WASHINGTON, D.C. – Rather than waiting until Halloween to scare the American people, “Bidenomics” has been terrifying Americans since he was inaugurated. Americans have been left in a panic wondering how they will make ends meet during a period of record inflation and skyrocketing interest rates, all while Biden tries to spin his failures into victories. The endless and futile masquerade has failed to convince Americans that the economy is thriving. But thankfully, a solution to the horrors of Bidenomics is closer than one might think.
This week, the Club for Growth Foundation released a new white paper, Reaganomics for the 21st Century, outlining how a return to the policies of President Reagan can similarly rejuvenate a flatlining American economy with crippling inflation. By bringing zombie Reaganism back, we can suffocate government spending, massacre marginal tax rates, slash red tape, and return to monetary policy that will bring our economy back from the dead.
Click here to read the full paper, Reaganomics for the 21st Century, from Daniel Mitchell and the Club for Growth Foundation.
Elected in 1980 and inaugurated in 1981, one of Ronald Reagan’s main goals was to restore America’s faltering economy. Inflation was the top concern for most citizens, but other serious problems included wasteful spending, high interest rates, punitive taxation, joblessness, and excessive red tape.
To deal with the plethora of challenges, Reagan had a four-pillar agenda: limit government spending, lower marginal tax rates, reduce the burden of red tape, and implement monetary restraint to lower inflation.
Regardless of how it is financed, government spending diverts resources from the productive sector of the economy. To minimize the economic damage, lawmakers in Washington should strive to limit the size and scope of the federal government. Ideally, certain departments and agencies should be abolished.
Spending discipline is not popular among politicians, but there is remarkable consensus among public finance experts that restraint is the right policy to boost prosperity while bigger government has very adverse effects on growth.
Governments impose “sin taxes” because they want to discourage behaviors such as drinking and smoking. Regardless of whether one thinks that is a proper role of government, the economic analysis is correct: the more you tax of something, the less you get of it. However, that essential insight also applies to taxes on work, saving, investment, and entrepreneurship. Which is why good tax policy should seek the lowest-possible tax rates on productive behavior:
- Low tax rates on work lead to more entrepreneurship, which improves competitiveness and encourages job creation.
- Low tax rates on saving and investment lead to more capital formation, which is the key to raising productivity and higher wages.
Red tape refers to a wide range of rules imposed by various government agencies. Regulations increase the cost of economic activity, sort of the way it is more difficult to get from Point A to Point B on an obstacle course. Red tape theoretically can be justified if benefits exceed costs but that rarely happens.
In an ideal world, central banks such as the Federal Reserve in Washington play a very quiet role, ensuring enough liquidity for long-term price stability and a smoothly functioning economy. Unfortunately, central bankers often feel compelled or pressured to create too much money. This is because incumbent politicians benefit when there is an illusion of more short-run prosperity.
Economic liberty is vital for human flourishing. During the 1980s, President Reagan enacted a wide range of promarket reforms that triggered several decades of strong growth. Unfortunately, policy has become more dirigiste in the 21st century, and the economy is now experiencing sub-optimal performance.
Today’s challenges are not identical to the problems that existed in 1980, but there is one big similarity. The economy was experiencing below-par performance when Reagan took office because of too much government. Likewise, the economy today is suffering from anemic performance because of too much government.
The solutions to today’s problems, broadly speaking, are the same as the solutions to the problems Reagan inherited. America needs lower tax rates, spending restraint, less red tape, and monetary prudence. That’s how to boost American greatness.