Re: Is Anyone In This Group Enthusiastic About Any Candidate?


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John Galt wrote:
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"Rumpelstiltskin" <PleaseDoNotReplyByEmail@xxxxxxxxxxx> wrote in
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---[snip]---
Carter only ran up a fraction of the deficits that Reagan and the
Bushes ran up for the same period of time. Yeah, I guess I would
have bitched about the Carter deficits if I'd been paying attention
at that time, but there's no comparison with what came later.
No, but at the time, the deficit was one of the issues that propelled
Reagan into office. It was, at the time, considered "runaway", and in
the context of the overall economy (not gross dollars) it wasn't much
different than it was today.

I recall that period very well since I was in the DC area at the time.
It was not the size of the deficit that was the issue at the time, but
the out-of-control interest rates that everyone including the federal
government was paying. There was a great deal of concern over the
amount of credit that was being bought up by foreigners and
speculation about how that might influence US foreign policy. The
deficit was low during the Carter years, but the interest was killing
us.
I remember it differently as far as emphasis, but both were in play,
IIRC.
While Carter gets most of the blame for the high inflation rate of the
period, the blame really goes back to Fed Chairman Arthur Burns who
increased the money supply in an effort to get Nixon reelected in '72.
The inflationary period was substantially attributable to Nixon. In
"Money Mischeif", Milton Friedman notes that the hyperinflation was
largely the result of Nixon telling Burns to crank up the printing
presses so as to pay of Vietnam debt.

Carter's deficit spending (as a percentage of the GDP), despite the
higher interest rates, was less than the Nixon/Ford administration
which preceded it and the Reagan deficit spending was nearly twice
that of the Carter administration. If it had not been for Paul
Volcker (appointed by Carter) who deserves the real credit for ending
the runaway inflation, Reagan would have been in very serious
financial difficulty.
Correct, but to be fair, let's note that the POLICY followed by
Voelker -- crank up the interest rates and choke the inflation
beast -- was a consensus policy developed by Voelker and Friedman and
authorized by Reagan. In fact, Friedman notes that one of the reasons
why the debt went up so far under Reagan is because they expected the
Fed's tight money policy to take longer to be effective, and thus they
counted on more tax bracket creep than they got. No creep, lower tax
receiepts.

JG


Yep, the hidden tax increases of the Reagan administration! Didn't work
just as the trickle down economy didn't materialize. Left the mess to
GHW Bush to eat the necessary tax increase.

Economy wise, Reagan was more of a disaster than Carter!

Carter was simply feckless. He had no idea how to solve the problems he
was left with, but he didn't do any additional damage. Considering the
record of the other presidents from Johnson on, that's high praise.

Was Reagan more of a disaster? Like most things economic, you have to
first decide what statistics you think are most important, which is a
subjective exercise. One of my annoyances with partisan analysis is that
the stats are always cherrypicked to justify the desired conclusion, not
the other way around.

We had staglation at the beginning of his term. Unemployment in 1981 was
7.6% and inflation was almost 11%. On the way out, 5.5 unemployment and
4.6% inflation. Good results by any measure.

The increase in the debt is, of course, another matter.

JG


The economy is not zero sum, but it is clear that there are trade-offs.

Absolutely.

One can get the appearance of better times by borrowing. Ultimately you
have to pay.

That's true, and easy credit distorts the market. You can sell more cars if
they are "$500 a month, nothing down" as opposed to "$400 a month, 20% down"
and certainly more if they are "$40,000."

On one hand, easy credit is good, because it stimulates production for the
goods easily acquired. On the other hand, it's bad, because it encourages
the manufacturers to jack up the prices until the monthly payment hits the
consumer pain point, as opposed to the cash price hitting the pain point.

At this point, and with the situation we're in, I have to take the hard line
and say that any President who proposes a nonbalanced budget is
irreponsible, and any Congress that approves a nonbalanced budget is
irreponsible. Sending up a balanced budget requires a rearragement of
national priorities, but it's quite possible to do.

JG


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