How does Reagonomics relate to today?

Answer 1

Reaganomics, or the more proper name, Supply Side Economics as described by Robert Mundell for his 1999 Nobel Prize award in for Economics, does indeed relate today.

While is not simple there is a simplistic way to look at it. The government role is to raise or lower taxes and raise or lower interest rates in combination that will either stimulate or dampen economic growth in conjunction with the business cycle.

The main factors of the business cycle are the cost of resources and the costs of manufacturing a product or providing a service. Economics abides by one rule, the rule of supply and demand. A description of the business cycle can begin anywhere in the cycle and experience the same results. This description will limit it to tangible goods and start with decreasing unemployment.

Increasing employment increases demand.

Increased demand requires an increase of supply.

An increase in supply requires more employment.

Until

Supply is less than demand.

Shortages occur and prices rise.

Rising prices cause a decrease in the demand.

Decreased demand requires decrease in supply.

Decreased supply requires a decrease in employment.

Decreased employment cause a decrease in demand.

Decrease in demand cause excessive supply.

Excessive supply requires decreased employment.

Decreased employment causes less demand.

Until

Demand is less than supply.

Overages occur and prices fall.

Falling prices cause increases in demand.

Increasing demand requires increased supply.

Increased supply requires increased employment.

Increase in employment increases demand.

I hope you have the gist of it by now.

If the economy is growing too rapidly causing inflation to rise to rapidly the government can increase taxes or raise interest rates to check the growth. If the economy is slowing, the government can lower taxes or interest rates to stimulate growth in the economy. This is the essence of supply side economics. The thermostat in your home is not instantaneous and neither is the application of correction by the government.

Personally, I would prefer the government stay within the confines of the Constitution where they belong.