English 12B E
December 21, 2012
Lost at Sea
The real role of government in relation to the economy is much like the role of the captain of a sailboat: If he has rigged the sails correctly, the ship will steer itself.Reagan used supply-side economic policies to change the way the United States looked at the economy. His policies, regardless of standpoint, were a huge change from the prior decades. Reagan promised real change and actually delivered on it.The economic policies of Ronald Reagan's administration accomplished the administration's four major policy objectives: reduce the growth of government spending; reduce the marginal tax rates on income from both labor and capital; reduce regulation; and reduce inflation. The United States Federal Government needs to adopt these policies again to get the country out of depression and back on track.
Princeton's lexical database defines supply-side economics as "the school of economic theory that stresses the costs of production as a means of stimulating the economy; advocates policies that raise capital and labor output by increasing the incentive to produce" (Princeton). Policies like these were implemented under Ronald Reagan. Critics often called the policies "Reaganomics," however, supporters have adopted the term as a positive reference. At this point, the terms are used interchangeably (Uchitelle).
Economics stems back to the dawn of centralized currency in the seventh century BC. During the past few hundred years, economics has become an important part of civilization especially since the emergence of the free market economy. The implementation and maintenance of these economies may be more difficult, but the freedom they provide is priceless. The debate of Reaganomics has been present since Reagan began his election campaign. Many criticized his policies and still do today.
The debate of supply-side economics is based on whether Reagan's policies worked. Statistics show his progress was concrete and undeniable, but still many people remain doubtful, and many others claim that big government should micromanage the economy, at the cost of freedom. The basis of the American economy and ways of thinking, financially, follow the principals of laissez-faire, a term which translates to "let it happen." This theory states that government has three roles and only three roles: that a government should protect the people's right to own property; maintain a stable currency; and provide for the public defense (McFall). That means that government need not be very large. Although some do not agree with these principles, they are the ones the country was founded on.
Some believe that the government should interfere with the economy and provide for every individual through programs such as public health care. Those people believe that the wealthy should pay more taxes and the less wealthy should pay less; in other words, the wealthy should be giving away their money to those who do not have as much. They also believe in generally high taxes to pay for the programs they support, which benefit only lower income families. This side is considered the liberal view on the economy and government. Others believe that supply and demand, the free market economy as a whole, will manage itself. The more government interferes, the worse off everyone is. They believe in low taxes and a small government which serves only those three roles of government described under laissez-faire. This is considered the conservative view. Reagan himself held this view.
Reagan’s biggest problem, which hurts how supply-side economics is perceived to this day, was his inability to produce a balanced budget within his presidency, to put it frankly, Reagan spent too much money. For any government to work, its spending must balance out with its income. This is also true for people and businesses. If a government spends more than it takes in, it falls into...