Rocky Vega

US fiscal policy has been out of whack for so long that both Democrats and Republicans share a part in the blame. But, for a recent column in the Financial Times Gideon Rachman focuses on the Republican role in debt creation. In particular, he looks at how Ronald Reagan’s strengths and weaknesses in office have evolved over time into a muddled mess of tax and spending strategy.

From the Financial Times:

“The Republican party – with Ms Palin to the fore – is currently decrying the huge deficits being run by the Obama administration. But this is a recent conversion. Ever since the Reagan years, the Republicans have been the party of deficit spending.

“Conservatives once believed both in lower taxes and in balancing the budget. Under Reagan, they simply became the party of tax cuts, without any commitment to fiscal responsibility.

“Dick Cheney, George W. Bush’s vice-president, admitted as much when he told a cabinet colleague: “Reagan proved deficits don’t matter.”

“A mystical belief took hold that if you just cut taxes, the economy would grow fast enough to cover the shortfall – or government would shrink, almost by magic. Somehow it would all come right.

“This drift in Republican thinking was actually profoundly anti-conservative – because it elevated ideology (cut taxes at any cost) over a pragmatic commitment to good governance.”

The idea that tax cuts alone — without a reduction in spending — can increase the wealth of the nation was unrealistic at best. Over time that shortcut thinking has only lead to worse ideas, such as the belief mentioned above that deficits are no longer important. Unfortunately, there still appears to be no magic cure for deficits.

You can read more details in Rachman’s Financial Times commentary on how Reagan ruined conservatism.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

  • tony bonn

    there is an even better treatment of this topic by the ghost of reagan past in the incarnation of david stockman….one of his recent articles was carried by mises.org….very much worth the read…

    the republicans and democrats are one and the same party controlled by the same puppet masters….not a whit’s bit of difference…

  • http://www.cesidebtsolutions.org ParisGirl111

    This is true. A balanced plan is going to allow the tax cuts to increase the buying power of the consumer as well as cut spending because less tax money is coming in.

  • American Thinker Fan

    Rocky

    Are you trying to be even more retarded than Rachman? Is that possible?

    Revenue doubled in the 1980’s. Why?

    Well, some reduction in tax rates (that’s what your retarded cabal calls tax cuts) raises revenue some doesn’t.

    Revenues went up because many rates were too high. Not all but many

    How many stores raise prices on goods to increase sales? Have you ever heard of “percent off” sales to get sales?

    Frankly, calling you a retard is an insult to retards.

  • http://www.sohu.ro Gravura Yag

    A mother was preparing pancakes for her sons, Kevin, 5, and Ryan, 3. The boys began to argue over who would get the first pancake. Their mother saw the opportunity for a moral lesson. If Jesus were sitting here, He would say, “Let my brother have the first pancake. I can wait.”Kevin turned to his younger brother and said, “Ryan, you be Jesus.”

  • http://www.pascal.mention.nl/phpBB2/viewtopic.php?p=225624#225624 Chassidy Liebe

    You have got to be a fool to believe this recession is over and the US economy will return to robust growth. The US govt. is spending money far in excess of tax revenues. Printing money we dont have. Additionally, the govt. has no way of paying for future Social Security and Medicare payments it has promised. Higher taxes are inevitable, which will depress business activity further. Hyperinflation is not too far away either, given the huge increase in money supply.

Recent Articles

The Coming May “Oil Buy Signal”

Matt Insley

According to the EIA, U.S. oil production is set to peak in May as shale drillers cut back enough to actually cause a decrease in oil output. As Matt shows, we can expect oil prices to stabilize soon after, meaning now is a great time to pick up well-run oil companies before they too rebound.


Turkey’s Long-Term Potential and Short-Term Problems

James Rickards

Notes from Jim Rickards' recent trip to Istanbul, where he met with “the Donald Trump of Turkey"... central bank officials... and others. It was a great chance for him to gather market intelligence on the world’s eighth-largest emerging market. Read on...


Gold is (Once Again) Money

James Rickards

Few understand how to value gold, and even fewer understand that gold is not really an investment — it is money. Jim Rickards illustrates this point further and gives you actionable methods to accumulate wealth in gold. Read on...


Assessing a Measles Outbreak in Your Neighborhood

Stephen Petranek

With summer vacation on the horizon across the United States, kids who are carrying measles from states hard hit like California and Arizona will be mingling to with kids from other states with almost no cases. And officials are still wary about this year’s mini-epidemic. Stephen Petranek has more…


Researchers Create New Superfood

Stephen Petranek

Rice is one of the world’s most important crops. Three billion people depend on it as a staple every day. But climate change is wreaking havoc on rice production. Stephen Petranek has more on the steps researchers are taking to protect one of the world’s most important foods.