I don't claim to know enough about economics to critically review the issue, but weren't Reagan and George W. Bush both huge deficit spenders? Doesn't Kenysian economics predict that deficit spending would increase consumption and boost an economy?

What would be interesting is if Reagan or Bush could have bolstered the economy through tax cuts while simultaneously decreasing government spending enough to pay for their tax cuts. But neither did that. And both left it to a later generation (or at least the next economic boom) for the government to pay down the debt.

Theirs may be very well be responsible short term economic policy, designed to pull an economy out of depression. But continual deficit spending is not good long term policy. And reduction of government spending, while a good idea, would likely cool the economy.

p.s.
demonstrating that you had to include the investor class in the income tax reduction in order to stimulate the economy.

That, to me, is the more interesting portion. I don't think it's obvious to all people. I don't want you to think I missed it. But I don't have the background to figure out if there are any confounding factors.

I don't claim to know enough about economics to critically review the issue, but weren't Reagan and George W. Bush both huge deficit spenders? Doesn't Kenysian economics predict that deficit spending would increase consumption and boost an economy?

Great point, Ryan -- an excellent question since many people will have the same thoughts.

You're right: There was huge deficit spending in the 80s. (It was Reagan's deal with the Democrats who controlled the purse-strings in Congress: give me my military buildup and I'll give you your domestic spending.) So that's also something we must look at seriously.

Thanks for the reply. It doesn't strike me as 'blasphemous' at all since I don't worship the man, or any economist for that matter. Lacking knowledge on a subject, I'm forced to reason by refering to "experts" which is not somthing I like to do.

Okay, my mistake. Hoover denounced Laissez-faire and his tax cut was primarily for poorer Americans. He raised taxes on the wealthy.

He explicitly denounced laissez-faire in his 1922 book American Individualism, took an active pro-regulation stance as Commerce Secretary, and saw tariff and agricultural support bills through Congress

He went to Congress with a $160 million tax cut, coupled with a doubling of resources for public buildings and dams, highways and harbors.

Urged the state governors to also increase their public works spending, though many failed to take any action.

In order to pay for these and other government programs, Hoover agreed to one of the largest tax increases in American history. The Revenue Act of 1932 raised taxes on the highest incomes from 25% to 63%. The estate tax was doubled and corporate taxes were raised by almost 15%. Also, a "check tax" was included that placed a 2-cent tax (over 30 cents in today's dollars) on all bank checks. Economists William D. Lastrapes and George Selgin, in The Check Tax: Fiscal Folly and The Great Monetary Contraction (Journal of Economic History, 57(4), December 1997, 859-78), conclude that the check tax was "an important contributing factor to that period's severe monetary contraction."

Franklin D. Roosevelt blasted the Republican incumbent for spending and taxing too much, increasing national debt, raising tariffs and blocking trade, as well as placing millions on the dole of the government. Roosevelt attacked Hoover for "reckless and extravagant" spending, of thinking "that we ought to center control of everything in Washington as rapidly as possible," and of leading "the greatest spending administration in peacetime in all of history." Roosevelt's running mate, John Nance Garner, accused the Republican of "leading the country down the path of socialism".

These policies pale beside the more drastic steps taken later as part of the New Deal.

http://en.wikipedia.org/wiki/Herbert_Hoover

To put it more directly,

If Reagan had not relied on deficit spending, his tax cuts would have been next to impossible, correct? Could we agree then that an economy funded through deficit spending will, in the short term, perform differently than one where a government taxes first and spends second? And that the economy under Reagan's would seem to be an example of the first? Correct me if I'm wrong here.

It might be easier to think about what happens when you lower the interest rate on loans; you encourage investment, you discourage savings and you also encourage people to take on debt. And that stimulates the economy. Right?

My question is whether deficit spending during the Reagan administration had an effect similar to (but not superior to) lowering interest rates (which was also done); It encouraged (government) debt, it encouraged (government) spending, and it encouraged at least some degree of investment through, say, 'trickle up economics' (new word alert) as well as government R&D. Whether that effect was intended or not, why shouldn't it be taken into account in interpreting the Reagan economy? In Bush's post 9-11 economy he deliberately encouraged people to take on debt and consume. Perhaps they should have invested instead, but it suggests that Bush, at least, is following a deliberate path here.

(And Reagan lowered interest rates as well, which would also impact income as well as encourage debt. )

Bastiat does not address keynesian economics because he does not address deficit spending, but assumes that taxes are levied and then spent.

Bastiat does not address kenysian economics because he describes actions taken on a continuous basis rather than temporary actions taken in response to a cyclical downturn in the economy, whose effects will eventually have to be 'paid off'.

I agree that spending government money on things like plays is a bad idea. I'm open to the possibility that government investment in things like the hydroelectric dams built during the Roosevelt administration was a bad idea as well, viewed in the long term.

The assumption I'm getting from your first reply is that the deficit spending of the Reagan administration (some of which, at least, involved millitary R&D, with civilain applications) had no impact whatsoever on the resulting economic boom, or else had a negative short-term impact and could thus be ignored. The assumption might be true, but it needs support. Or else the graph of wealth needs to account for the effects of that deficit spending on income.

Franklin D. Roosevelt blasted the Republican incumbent for spending and taxing too much, increasing national debt, raising tariffs and blocking trade, as well as placing millions on the dole of the government...

I see you are learning some history, Ryan! Isn't that interesting? What frustrates me so much is that it is the exact opposite of the lies we were taught in school. FDR didn't "get us through" the depression, he kept us in it. And the line about Hoover being "laissez-faire" is an equally important deception: it's as if they wish to deprive us of the facts of history, so that we'll be unable to draw correct conclusions about what policies to support for a good future.

Now, when I see depictions of the Great Depression, with people out of work, full of despair, starving begging for even a bite to eat, families split up by poverty -- I think "FDR did this." True, we would have had a 2-year recession under Hoover. But FDR turned into the hellish cesspool of unrelenting despair and poverty it became.

And to think he's still praised for it in the public schools!

Next we'll study Woodrow Wilson's impact the world...