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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
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>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