Reaganomics and American Character by Phil Gramm

I never voted for Ronald Reagan--I was a Democrat in those years, more by habit than by thought or investigation. I've since come to see my error. Interesting piece in Imprimis (Hillsdale College) by Phil Gramm.

"Ronald Reagan did not believe America was in decline, but he did believe it had been suffering under wrongheaded economic policies. In response, he offered his own plan, a program for creating economic freedom that came to be known as Reaganomics. Of course, most of Reaganomics was nothing new. Mostly it was the revival of an older understanding that unlimited government will eventually destroy freedom and that decisions regarding the allocation of scarce resources are best left to the private sector. Reagan explained these old ideas well, and in terms people could understand.

But there was also a new element to Reaganomics, and looking back, it was a powerful element and new to the economic debate. It was the idea that tax rates affect a person’s incentive to work, save and invest. To put it simply: lower tax rates create more economic energy, which generates more economic activity, which produces a greater flow of revenue to the government. This idea—which came to be known as the Laffer Curve—was met with media and public skepticism. But in the end, it passed the critical test for any public policy. It worked."

Read the rest here. Hillsdale College - Imprimis Issue