samhill wrote:Fred if you look up a bit of Reaganomics it followed keynesian economics where basically it believes that deficits are stimulating for the economy & really don`t matter because we can grow out of them. Only fault is we no longer produce anything & the economy is flat but it was a fun ride while it lasted.
Deficits in themselves are not bad. It's the size of the deficit in relation to income that's the problem. Many people starting out have a negative net worth ie owe more than they have in assetts assuming a house and mortgage. If they have sufficient income that's not a problem. If their income goes down too much or they increase their expenses too much, they have a problem. Right now the governments income has declined due to the recession and instead of tightening their belt, they are increasing spending. A double whammy and it WILL come back to bite us in the ass.
The basic premise of "reaganomics" was that even though you decrease taxes, income to the government will increase because by lowering taxes, the economy is spurred, everyone makes more money and the taxes PAID are still greater than the taxes lost by cutting tax rates. It works, it makes sense, and it's what was responsible for the growth in the US during the industrial age (before income taxes, real estate taxes, and the host of all the rest of the hidden taxes we don't even see.)