Occam’s Razor tells us to look simply for answers. So, what basic principal applies to our current economic crisis? Supply and Demand. More than anything else, the basic laws of supply and demand have caused the investment bubbles of the past twenty years.
During the Reagan Administration, aided by a republican congress, Ronald Reagan slashed taxes on the rich. In 1980, the income tax rate on the highest bracket was 70 percent (Married, filing jointly - Income over $215,400). By the time Reagan left office, the rate on the same income was only 28 percent ((Married, filing jointly - Income over $155,320). http://www.taxpolicycenter.org. With after-tax incomes soaring, the investment class invested irrationally, causing bubble after bubble. The economic downturn we’re experiencing, now, is the inevitable consequence of Reagan’s policies.
Let’s take the dot.com bubble for instance. The dot.coms started growing in the early 1990s. At that time Reagan’s tax cuts had fully taken hold, giving the investment class much more money to invest than there was equity in which they could invest. The basic laws of supply and demand tell us that when there is excessive demand for something and insufficient supply, prices will soar. Investors had too much money to invest and equity could only be created so fast. So, the demand for equity was extremely high and the supply was limited. Investors bid up the price of stock in dot.coms to levels many times higher than its actual value. In fact, no dot.com made a profit until the late 1990s. Because such prices were unsupportable, eventually the industry collapsed.
We’ve seen the dot.com bubble and the housing bubble. Now we’re entering into the age of the oil bubble. The collapse of the oil bubble could have catastrophic effects around the world. We need to re-graduate the tax system before the investment class causes the next disaster.
Subscribe to:
Post Comments (Atom)
4 comments:
posted by GreyTheory: "During the Reagan Administration, aided by a republican congress"
Psalter_Christ: I guess Tip O'Neill was just a figment of my imagination. For your information, Democrats controlled the House of Representatives for the entire eight years that Reagan was president. There was no Republican Congress.
FAIL.
You're wrong. The Republicans had control of the Senate for the first six years of the Reagan administration and working control, along with the Dixiecrats, in the House.
You don't remember that Bob Dole ran on being Majority leader of the Senate?
And ... Even if the Democrats passed the mass, disproportionate, cutting of taxes, doesn't the point still stand?
btw ... This is not a contest. I'm asking you to think.
You stated that Republicans controlled Congress, that is flat out wrong. Congress is the House and Senate. If you ever expect to be taken even halfway seriously, you can't begin your argument with blatant falshoods. - Psalter_Christ
Please read my response again. It's pretty clear.
"The Republicans had control of the Senate for the first six years of the Reagan administration and working control, along with the Dixiecrats, in the House."
The point about taxes and bubbles still stands. You didn't address that at all.
If all you're trying to do is start a fight, please stay off this blog. If not, please identify yourself.
Post a Comment