The Truth Behind Reaganomics

by Arjun Patel

            Republican David Stockman once claimed that “Whenever there are great strains or changes in the economic system, it tends to generate crackpot theories, which then find their way into the legislative channels.”[1] It was difficult to comprehend the reasoning of this economic theorist due to the circumstances of the 1980’s. Similar to the roaring twenties, this new decade brought about new lifestyles such as the popular rap scheme and advancement of the free world. As a result, there was an economic crisis fairly disguised amidst the environment. Critics such as David Stockman and Frank Ackerman carefully analyzed the economic policies of the Reagan administration that came into power in 1981. Frank Ackerman examines the presiding factors and causes of this economy in his fascinating book Reaganomics: Rhetoric vs Reality published in 1982.

            At the beginning of the book, Ackerman notes that very few Americans understood Californian Ronald Reagan’s strange beliefs after James Carter’s presidency. He attributes Reagan’s early success to the timing during the 80’s economic environment in which workers’ compensation was less than what it had been in the 1960’s and 1970’s. Changes in U.S. international power, oil supply, suburban and highway complexes, and government intervention in the economy led to the disaster known as “stagflation.” Cheap oil from the Middle East transformed the social and economic lives of Americans as it contributed to the massive boom of automobiles, suburbs, and highways. Postwar prosperity, Ackerman states, continued due to economic facilitation: “Presiding over the last long stretch of postwar prosperity, and over a rapid expansion in the size and role of the public sector, [the government] claimed the they could “fine-tune” the economy to a desired level of employment and growth.”[2] Along with other economic theories, Ackerman looks into various economic theories such as the trade-off theory to contrast with Reagan’s policies. Indeed, Ackerman shows firm support for John Keynes’ Keynesian economics theory and the trickle-down theory. Ultimately, the beginning of the book focuses on the results of economic actions in previous decades.

       As many economists address, Ackerman analyzes the reasoning behind Reagan’s tax cuts. At the time, Americans did not recognize the dangers of “a shift of wealth between different income groups.”[3] Eventually, the increased credit use that led to the Great Depression became prevalent in the late 80’s. The failure of exemptions and deductions is further analyzed by Ackerman through the IRS’s table of tax burdens.[4] For an entire section of the book, Ackerman compares the tax cuts that affect the middle and lower classes with tax exemptions for the upper classes from the Kemp-Roth Bill. Instead, he offers “free to choose” as a solution to the issue of prosperity amidst disaster. Demand, labor, and wages correlate in many ways, but Ackerman’s unique theory of economics requires cooperation between the individuals and the employer. On the other hand, Ackerman discussed the effect of using tax cuts to stimulate more women to work. Because of its importance in the Reagan administration, tax exemptions are an interesting topic that Ackerman considers deeply impactful.

      Similarly, the controversy on the price of war escalated as the Reagan administration put more resources into the program. Statistics presented by Ackerman claim that Reagan planned to spend $1.5 trillion on the Defense Department alone over five years. After further balancing the trauma of fear and threat, Ackerman asks a rhetorical question to challenge the supporters: “Why are we spending so much more than, by any standard, we need for defense?”[5] In fact, T.K Jones, a deputy secretary of defense, claims that recovery from complete mutual destruction of nuclear warfare for the United States would take only two to four years.[6] He concludes the answer to his question by saying that the Adam Smith method of economics does not apply to this current age. Laissez-faire, to Ackerman, was similar to leaving occupied land under water without hesitation. For example, he attributes the fall of the Shah in 1979 to the United States’ policies as an international police power for Third World countries. As a result, a majority of the military spending is aimed at improving attacks on these underdeveloped nations rather than using mutual assured destruction against more powerful nations.

      Towards the end of the book, Ackerman parallels the thin prosperity of the Roaring Twenties to the “smell of success” in the 1980’s. More specifically, he mentions that “Unfettered free enterprise is all the rage in Washington these days.”[7] However, more and more theorists began to realize the false direction the economy was undertaking when the government was deregulating numerous industries. For the energy industries at the time, the prime goal was to be unleashed and gain permission to drill for resources anywhere. Under the shell of profits for big businesses and corporations was the intense pollution and stagflation. His concerns lay mostly in the emissions of soot and dust that reduced the sulfur dioxide levels in the air. This extended discussion on environmental factors portrays that economists also evaluate the longevity of natural resources which includes important government programs.

            Throughout the book Reaganomics: Rhetoric vs Reality, Frank Ackerman proclaims his purpose clearly. He follows a definitive pattern that presents aspects of Reagan’s policies and immediately counters those ideas through reasoning. However, he does give credit to Reagan for some successful actions to bolster the United States economy. In the very beginning, Ackerman states, “Reaganomics offers only a very partial, biased response to the causes of stagflation, and will provide, at best, a very partial, biased cure.”[8] As he deeply uncovers his beliefs on Reaganomics, he gets further and further into details of the economy such as the demands and underlying factors. For example, he includes the economic policies of Reagan regarding tax cuts, and then describes the effects directly on a particular society. Similarly, he attacks Reagan’s restrictions on labor unions with elaborate detail. Overall. Frank Ackerman expertly analyzes the different aspects of the economy during the early 1980’s and poses possible effects and solutions in each distinguished sector of the economy.

            Born in Wisconsin in 1946, Frank Ackerman was a leading economist during the late 20^th century. At the same time, he continues to publish works such as Can We Afford the Future? Economics for a Warming World from 2009. However, his particular niche was environmental economics emphasizing development and change. Therefore, his more recent works concern the contemporary issue on resource management for the future. In his book entitled Reaganomics: Rhetoric vs. Reality from 1982, Ackerman also strongly observed the economic factors in correlation to the economy. His extensive research and studies in cost and benefit analysis for governmental organizations and private agencies ties to his criticism of conventional economics of the 1980’s. In addition, he currently is a senior economist and advisor at Synapse Energy Economics in Massachusetts. Moreover, his knowledge in the energy industry is depicted in his analysis of cost efficiency of oil companies when Reagan offered additional control.[9] Throughout the book, Ackerman talks about the gas and oil industry causing the boom of highways and suburban life.

            During the early period of the Reagan administration, people were confused at what Reagan was trying to accomplish. The general population did realize the increase in power for the higher-income workers but did not criticize big business or private enterprise as a whole. The tax-cut re-ignited stagflation and raised interest rates which led to the deep recession in 1981-1982: “Biased as an across-the-board cut in income taxes would be, the tax cut adopted in 1981 is even worse.”[10] Because Ackerman’s book was published in 1982, it was a direct response to these two significant but commonly forgotten recessions. In fact, the economy became stable quite suddenly in 1983. In general, Ackerman did share common beliefs regarding the Reagan administration with American society amidst the economic crisis, but he also analyzed issues that continued in the 1990’s.

           Among various critics of Ackerman’s thoughts, there is a common understanding that the grandeur of Reagan was a myth. Thus, many such as the GUND Foundation point out the subtle damages that president Reagan has caused.[11] Secretary Trisha J. of this organization outlines the decimation done to the middle class which has brought the U.S. economy to its current state. However, she denies Ackerman’s reasoning behind preservation of the environment as it could cause devastation in the oil industry. Ultimately, most people who sided with Ackerman’s liberal ideas criticized every aspect of Reaganomics.

            Structuring his chapters expertly in a practical manner with explicit reasoning, Frank Ackerman does advocate firm ideas countering Reagan’s policies. He clearly refutes most of Reagan’s policies by presenting examples of failures. However, Ackerman does not reveal the success that Reagan’s policies brought in early 1983. Furthermore, he speaks as a middle class individual which forces him to hold biased opinions on Reagan’s tax cuts. Although his data from the IRS on tax cuts does reveal the accurate percentages based on income, it fails to show the categories of work done by individuals.[12] Along with other reasoning methods with military soldier budgets, Ackerman does not precisely weigh the effects of Reaganomics. In due respect to the terror among American society of Soviet Threat, Reagan’s military policies were necessary. In some cases, Ackerman lacks factual analysis and rather lays out interpretive analysis which is dangerous to an author’s purpose. For example, he provides the analogy that “ants, however, are distinctly more likely to survive than human beings, as insects have proved able to withstand doses of radioactivity that are lethal to mammals.”[13] Pertaining to labor unions, Ackerman simply criticizes Reagan’s threat to turn down the Professional Air Traffic Controllers Organization in 1981 and many other similar unions by correlating these actions to the failures of President Calvin Coolidge’s policies on labor unions. Although these conflicts in the book do digress the quality of the work, Ackerman does pose interesting ideals on the economic situation of the 1980’s.

        Frank Ackerman’s background contributes to his underlying purpose. Aside from addressing the economic crisis and posing solutions, Ackerman calls for attention specifically in the environmental and energy issues caused by Reagan’s policies. He pulls away from an economist perspective when he talks as an environmentalist: “The regulations are well worth the price: in exchange for higher energy bills now we will be enjoying better health (and lower medical expenses) in years to come; we will be preserving large areas of the country for agricultural, recreational or residential uses in the future, rather than letting them be ravaged today.”[14] In this excerpt, Ackerman clearly portrays himself as a Democratic-Republican advocating for a conservationist and agricultural movement. Ackerman desires to have a slight “fine-tuned” version of trickle-down or supply-side economics. Instead of cutting many government programs, he wishes to have active government spending on significant programs while keeping a rational policy on tax cuts and deductions. For example, he fights for a reduction in fossil fuel burning and related industries to bring opportunity to American workers. This would be done by providing higher quality jobs and dignified retirement.

           All in all, Ackerman’s position on the realm of economics makes him a progressive activist. Instead of supporting Reagan’s conservative policies on extreme deregulation, Ackerman reasoned for regulation to a lesser degree. In addition, his firm belief in economic progressivism caused him to oppose Reagan’s budget cuts. He also articulately attacks society’s changes when he discusses class struggles.[15] In these ways, he moved away from the common attraction to conservatism to solve economic issues and held a liberal stance in society.

            In conclusion, Reaganomics: Rhetoric vs Reality by Frank Ackerman is an indulging book on the explicit causes, effects, and solutions of the president Ronald Reagan’s economic principles. His criticism of Reagan’s supply-side economics is followed by deep analysis of the economic situation of the country at the time. Overall, his own theory in response to the crisis in the early 1980’s should be considered for even today’s economy.

 

 1: Stockman, David. The Triumph of Politics: Why the Reagan Revolution Failed. 1986.

2: Ackerman, Frank. Reaganomics: Rhetoric vs. Reality. South End Press, 1982. 8.

3: Ackerman, Frank. 39.

4: Ackerman, Frank. 43.

5: Ackerman, Frank. 67.

6: Jones, Thomas.

7: Ackerman, Frank. 119.

8: Ackerman, Frank. 3.

9: Ackerman, Frank. 152.

10: Ackerman, Frank. 39.

11: JP, Trisha. GUND Foundation. 2005.

12: Ackerman, Frank. 43.

13: Ackerman, Frank. 82.

14: Ackerman, Frank. 141.

15: Ackerman, Frank. 42.