Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 exptools 1/6/84; site ihuxe.UUCP Path: utzoo!watmath!clyde!burl!ulysses!mhuxj!ihnp4!ihuxe!rainbow From: rainbow@ihuxe.UUCP Newsgroups: net.flame Subject: stagflation Message-ID: <870@ihuxe.UUCP> Date: Mon, 1-Oct-84 18:42:04 EDT Article-I.D.: ihuxe.870 Posted: Mon Oct 1 18:42:04 1984 Date-Received: Wed, 3-Oct-84 08:31:26 EDT Sender: rainbow@ihuxe.UUCP Organization: AT&T Bell Labs, Naperville, IL Lines: 101 >And, in fact, it hasn't>--unless you want to give Reagan credit for bringing >the economy back to about where it was when he took office. Also, you >might factor the huge federal deficit into the figures--what would the >economy look like if he hadn't been spending money left and right (as he >accuses the Dems of doing) and artificially pumping up the economy by doing >that? SNAPSHOT: four years ago today. Take a look at the world outside. Unemployment at record levels with no indication of more jobs. Companies going bankrupt left and right. Everyone being layed off because there just wasn't any work to do. No one was spending money on goods and services. Interest rates at all time highs. Real Estate business all but halted, etc. No one had money to spend. Those with money, they saved it. This should cause stagnation, but...... Inflation was spiraling upwards at a record pace. This was caused by the lack of goods and services available. Stagflation I believe it was called. This is the state Carter left us in. It was terrible. I certainly think it's a lot better today. I guess though good times makes it easy to forget the bad times. By the way, this stagflation economy we were stuck in with Carter is not easy to solve. Government has two policies generally. First, you can increase the money supply. This will cut down on interest rates(the price of money). More money will be spent. Companies will prosper. Jobs will open up. More money will be available. Everything is fine except inflation will now continue upwards until out economy collapses because out money is worthless. The second option is to decrease the money supply. This will halt inflation because there is less spending and less demand for goods. But this hurts industry which results in more unemployment. Also obvious is increased interest rates because the demand for money is greater. Both options are bad and Carter was unable to cope with the situation. So he did nothing. Not a bad choice because either of the two options would make things worse. Along comes Reagan. He suggests tax reductions. This had the effect of giving people more money to spend. So the demand for money lessoned lowering interest rates. More money was spent on goods and services. Unemployment figures lowered. And since the money supply wasn't increased (matter-in-fact it was tightened a little to help out), inflation returned to more normal levels. A terrific solution. It worked perfectly. And the democrats claimed the people would not spend their increased funds. They claimed Reagan's plan would therefore never work. They were clearly wrong as history shows. Our economy is clearly better today than four years ago. I'm not even an economist and I can realize these things. I don't let all the rhetoric blind me to the obvious. I hope that more people are now aware(or remember a little better) of what was before. The repercussions of this are less money for government spending(less taxes). So Reagan didn't spend one cent more to suddenly increase the disparity between spending and income with respect to the budget. Hence the deficit also increased. The defense money was just a reallocation of spending priorities. The actual total budget changed little. Now Reagan tried real hard to cut government spending. Unfortunately he is not a dictator and there is Congress to deal with. And the democrats there made sure not to help out. While the Republicans went along with the Reagan's plans, the democrats were united enough to thwart the overall plan. They refused to cut government funds for their states, etc. They were scared their reelection chances would be hurt if they came back with a smaller piece of pie for their supporters/voters. So all the wasteful spending continued because no one would budge an inch on any programs. This is not the presidents fault. It's the democrats. They compounded the difficulty by not allowing the president line item veto power. Why? So now they can push through more spending plans in packages. It makes it real tough to get anything done. How can one balance the budget if no one is willing to cut expenses. While I hold Reagan partially responsible for insisting on his program emphasis(ie defense), I hold the democrats more responsible for not helping one bit in cutting spending. Reagan could only try and did so. Now what gets me furious is the democrats using election rhetoric to remove the blame from themselves and try to put it on Reagan for the unbalanced budget. They forget their previous wrongs and mislead the unsuspecting public. The best defense is a good offense. Trying to turn public opinion, they sling any mud possible, true or not. Disgusting. And now, the democrats have this quick fix for balancing the budget(raising taxes). This throws the emphasis off their failure to reduce any of their spending. Unfortunately four years down the road, we'll have stagflation again alla Carter. But the only thing they're concerned about is now and the election. I can only hope this empty plan won't be supported on election day. Otherwise eight years down the road we'll have another republican cutting taxes. And then 12 years later we'll have another democrat raising them. And 16 years......Well, it's a farce. I hope a majority of people keep this in mind come election day. We don't want a return to stagflation. We want a continuation of present policies. We want an effort to cut spending. We should demand comprimises. But that will never be as long as there are two major parties each wishing bad things for the other. Each trying to gain public approval. Each trying to avoid disapproval. We've come a long way in four years. Just a little more effort now in the right areas. Let's not throw it all away. Otherwise sooner or later we'll be starting the same policy(Reagan's) over again. Robert