] have then a really curious situation and [00:18:28] and this is one of the complexities that [00:18:29] are going Oh yeah. Okay. Yeah. Question [00:18:32] is about the last slide. So did Reagan [00:18:33] ever did he try to fire Paul Vulker or [00:18:36] like if he was doing something that was [00:18:38] like opposite did he ever like put [00:18:39] pressure on him to [00:18:41] >> Yeah. Right. So very interesting, very [00:18:43] topical question, right? Does is it a [00:18:45] good idea for the president to pressure [00:18:46] the chair of the Federal Reserve on [00:18:48] monetary policy? And so one of the [00:18:50] interesting things is Reagan never put [00:18:52] pressure on Vulkar. Uh generally [00:18:53] supported Vulkh Vulkar in this effort [00:18:56] and um and generally was um you know [00:18:59] appreciative of the work that Vulkar was [00:19:01] doing even though right this is a tough [00:19:03] thing for a president. uh if your [00:19:05] economy is in a recession in 1982, which [00:19:09] is a midterm election year, you know, it [00:19:11] could have cost Republicans seats in [00:19:14] Congress. And nevertheless, basically [00:19:16] was like okay with this. Said, "We have [00:19:17] to get this done. This is the right [00:19:19] move." Yeah. Okay. So, look, here's what [00:19:21] I was saying before. So, 8283, this is a [00:19:23] really fascinating moment because think [00:19:25] about what's going on. There's a clear [00:19:27] contradiction in policy here. So on the [00:19:30] one hand we have the Federal Reserve [00:19:34] advocating for a contractionary policy [00:19:36] at the same moment that the federal [00:19:38] government is advocating for an [00:19:40] expansionary fiscal policy. Right? So [00:19:43] tax cuts on the one side while you're [00:19:46] trying to limit the supply of money on [00:19:48] the other side. So they're kind of [00:19:49] working in some ways at cross purposes. [00:19:52] All right. Well here was the longer term [00:19:55] or at least medium-term consequence. You [00:19:57] can see inflation did in fact come down [00:19:59] but so did unemployment. So again this [00:20:02] is a reputation of the Phillips curve. [00:20:04] You have these two things that should [00:20:05] work inversely actually working in [00:20:07] tandem. So that by the time we get to [00:20:09] 1983 8485 inflation uh unemployment is [00:20:12] now back around 6% which is not super [00:20:15] low but is definitely better than 10%. [00:20:18] >> C-SPAN's lectures and history podcast [00:20:20] continues in a moment. Now back to [00:20:21] C-SPAN's lectures and history podcast. [00:20:24] >> Right. And so, uh, one, you know, by the [00:20:26] time Reagan did come to re-election in [00:20:28] 1984, the economy at least was looking [00:20:31] pretty solid, right? So, it looked like [00:20:33] inflation had finally been beaten and [00:20:36] uh, and the economy was actually [00:20:38] growing. Okay, so Reagan had promised to [00:20:40] reduce government spending while [00:20:42] reducing taxes, but it turns out it's [00:20:44] really hard to reduce government [00:20:45] spending in general, let alone when [00:20:48] facing a really severe recession. So as [00:20:52] a result uh the spending didn't [00:20:55] necessarily come down. Moreover, the tax [00:20:58] cuts actually did not at least initially [00:21:00] pay for themselves. So as a basic [00:21:03] question like when tra tax revenue [00:21:05] declines even while government spending [00:21:08] increases, what is the result? [00:21:12] And you guys can all say it at once. [00:21:13] Yeah, Jack. Yeah, you get a big deficit, [00:21:16] right? So, one of the consequences is [00:21:18] that debt, and I'm measuring it here as [00:21:20] a percentage of GDP, grew quite a bit [00:21:23] during the Reagan years and for the [00:21:25] obvious reason, right? Like I said, if [00:21:27] you're cutting your income, while you're [00:21:29] increasing your expenditures, debt is [00:21:31] one of the consequences. And this was [00:21:33] already clear in 1982. So even while the [00:21:36] recession is going on, as the both [00:21:39] Republicans and Democrats in Congress [00:21:40] and Reagan are looking at this, they [00:21:42] sort of work together to say, "Okay, we [00:21:44] got to do something to at least try to [00:21:45] close this debt a little bit." So in [00:21:47] 1982, [00:21:49] Congress passed and Reagan signed the [00:21:51] Tax Equity and Fiscal Responsibility [00:21:53] Act, which increased taxes on interest [00:21:55] and dividends, reduced depreciation [00:21:57] deductions, which we just talked about, [00:21:59] and increased consumption taxes on often [00:22:02] called sin taxes. You increase taxes on [00:22:05] things you don't want people to do [00:22:06] anyway, like smoke cigarettes. So, they [00:22:08] tried to raise a little bit more revenue [00:22:09] that way, try to reduce the debt, but as [00:22:11] you can see, the debt kept climbing [00:22:13] moving forward. Yeah, Erin. [00:22:14] >> Yeah. So, in this situation, since the [00:22:17] taxes were raised, is this just a [00:22:19] reversal of effects or did it did it [00:22:22] completely cut out the the tax cuts that [00:22:24] were previously done? [00:22:25] >> So, really good question. And uh the [00:22:27] answer is the the tax revenue generated [00:22:29] as we can see the tax revenue generated [00:22:31] from these increases was smaller than [00:22:33] the tax cut right that's why we keep [00:22:34] seeing deficits growing. So it's it's [00:22:36] trying a little bit hoping that things [00:22:38] will you know the economy will rebound [00:22:40] and maybe that'll help something along [00:22:41] those lines. So the net effect is the [00:22:43] big tax cut was bigger than the [00:22:46] increase. But let's keep going because [00:22:47] that was just increase number one [00:22:49] because look 1983 you still have the [00:22:51] same problem. And in this case in 1983 [00:22:53] the uh the growing deficit was affecting [00:22:56] social security's ability to pay out [00:22:58] benefits. So Congress worked with [00:23:00] President Reagan to save Social Security [00:23:03] and uh in 1983 the Social Security [00:23:06] Reform Act made its way through Congress [00:23:08] became law. This raised payroll taxes. [00:23:11] So you guys pay these right now if you [00:23:13] have a job that goes to social security [00:23:15] uh and also tax social security [00:23:17] benefits. So it reduced the amount of [00:23:19] benefits going to retirees and delayed [00:23:22] payouts for a little bit of time uh and [00:23:24] so on. So in other words, this helped [00:23:25] save social security but in but actually [00:23:28] raised taxes. Okay. And then you keep [00:23:30] fast, you know, looking forward and you [00:23:32] can see that the def the debt was still [00:23:33] pretty high in 1984. So in ' 84 once [00:23:37] again Congress and Reagan worked [00:23:39] together to see about reducing the [00:23:41] deficit and this time they passed the [00:23:42] deficit reduction act. So in July of 84 [00:23:46] this further increased taxes on interest [00:23:48] and dividends, further reduced [00:23:49] depreciation deductions and so on. So in [00:23:51] other words, if you're keeping track, [00:23:53] you have one big tax cut followed by [00:23:55] three smaller tax increases. All right. [00:23:58] Well, I said things were actually [00:24:00] picking up by 1984 in the economy. And [00:24:03] you can kind of see it. This is GDP. So [00:24:05] there's that negative number in 1982. [00:24:08] That's the recession. But by 1983, you [00:24:10] can see the economy came roaring back, [00:24:12] right? That's a big number. 8% growth is [00:24:15] a really big number for, you know, the [00:24:18] United States. The average growth for [00:24:19] the last, let's say, hundred years is [00:24:21] around two and a half%. So this is four [00:24:23] four times, you know, not quite four [00:24:25] times more than the average, uh, but a [00:24:27] really big number. and then it stayed [00:24:28] very solid uh throughout the remainder [00:24:31] of Reagan's term which meant that as [00:24:33] Reagan sought reelection he was actually [00:24:36] in a pretty good spot right and I want [00:24:38] to show another stat because this one we [00:24:40] don't talk about a lot we always talk [00:24:41] about the unemployment rate and [00:24:43] unemployment measures the number of [00:24:45] people who want jobs uh versus the [00:24:48] number you know so how many people want [00:24:50] a job but don't have a job but that [00:24:53] could mean you know a lot of different [00:24:54] things and we talked about this before [00:24:55] maybe a lot of people want jobs and [00:24:57] therefore or the unemployment rate is [00:24:58] really high. Maybe people have given up [00:25:00] looking for jobs. And so the [00:25:01] unemployment lowers not because more [00:25:03] people have jobs, it's just because [00:25:04] fewer people are looking. But this is [00:25:06] the percentage of Americans who actually [00:25:07] have jobs. And you can see in the Reagan [00:25:09] years, the total number of people who [00:25:11] got jobs actually went up pretty [00:25:12] dramatically. And part of this is women [00:25:15] entering the workforce, but part of it [00:25:16] is that the economy was just very [00:25:18] strong. And so more people could find [00:25:20] jobs. Okay. So yeah, there are the [00:25:23] Reagan years. Well, as a result, when [00:25:25] the 84 election came around, Reagan was [00:25:26] in a strong position. And very quickly, [00:25:28] it turns out the main issue driving the [00:25:31] election was, is Reagan too old? And [00:25:34] this sounds very weird. You know, we've [00:25:36] just had Trump and then Biden and then [00:25:39] Trump again and they're all pretty old, [00:25:41] right? So, uh, so Reagan went into his [00:25:44] debate with his opponent, Walter [00:25:45] Montdale, and Montdale was pressing the [00:25:47] case. Reagan might might have been [00:25:48] pretty good, but is he going to be, you [00:25:50] know, alert enough to get through a [00:25:52] whole second term? [00:25:53] >> You already are the oldest president in [00:25:55] history, and some of your staff say you [00:25:57] were tired after your most recent [00:25:58] encounter with Mr. Montdale. I recall [00:26:01] yet that President Kennedy had to go for [00:26:04] days on end with very little sleep [00:26:05] during the Cuba missile crisis. Is there [00:26:07] any doubt in your mind that you would be [00:26:10] able to function in such circumstances? [00:26:12] >> Not at all, Mr. Trud. And I and I want [00:26:14] you to know that also I will not make [00:26:17] age an issue of this campaign. I am not [00:26:20] going to exploit for political purposes [00:26:24] my opponent's youth and inexperience. [00:26:34] [applause] [00:26:42] All right. So, uh, when you kind of mix [00:26:45] a good economy with a lot of charm, uh, [00:26:47] it all bowed well for Reagan going into [00:26:49] the 84 election. As it turns out, it was [00:26:52] not super close. So, uh, this is the [00:26:55] electoral map and you can see Mandel [00:26:57] carried his home state of Minnesota [00:26:59] along with the District of Columbia, but [00:27:01] lost all of the other states and, uh, [00:27:03] you can see even in the popular vote, [00:27:05] uh, Reagan won by really significant [00:27:07] margins. Right? So, okay. So this is [00:27:09] also I I wanted to point this out [00:27:11] because part of what we're talking about [00:27:13] is not just Reagan the policies but [00:27:15] Reagan who the symbol right Reagan sort [00:27:18] of casts this shadow over politics ever [00:27:21] since partly because of what he did but [00:27:23] partly because you look at this and [00:27:24] you're like this is a person who you [00:27:26] know really dominates. So if you're if [00:27:28] you're a Republican this is part of why [00:27:30] Reagan keep people keep going back to [00:27:31] Reagan and saying this is what we've got [00:27:33] to continue. this is kind of the hero [00:27:34] and if you're a Democrat, this is the [00:27:37] the image that you need to tear down in [00:27:38] some ways and try to clarify why it [00:27:41] wasn't so great and why this was a [00:27:42] mistake and and so on. So, okay, which [00:27:44] leads us into the next part of what we [00:27:46] want to talk about, evaluating Reagan [00:27:49] because there are a lot of things people [00:27:51] say about Reagan, but we in history [00:27:54] class want to go back and look at the [00:27:55] record and say, well, is that an [00:27:57] accurate appraisal of what actually [00:27:58] happened, what he was about, what he was [00:28:00] trying to do, and what the consequences [00:28:01] were. So the next few few slides, that's [00:28:03] what we're going to do. And we're going [00:28:05] to start with his supporters. [00:28:09] >> There was a strategy. Less regulation, [00:28:12] lower tax rates, get inflation under [00:28:14] control. If you do those things, you may [00:28:17] have a short-term problem, but in the [00:28:19] longer term, you'll have a strategy that [00:28:22] works. [00:28:23] >> People forget the fact that when we came [00:28:25] into power, the top marginal tax rate [00:28:27] was 70%. It's time to create new jobs, [00:28:31] to build and rebuild industry, and to [00:28:32] give the American people room to gave us [00:28:35] a prototype. Low taxes, less regulation, [00:28:39] limited spending. That's the model. He [00:28:41] created an economic miracle. [00:28:43] >> It's clear that recovery is [00:28:45] strengthening and spreading throughout [00:28:46] the economy. And as Al Jolson would have [00:28:49] said, you ain't seen nothing yet. [00:28:52] >> Okay, so you heard this is and this is [00:28:54] very common. I think if you talk to [00:28:56] people who really like Ronald Reagan, [00:28:58] want to talk about the things that he [00:28:59] accomplished, these this is usually the [00:29:02] list. So he cut taxes, he cut [00:29:03] regulation, got inflation under control, [00:29:06] brought about an economic recovery or [00:29:08] even an economic miracle, uh and limited [00:29:12] spending, shrank government. That's [00:29:13] that's basically the claim. So okay, [00:29:15] let's go through these one at a time. So [00:29:17] let's start with cut taxes. Well, uh, [00:29:21] overall tax revenue did, uh, decline as [00:29:24] a percentage of GDP after 81, but as we [00:29:26] know, he raised taxes three times. So [00:29:29] that it approached where Jimmy Carter's [00:29:32] taxes were in the 1970s. So if we look [00:29:34] at this graph, you can see, right? So [00:29:36] Reagan's, you know, the big cut right in [00:29:38] 81, but by the time we get to 8788, [00:29:42] that's roughly as a percent of GDP where [00:29:44] taxes were in 7778 when Jimmy Carter was [00:29:48] in office. So in a sense he did cut [00:29:50] taxes, right? Or and he definitely cut [00:29:52] the growth rate in taxes, but he also [00:29:54] raised them enough to try to close the [00:29:56] deficit so that we're kind of a put the [00:29:58] country back where it was in the 19 [00:30:00] early sort of mid 1970s rather than late [00:30:03] 1970s 1970s. So we'll call that that one [00:30:06] half true. All right, let's try the next [00:30:08] one. Cut regulation. So we didn't really [00:30:10] talk about this and I hate to say it. I [00:30:12] don't mean to be a lazy professor. I'm [00:30:14] just going to skip this. Uh the problem [00:30:16] is that it turns out Jimmy Carter also [00:30:18] cut regulations and it's not always [00:30:21] clear whom to give credit to in [00:30:23] evaluating this. So if you guys will [00:30:24] forgive me and in the interest of time, [00:30:26] this means we will get out on time which [00:30:28] you guys always like. So uh you will get [00:30:30] out on time by virtue of the fact that [00:30:32] we're going to skip the question about [00:30:34] regulation got inflation under control. [00:30:37] All right, we're going to call this one [00:30:39] maybe a little true. Now, how little I [00:30:41] leave up to all of you because we have [00:30:44] to say Paul Vulkar probably had more to [00:30:46] do with this than Ronald Reagan, right? [00:30:49] It's the as we've talked about a lot of [00:30:50] times, inflation tends to be a monetary [00:30:53] phenomena. So, Vulkar in terms of [00:30:56] controlling the monetary supply, he [00:30:58] probably is the one to do it. But to his [00:30:59] credit is that, you know, Reagan didn't [00:31:02] criticize or pressure Vulkar to reverse [00:31:04] course. It was consistent in his mind [00:31:07] with what he was up to. And so again, [00:31:09] you know, we have to give him at least [00:31:10] credit for not making it harder for [00:31:11] Vocar to do what he wanted to do. Okay. [00:31:14] Brought about economic recovery. [00:31:16] Economic miracle. Yeah. Jordan, do you [00:31:18] think if Paul Walker didn't do what he [00:31:20] did with inflation that regonomics as a [00:31:22] general would actually have worked as [00:31:24] well as it did? [00:31:25] >> Uh so that's a you're asking my opinion. [00:31:28] >> Your opinion. [00:31:29] >> So I will say this is controversial. Uh [00:31:32] I don't think so. I mean I I I am [00:31:35] persuaded personally I am persuaded that [00:31:38] if if you're always increasing the money [00:31:40] supply you eventually get inflation no [00:31:43] matter what the the Fed you know the [00:31:45] federal government does right so [00:31:47] monetary policy ultimately determines [00:31:48] inflation in a way the fiscal policy [00:31:50] doesn't but I will be honest there are [00:31:51] good counterarguments and uh and people [00:31:54] very smart people would disagree with me [00:31:56] on this so so uh if you're ever if [00:31:58] you're applying to business school or [00:31:59] something and that this comes up make [00:32:01] sure you know what the person thinks [00:32:02] across the you don't just don't just [00:32:03] quote me, right? Uh we want to get you [00:32:05] into school. Okay, so point four, [00:32:08] brought about economic recovery, [00:32:10] economic miracle. Let's say this could [00:32:12] be true, right? And it's a tricky [00:32:15] question and it goes something like [00:32:16] this. So here's again our graph. There [00:32:18] is no question that GDP expanded [00:32:20] dramatically uh from the trough that was [00:32:23] coming you know at the end of the Carter [00:32:25] years and then the early uh part of his [00:32:27] own term. So that part is true and again [00:32:30] employment participation we talked [00:32:32] about. But the question is this uh and [00:32:34] and you're going to want to me to answer [00:32:36] this one too and I don't know the answer [00:32:38] to this one very well which is uh what [00:32:40] was the role of the Federal Reserve [00:32:42] right you have these two big players in [00:32:44] the economy working in opposite [00:32:46] directions which one gets the credit [00:32:49] right maybe the tax cuts are responsible [00:32:51] for the economic growth maybe it was the [00:32:53] stabilization of prices or and this is [00:32:56] the answer you guys love to give every [00:32:57] time I give you an essay question it's [00:32:59] like well they're both right you know [00:33:01] everybody is so nice here at BYU, right? [00:33:03] Uh so maybe there's this way that [00:33:05] they're both important. So you have to [00:33:07] have both stabilization and a smaller [00:33:10] tax footprint in order to get the kind [00:33:12] of 8% growth uh almost 8% growth we saw [00:33:15] in 83, right? Something like that. So [00:33:17] anyway, so it's a tough one to evaluate. [00:33:19] So I'm going to call it could be true, [00:33:20] might be true, you know, probably is [00:33:22] true maybe. I don't know. Somewhere in [00:33:23] that range. Okay, limited spending. This [00:33:27] one we're just going to call false. And [00:33:30] you can see it here. This is government [00:33:32] spending, federal government spending as [00:33:34] a percentage of GDP. And you can see [00:33:36] that at almost no point in the Reagan [00:33:39] years was it lower than the lowest point [00:33:42] in the Carter years. I mean, you can say [00:33:45] that maybe he reversed the trend that [00:33:47] was running up through 1982. [00:33:50] But in practical terms, the government [00:33:52] in terms of and again in terms of [00:33:54] spending was about as big when he took [00:33:57] office as it had been under Gerald Ford [00:34:00] in the 70s and higher than it was at the [00:34:03] low point in the Carter administration. [00:34:05] So in this sense, you'd have to say this [00:34:07] claim is not true. All right. So those [00:34:09] are his advocates. What about the people [00:34:12] that don't like Reagan almonds? What do [00:34:15] they say about it? [00:34:16] >> Easy part of it is, you know, let the [00:34:17] market be free. let the people who own [00:34:19] the businesses do whatever they want, [00:34:20] cut their taxes, uh give them incentives [00:34:23] to produce more. Now, the problem is [00:34:26] that generally speaking, when you cut [00:34:27] taxes really dramatically, obviously the [00:34:29] amount of money going into federal [00:34:31] coffers is is reduced. Therefore, the [00:34:34] federal government has to either cut [00:34:35] spending or they're going to run a huge [00:34:37] deficit. Well, the Reagan people came up [00:34:39] with a theory that you could cut taxes [00:34:42] and this would goose the economy so much [00:34:45] that you could actually increase [00:34:47] proceeds at the same time and it would [00:34:49] all work out. George Bush famously [00:34:51] called it [00:34:51] >> sold as less government. In other words, [00:34:54] less spending and less taxes. But there [00:34:58] was a fundamental deception about that [00:35:00] because there was only less spending in [00:35:02] certain areas. I'm sure there's one [00:35:04] department you've been waiting for me to [00:35:06] mention, the Department of Defense. It's [00:35:10] the only department in our entire [00:35:12] program that will actually be increased [00:35:14] over the present budgeted figure. [00:35:17] >> The cuts were only in relation to social [00:35:19] spending, education, welfare, food [00:35:21] stamps, [music] that sort of thing. Uh [00:35:23] enormous increases in military spending. [00:35:26] He told the secretary, [00:35:27] >> "The essence of regonomics was a massive [00:35:30] transfer of wealth towards the rich and [00:35:33] away from the poor." The Reagan [00:35:35] administration, by cutting taxes [00:35:36] overwhelmingly for the wealthiest and [00:35:38] the corporations, set in motion arguably [00:35:41] the single greatest government-led [00:35:43] transfer of wealth in history and in the [00:35:46] direction of the top 2% of the country. [00:35:50] >> In 1980, the top 1% of Americans earned [00:35:53] wages of about $110,000 a year. By 1990, [00:35:57] after about 10 years of reggonomics, [00:36:00] boing, the top 1% had seen their wages [00:36:03] rise by 80%. [00:36:05] Trickle down economics, though, right? [00:36:07] What's good for the rich is good for all [00:36:09] of us, right? Not quite. Here's the [00:36:11] average wages of the rest of the country [00:36:13] in 1980. And here's what happened for [00:36:16] the rest of the country after about 10 [00:36:18] years of regonomics. Flat. A whopping 3% [00:36:21] rise in wages in 10 years. The richest [00:36:24] people see their fortunes go up like the [00:36:26] matter horn. Everybody else, f nothing. [00:36:30] This is what family income growth looked [00:36:32] like during the 1980s. Look at that. The [00:36:34] richest 1% of Americans had an awesome [00:36:36] decade. They saw their family income [00:36:38] skyrocket by 74%. Everybody else, not so [00:36:41] much. In fact, the poorest Americans saw [00:36:44] their income shrink by more than 4%. [00:36:47] That was regonomics. That was what [00:36:49] regonomics did. That was the impact of [00:36:50] regonomics. It was the results of this [00:36:53] experiment called trickle down [00:36:54] economics. The rich did great. Everybody [00:36:58] else still waiting for the trickle. [00:37:01] Okay, so those are the typical [00:37:03] complaints about regonomics. So let's go [00:37:05] through it. So raise the deficit, cut [00:37:07] social spending while raising military [00:37:09] spending, increased inequality, a [00:37:12] massive transfer of wealth from poor got [00:37:14] poor, rich got richer, and the middle [00:37:16] class got squeezed. So let's go through [00:37:18] these. All right, so let's start with [00:37:19] number one. raise the deficit. Well, we [00:37:22] know that that's true, right? We already [00:37:23] saw the chart everything else. So, this [00:37:26] part we have to say the critics are [00:37:28] right about. Okay. Two, cut social [00:37:30] spending raised military spending. We're [00:37:32] going to call this one half true, right? [00:37:35] So, as it turns out, through the Reagan [00:37:36] years, more money went to the military. [00:37:39] So, this is kind of an absolute dollars. [00:37:41] And I know it says in hundreds of [00:37:42] thousands. So, that's actually in [00:37:44] billions. So, it should be like 50 [00:37:45] billion, 100 billion, so on. By the time [00:37:48] uh he left office, the US was spending [00:37:50] about $300 billion on the military, [00:37:53] which is fair amount of money. But what [00:37:55] about the cutting social spending? Well, [00:37:56] we already know that's not quite true. [00:37:58] So here, this chart, this is increases [00:38:02] in welfare spending. So if he had cut [00:38:04] spending, some of these numbers should [00:38:06] be negative, should be below zero, [00:38:08] right? But you can see in every single [00:38:10] year, it's on the positive side. there [00:38:13] was an increase in the amount of welfare [00:38:16] spending. Now, you could say it might be [00:38:17] less than say the Carter and Ford years. [00:38:20] So, that might be an argument, but in uh [00:38:22] in absolute terms, we'd have to say [00:38:24] welfare spending increased every single [00:38:26] year Reagan was in office. Yeah, Jordan, [00:38:28] >> this chart year to year, so like 84, [00:38:32] it's that much higher than 84. [00:38:33] >> Exactly. That's right. So, it's [00:38:35] compounding. You're exactly right about [00:38:36] that. Okay. Right. So, welfare spending [00:38:38] increase. So we'll call this half true [00:38:40] because it's true that increases happen [00:38:43] in uh the military but also with welfare [00:38:45] spending. And here if you see them side [00:38:47] by side, right? So the red line is [00:38:49] welfare spending. The blue line is [00:38:51] military spending. You see military [00:38:53] spending outpaced welfare spending [00:38:55] except for in the last couple years, oh [00:38:57] I'm sorry I don't have it shaded, but [00:38:58] Reagan was in office all the way till 89 [00:39:00] there. So in the last year or two of his [00:39:02] uh time in office, welfare spending was [00:39:04] increasing faster than military [00:39:05] spending. So, uh, in other words, we're [00:39:07] going to have to call this one half [00:39:09] true. All right, point three, increased [00:39:12] inequality. This one's going to be a [00:39:14] little bit more challenging to evaluate. [00:39:15] I'm going to call this one could be [00:39:17] true. So, here's the part of it that is [00:39:19] true. During his time in office, the top [00:39:22] 10% of income earners grew. You know, [00:39:25] you can see their share of everybody's [00:39:27] income went up. So in other words, if [00:39:29] the top 10% of earners were earning [00:39:31] about 31 32 33% of all income in the [00:39:36] country in 81 when Reagan took office, [00:39:38] by the time he left office, that had [00:39:40] gone up to about 39%. So that part is [00:39:42] true. So income inequality grew more [00:39:46] stark during his years in office. Here's [00:39:48] where it gets complicated. Especially in [00:39:50] about the last 15 years, economists have [00:39:52] done a lot of research on income [00:39:53] inequality. And the question is [00:39:56] something like was this a Reagan [00:39:58] phenomena or is this a global phenomena? [00:40:01] >> C-SPAN's lectures and history podcast [00:40:03] continues in a moment. Now back to [00:40:04] C-SPAN's lectures and history podcast. [00:40:07] >> And you know in this class we've always [00:40:08] asked that question. If the same thing [00:40:09] is happening not just in the United [00:40:11] States but throughout sort of the [00:40:12] western world uh then is there an [00:40:16] underlying cause that doesn't have to do [00:40:17] with the specific policies of that [00:40:19] country? So here is Europe and then [00:40:21] again we're looking at the Reagan years [00:40:22] and you can see that from a similar [00:40:24] starting point the top 10% of income [00:40:27] earners also saw a pretty significant [00:40:29] increase. Now not as dramatic as the US [00:40:31] in the Europe is maybe from about 30% or [00:40:34] so 31% to maybe 33% something like so a [00:40:36] couple percentage points increase [00:40:38] whereas the US it was from 31 32 up to [00:40:40] about 38 but still an increase. Uh and [00:40:44] so maybe there's something else going on [00:40:46] in the economy. And then if we look at [00:40:47] this chart in more even sort of [00:40:50] fine-tuned way so different parts of [00:40:52] Europe and over a longer span of time we [00:40:55] can see that in fact parts of Europe [00:40:57] have seen very similar rises in [00:41:00] inequality particularly Eastern Europe [00:41:01] right but also that in the United States [00:41:04] you see similar clims in inequality [00:41:07] through periods we wouldn't expect right [00:41:09] if this is all about regonomics then why [00:41:12] under the Clinton years would we see a [00:41:14] similar climate in inequality or under [00:41:16] the Obama years, Obama years, excuse me, [00:41:18] would we also see a climate inequality? [00:41:21] So the question very quickly becomes, [00:41:23] well, was it reeganomics that did this [00:41:25] or is there a broader phenomena that is [00:41:28] both longerlasting and more global in [00:41:30] reach? So this one we'd say could be [00:41:33] true. Okay, let's keep going. Oh, with [00:41:36] so in other words, it is true, I'll [00:41:37] summarize it this way. It is true that [00:41:39] inequality increased during the Reagan [00:41:40] years. It is true it happened more in [00:41:42] the US than elsewhere but it happened in [00:41:45] Europe as well and it has continued to [00:41:47] happen even after Reagan has left [00:41:49] office. Okay, let's go now to this last [00:41:52] one. Massive transfer of wealth. Poor [00:41:54] got poorer, rich got richer. So I went [00:41:56] and looked and I don't know can any of [00:41:58] you read this? It's the from the the [00:42:00] sources the economic policy institute. [00:42:02] So one of you maybe can track down the [00:42:04] study that Rachel Matau is citing here. [00:42:07] I tried I'll admit I didn't spend a lot [00:42:08] of time. I spent like maybe 10 minutes [00:42:10] trying to track it down and when I [00:42:11] couldn't find it, I just was like, "All [00:42:13] right, I'm not going to worry about it. [00:42:14] I'm just going to try to duplicate the [00:42:15] study." So, I went to the census data [00:42:18] and I have to call this one false. So, [00:42:20] this is what I found when I would went [00:42:22] to looked at the US census data and I [00:42:24] went back a little bit further to try to [00:42:26] help clarify what was going on. Again, [00:42:27] this is a history class. We always want [00:42:29] to know what happened before. So, okay. [00:42:31] So if you break it down in quintiles, so [00:42:33] 20% groupings, which is typically what [00:42:35] the census does, and you look at [00:42:37] household data, not family data, which [00:42:40] I'll explain in just a second why that's [00:42:42] important. It turns out that compared to [00:42:45] the 70s, the Reagan years were pretty [00:42:47] good for all quintiles. Now, it does [00:42:49] capture the inequality problem, right? [00:42:51] In other words, the upper 20% did make [00:42:54] quite a bit more rel, you know, so in [00:42:56] other words, this is from 81 to 88. So [00:42:58] in 88 that upper quintile was doing [00:43:00] about 20% better than it had in 81. Uh [00:43:03] but even the lowest 20% is still doing [00:43:07] about 8% 7 and a half% better on average [00:43:10] than it had done in 1981. So all [00:43:12] quintiles are better off. And as you can [00:43:14] see comparatively that's a much better [00:43:16] record than what we see from 89 to 2000 [00:43:18] and clearly a lot better than what was [00:43:20] going on in the seven years before [00:43:22] Reagan took office. Now why is the [00:43:24] household thing interesting? Uh there's [00:43:27] just it's a weird quirk of the census [00:43:30] that the census thinks of families well [00:43:33] the census thinks of families in the way [00:43:34] we would uh some kind of legal [00:43:36] relationship. So husband wife with [00:43:39] children that belong to them all [00:43:40] together that's a family income. [00:43:43] Household would be let's say you have [00:43:46] man cohabitating [00:43:48] that's two separate families there's no [00:43:51] legal relationship. So if you're you [00:43:53] this is a trick. If you want to talk to [00:43:55] somebody about income inequality, if [00:43:59] they pull out family data, they're [00:44:01] trying to say the problem is worse. [00:44:03] Because think about it, if there's a man [00:44:05] and woman living together but not [00:44:07] married and one of them works full-time [00:44:08] and the other one is stay at home, [00:44:10] family income will say there's a huge [00:44:12] gap between wealthy employer, right? One [00:44:14] has zero income, the other has all the [00:44:16] income. Whereas if it's household [00:44:17] income, it averages the two and so you [00:44:20] don't get that gap. So, I think that's [00:44:21] also part of what the Rachel Matto thing [00:44:23] is showing is that I think they they [00:44:25] were selective in what they picked in [00:44:27] order to get to the outcome they wanted. [00:44:28] But, okay. So, we're going to have to [00:44:30] call this one false. Leads me to the [00:44:32] last claim. The middle class got [00:44:34] squeezed. So, I'm pretty much [00:44:37] definitionally middle class. That's uh [00:44:39] what a average professor's income is, [00:44:41] right? Uh maybe not if I taught in econ [00:44:43] or law, but in history we're pretty much [00:44:46] middle class. Uh I don't know what it [00:44:49] means to feel squeezed. Uh, I'm not sure [00:44:51] about this. Maybe someone else knows. I [00:44:53] think this is just a way of saying that, [00:44:55] you know, uh, you know, the middle [00:44:57] class. I don't I don't actually I just [00:44:58] don't know. So, I just have question [00:44:59] marks. I'm not sure how to evaluate that [00:45:01] particular claim. Uh, okay. So, let's [00:45:03] bring it all together. So, here it is. [00:45:06] Cut taxes, half true. Raise deficit, [00:45:08] true. Less regulation, we skipped. [00:45:10] Sorry, but we're going to get you out on [00:45:11] time. Cut social spending, half true. [00:45:13] Stopped inflation, a little true. [00:45:15] Increased inequality, could be true. [00:45:17] Economic recovery, miracle, could be [00:45:18] true. Massive transfer of wealth false [00:45:22] shrank government false middle class got [00:45:24] squeezed who knows right that is the [00:45:27] rough evaluation of regonomics. Okay. So [00:45:30] yeah Abraham [00:45:31] >> I was just wondering like who should get [00:45:32] more credit for the economic recovery [00:45:35] should boer or should [00:45:36] >> see I knew you were going to ask me [00:45:38] this. I said you're going to want me to [00:45:39] take a stand on this. [00:45:41] >> Uh so I don't know. Uh, but I would say [00:45:47] maybe given the fact that Reagan was [00:45:49] actually supportive of the Vulkar [00:45:50] program, we could say Reagan deserves I [00:45:53] should maybe change it from could be [00:45:54] true to probably true. Does that make [00:45:56] sense? But but um but I don't know [00:46:00] because you'd have to add in the part [00:46:01] that he didn't just cut taxes, right? He [00:46:03] then raised them. So it's maybe the [00:46:06] combination of all the things that ended [00:46:07] up helping the economy grow. Okay. So [00:46:10] here is if you want to be historically [00:46:14] grounded and rooted, what are the things [00:46:15] we can say about regonomics that would [00:46:18] be accurate? Well, we should say this. [00:46:21] Reagan saw significant e economic growth [00:46:24] with a disproportionate share of that [00:46:25] growth going to the wealthiest [00:46:27] Americans, right? So not all of it, but [00:46:30] more of it went to the wealthiest [00:46:32] Americans than went to everybody else, [00:46:34] but significant economic growth. Okay. [00:46:37] Reagan increased federal spending. So he [00:46:40] didn't cut any part of, you know, like I [00:46:41] said, maybe individual programs, but but [00:46:43] in the aggregate, federal spending went [00:46:46] up with the military budget growing a [00:46:48] little faster than the rest of the [00:46:50] budget. My sense is that those are both [00:46:52] historically defensible claims. Now, it [00:46:56] all leads me to an interesting point and [00:46:58] you guys have maybe heard this in your [00:47:00] own as you've listened to, you know, [00:47:03] different people on t uh well, you guys [00:47:04] never watch TV, YouTube, Instagram, [00:47:07] maybe Tik Tok talking about the Reagan [00:47:09] years, right? Uh there's this weird way [00:47:12] that both conservatives and liberals [00:47:15] talk about Reagan that based on what we [00:47:17] have just clarified, it's not true. [00:47:21] Right? So, we have a situation where [00:47:23] they keep repeating things that you [00:47:26] would think the other side would say, [00:47:27] "Well, that's not true. Why do you keep [00:47:28] saying?" I'll just give you one example [00:47:30] quick here. [00:47:31] >> Paul's Church. [00:47:32] >> Hi, Russ. I um I'm calling because well, [00:47:36] first of all, I'm a liberal and I [00:47:37] seriously don't understand uh this [00:47:40] Reagan idolatry on behalf of [00:47:43] conservatives. [00:47:45] I'll get I'll give you my reasons. [00:47:46] Instead of privatizing Social Security, [00:47:48] he raised taxes. We're all paying higher [00:47:50] taxes today out of our paychecks every [00:47:52] single week because he decided to save [00:47:54] Social Security. He [00:47:57] >> hold I need to go way. Oh jeez. Um [00:48:01] >> the Greenspan Commission. [00:48:03] >> Um [00:48:04] >> he he signed it into law and it raised [00:48:06] taxes on social security. [00:48:07] >> You're talking about Reagan or Clinton? [00:48:10] >> I'm talking about Reagan. [00:48:12] >> Would understand it. Where where did [00:48:13] where did you get this silly notion that [00:48:17] Reagan raised taxes on social security? [00:48:20] What what websites do you read? Where [00:48:21] did you pick that up? Reagan was I don't [00:48:24] do Do you understand the notion Ronald [00:48:25] Reagan fought for America? He loved [00:48:29] America. [00:48:31] >> All right. So that's Limba trying to [00:48:33] explain no. What do you mean he raised [00:48:34] tax? But we know he did. I think Limbbo [00:48:36] actually knows that he did too, but it [00:48:38] doesn't kind of fit the narrative [00:48:40] somehow. So, it's we have this weird [00:48:43] situation that I'm going to ask you guys [00:48:45] as our kind of our last thought. Why is [00:48:47] it that people that disagree about [00:48:48] everything, Rachel Matto and Rush Limba, [00:48:51] you know, conservatives and liberals, [00:48:53] why is it that they both have decided to [00:48:56] agree on what is actually kind of a [00:48:58] false narrative about Reagan that he cut [00:49:00] taxes and he cut social spending? [00:49:03] >> Yeah, Jack, he's more of a symbol than [00:49:06] like a real actual like historical [00:49:09] figure. Yeah, I mean I have to agree [00:49:11] with that. Thank you. That's actually [00:49:12] the perfect summary of of what we're [00:49:14] talking about here. I mean I think that [00:49:16] in some important ways Reagan the symbol [00:49:20] is more useful for contemporary [00:49:22] political talk than Reagan the [00:49:24] historical figure. And and so he [00:49:28] continues on and these myths about him [00:49:29] continue on about cutting government [00:49:31] spending, shrinking government, cutting [00:49:32] taxes, all this sort of stuff because [00:49:34] that remains a valuable argument for [00:49:38] both the left and the right, but sadly [00:49:40] obscures the actual historical record. [00:49:42] Okay, you guys, I promised I'd get you [00:49:44] out of here on time. Our time is up. [00:49:46] Thank you all, and I will see you all [00:49:48] back here uh later this week. [applause] [00:49:57] To find more of our history programming, [00:49:59] visit our website at cyphenspan.org.