Since the middle of the twentieth century, two schools of economics have dominated the American sociopolitical landscape. The first, championed by such figures as Milton Friedman, is the Austrian. It holds that a free and unfettered market allows a nation to actualize its full fiscal potential. This means minimal tax rates, no tariffs, trade embargoes, or even minimum wage floors. The second, advocated by scientists such as Paul Krugman, is the Keynesian. This entails the government stabilizing the economy during hard times by infusing it with capital financed by higher tax rates for higher earners. More often than not, these are accompanied by tax cuts for the non-wealthy in order to spur mass growth in the market.
Historically, certain aspects of both schools have been incorporated into America's mixed economy. During the World War II era, the military required so much funding and personnel that private companies (and consumers) were subjected to strict supply rations; too, many of the unemployed found jobs through conscription. The government was employing so many people, and those who had never held a job before forced to take the place of soldiers, that suddenly money was everywhere. The wealthy were heavily taxed, as was most of the middle class, but so many people suddenly had so much cash that the economy was booming again.
Of course, the good days did not last forever. By the early 1960s, President John F. Kennedy was promoting income tax cuts and a Treasury, rather than Federal Reserve, -bound monetary policy. By easing governmental burdens and attacking inflation, he reasoned that capital would flow without obstruction. After Kennedy's assassination, his successor, Lyndon B. Johnson, reversed course and attempted to eradicate poverty by stimulating poor areas with grossly expensive public works projects. Dubbed the Great Society, his program was a colossal failure.
Richard Nixon, the next occupant of the Oval Office, shared Johnson's Keynesian ideas. However, he was more moderate in approach and managed to get a great deal done, including fostering commerce with communist China and setting vigorous price controls for both the private and public sectors. He was ousted on corruption charges, sadly, and the next two presidents in line did even sadder jobs of stabilizing the economy, which quickly spiraled into a drain of inflation. As a result of the election of Ronald Reagan, Austrian-like ideas flooded back to Capitol Hill. He slashed taxes and regulations while spending more on national defense concerns. Such a strange combination paved the way for a financial boom during the 1980s, but this busted spectacularly in the later part of that decade.
Article comments
1 - Glenn Contrarian
Joseph -
Please get into the habit of verifying historical claims before you make them, to wit:
Lyndon B. Johnson reversed course and attempted to eradicate poverty by stimulating poor areas with grossly expensive public works projects. Dubbed the Great Society, his program was a colossal failure.
Blame LBJ for ramping up Vietnam and I'm with you...but if you actually look at the numbers, the Great Society was a resounding SUCCESS!
From the University of Michigan Gerald R. Ford School of Public Policy: In the late 1950s, the poverty rate for all Americans was 22.4 percent, or 39.5 million individuals. These numbers declined steadily throughout the 1960s, reaching a low of 11.1 percent, or 22.9 million individuals, in 1973. Over the next decade, the poverty rate fluctuated between 11.1 and 12.6 percent, but it began to rise steadily again in 1980. By 1983, the number of poor individuals had risen to 35.3 million individuals, or 15.2 percent.
For the next ten years, the poverty rate remained above 12.8 percent, increasing to 15.1 percent, or 39.3 million individuals, by 1993. The rate declined for the remainder of the decade, to 11.3 percent by 2000. From 2000 to 2004 it rose each year to 12.7 in 2004.
Since the late 1960s, the poverty rate for people over 65 has fallen dramatically. The poverty rate for children has historically been somewhat higher than the overall poverty rate. The poverty rate for people in households headed by single women is significantly higher than the overall poverty rate.
Hm - cutting the poverty rate in half and largely maintaining that cut is NOT what I would call a 'colossal failure'.
Also, from Politifact, concerning Bill O'Reilly's charge that "the poverty rate hasn't budged" - they rated his claim as "False", and among other things noted: Poverty among blacks was 55 percent in 1959 and 41 percent in 1966. By 2009, the rate had fallen to 25.9 percent. For black single moms without a father present, the poverty rate fell from 70.6 percent in 1959 and 65.3 in 1966 to 39.8 percent in 2009.
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George W. Bush, H.W.'s son and a new president for a new millennium, transformed Clinton's surplus into a staggering deficit by lowering tax rates while increasing spending. Though Bush II didn't have much choice on the tax rates; as he plunged the country into war.
Exactly where do you get that Bush 43 "didn't have much choice" on the tax rates? I'd really like to see where you got that from!
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The economic stimulus package crafted to relieve many a woe turned out to be, in large part, an audacious bipartisan scheme to repay select special interest groups. By the time Obama was nearly done with his first term, nobody could really agree about anything, because no one wanted to listen to what the other side had to say
Really? Because no one would listen to the other side, exactly how did we wind up with one-third of the stimulus being (non-stimulative) tax cuts?
2 - Kenn Jacobine
Joseph,
Neither Friedman nor Reagan were Austrians. Friedman was a monetarist and argued that the Fed did not do enough to remedy the Great Depression. Reagan was a supply-sider who was the biggest spender and tax incraser to that point in history.
The main tenet of Austrian economics is that booms and busts are caused by govrnment interference in the economy and money manipulation by the Fed. Neither gentlemen necessarily had a problem with either of those two positions.
3 - Cannonshop
Kenn, I think Glenn is confusing what a man says he wants, with what he actually does wrt Reagan and Reaganomics.
4 - Warren Beatty
Joseph, you say, "Designed by some of the same people who designed this nation, it allowed for unsurpassed pinnacles of finance and entrepreneurship to be reached. For a system that helped a fledgling band of colonies transform into the world's unquestioned superpower, its name is rarely mentioned.
Fittingly, it is this: the American School. What is it all about? We shall find out."
OK, we are breathlessly waiting for you to tell us.
BTW, from what university was your economics degree granted?
5 - Glenn Contrarian
Warren -
Where one went to university is important - but is not crucial, as the story of Bill Gates shows fairly convincingly.
6 - troll
...I believe Joseph is referring to the American school of economics not a particular university
7 - Glenn Contrarian
good point, troll.
8 - Dr Dreadful
I don't think Warren actually believes Joseph attended a university called the American School of Economics, but you never know.
9 - Kyle Hunter
Glenn if you're not a politics editor you should be.
10 - Kyle Hunter
It's still up in the air as to whether Warren believes the world is round or not.
11 - Kyle Hunter
Is it possible that Mr. Cotto and Mr. Beatt share information sources?
12 - Kyle Hunter
It is obvious to me that Joseph was home schooled.
13 - Glenn Contrarian
Kyle -
No, I should NOT be an editor - I was a moderator on a religious forum for a couple years and no thanks, I never want to do that again! And that's why I often thank and rarely gripe at the BC editors (except for a particular one, but I won't mention Chris' name) - they've got a tough job and deserve respect for doing it.
14 - Kyle Hunter
Not that there's anything wrong with it, but I'd never have taken you for a bible-thumper Glenn. Of course I haven't been around here that long to know everyone.
15 - Glenn Contrarian
Yeah, I'm pretty religious - twice a year I really do the every-day-of-the-week-and-twice-on-Sunday thing, and most of my friends are pretty conservative. But it would be hypocritical of me to push my religion on others since I really don't like them pushing it on me. I'm always happy to talk about it, to discuss it, but since I'm not part of what I call "mainstream Christianity" - neither protestant nor Catholic, I don't accept the idea of the 'trinity', and I don't do Christmas, Easter, or Halloween - I can well understand how frustrating it is for, say, Muslims when the school is pushing their kids to take part in the Christmas celebration.
btw, my religion is called "Iglesia ni Cristo", which is Filipino for "Church of Christ".
Now I'll get off my religious shtick and tilt once more at the windmill that looks a whole lot like an elephant wearing a flag pin.
16 - Kyle Hunter
I thought it was illegal to be anything but an evangelical Catholic in the Philippines?
17 - Kyle Hunter
Tim Tebow was born there-which explains a lot-no offense.
18 - Glenn Contrarian
Kyle -
No, I don't think it's ever been illegal here - but non-Catholics did face a lot of persecution for a long time. These days I don't see any persecution outside, but in schools it's a different story - there's no 'separation of church and state' when it comes to schools here.
Don't get me wrong - I've been Episcopalian, Southern Baptist, Methodist, Lutheran, and also attended Presbyterian and Catholic. Then I became agnostic and almost atheist. But things happen, y'know....
19 - zingzing
"I don't do Christmas, Easter, or Halloween"
hrm. halloween seems to be an outlier there. and what's wrong with dressing up like a child molester and giving candy to the kids? huh?
20 - Glenn Contrarian
zing -
I know you're just making a joke, but look up the history of Halloween sometime and its direct connection with the Catholic "All Souls Day" and "All Saints Day". I cannot in good conscience tell my kids to celebrate what began as a religious holiday for other religions. Please understand I'm not trying to offend anyone.
21 - Zingzing
I know, Glenn, but isn't that the day after? Halloween is just an excuse to get silly. As far as I know, many Christians denounce Halloween as some sort of a pagan thing. It's got very little to do with the catholic days that follow at this point. I'd view not allowing your kids to have fun on Halloween as Christianity gone too far, not the other way around. Besides, Christmas is all about trees and presents and Easter is all about bunnies and ham these days. Weird world.
22 - jamminsue
Kenn says, Reagan was a supply-sider who was the biggest spender and tax incraser to that point in history. I'm confused. I was preparing tax returns at this time, and every return I did that the taxpayers had paid in estimated taxes (equal to tax the year before) received major refunds. But their incomes weren't any different.
I agree he was a spender. That is why the deficit grew.
23 - Clavos
Glenn, neither Halloween nor pretty much any other holiday practiced by "modern" religions was started by Catholicism or any of the other "moderns." Practically all, including Christmas and Easter, predate even Catholicism and were originally pagan festivals.