The effect of Ronald Reagan on the USA economy is very clear for clear thinkers who lived through the era. Before Ronald Reagan we lived in an era of a light analogy of a military dictatorship. Highly punative marginal tax rates in the top incomes essentially prohibited movement of capital and social mobility.
Capital was locked up in less than productive pursuits because of the high tax bill you would have to move it.
In order to understand how the government influences the economy one must imagine the economy as a river of money that flows downstream. If the money water is diverted by the government it does not go unspent. It is spent for a different purpose in a different location. Thus governmental spending effect is a pure diversion. Now imagine what this cash really signifies. It is merely a proxy for work effort in the economy. Thus now you can see that governmental diversion of cash in the private sector is a redirection of societal work efforts. Further yet imagine a few government program managers directing the efforts of millions of people. How efficient do you imagine that to be ? If you are a good engineer you rapidly know its highly inefficient.
Social mobility was prohibited because if you worked harder / smarter you were essentially punished by a rapidly increasing tax bill. Social mobility may sound frivilous but it is not. it is from the upper echelons where people have extra money that have the luxury of imputting control to the economy either through their economic decisions or through political office. Thus the upper echelons of society essentially closed the door on new people in this set of people. It resulted in effects highly similar to the Brazilian military dictatorship that “governed” from the 60’s through the 80’s.
Reagans approach also built in a basic disdain for the political class of Washington that still exists to this day. Although this can be seen to be waining somewhat in the current ascendency of the ideas of socialized medicine.
Reaganomics as the USA moves into the future:
1- Reagan emphasized the individual over the collective. America has flirted with socialist collectivism since the great depression of the 1930’s. This flirtation has not yet ended. With George Bush there has been a defacto resurgence of these policies through out of control spending.
2- First through Rush Limbaugh and more powerfully through the internet the natural libertarian impulses in the people who make up the economy are being encouraged. While at every turn politicians tend to want to stifle anything that would encourage free independent thinking websites like Ebay are providing real life universities in pure free market capitalism for anyone who wishes to take part.
I lived through this era. All the explanations that blame Reaganomics for deficit spending are viewing the situation incorrectly. For hard core conservatives / capitalists / libertarians see deficit spending as a way of weakening central government and strengthening the individual. The more tax money required to service government debt …the more tax money that goes back into private hands.
Thus now you know why liberals scream bloody murder when they talk of Ronald Reagan. Their built in tendency to long for central control is threatened by this basic no nonsense impulse to live free. After all is said ….we should live in a consentual society ….not a coercive one right ?