Understanding Voodoo Economics
“Voodoo Economics” might sound like a new wave band from the 80s, but it was actually George H.W. Bush’s less-than-flattering characterization of Ronald Reagan’s economic policies during the fiercely fought 1980 presidential primaries. Reagan’s policies, later christened “Reaganomics,” were a cocktail mixed with hefty tax cuts, deregulation, restrained government spending, and a squeeze on the money supply. Proponents toasted to economic revival, while critics, sipping skeptically, awaited fiscal hangovers.
Criticism and Consequences of Voodoo Economics
Playing the role of the economic fortune teller didn’t pan out as Bush had predicted. Initially calling it economic witchcraft, Bush later embraced these policies as Reagan’s Vice President, showing perhaps that in politics, the only real dark magic is the spell of convenience. Despite the initial hope that these policies would pull the U.S. from the murky waters of stagflation, the results were a mixed bag—spurring growth and inflation control, yet swelling national debt and fanning the flames of income inequality.
Side Effects of Reaganomics
Despite initial successes like reduction in unemployment and control of inflation, Reaganomics had its share of economic indigestion. The expected reinvestment by the rich, akin to economic manna from heaven, didn’t quite rain down as abundantly as hoped. Moreover, deregulation had its part in setting the stage for the Savings and Loan Crisis, an unfortunate prelude to the more severe financial calamities to come in following decades. In essence, the Reagan administration’s fiscal policies were like a double-edged sword—cutting through some economic barriers while stabbing at the national debt ceiling.
Special Considerations in Hindsight
When Bush took the presidential oath in 1989, he pivoted towards broader fiscal responsibility, an echo perhaps of his earlier skepticism towards Reagan’s policies. In a move that seemed akin to confessing fiscal sins, he even agreed to a tax increase, breaking his “no new taxes” pledge. This fiscal penance, however, set the stage for more stable economic policies.
Related Terms
- Reaganomics: The colloquial term for the economic policies of Ronald Reagan, which focused on tax cuts, deregulation, and reduction of government spending.
- Supply-Side Economics: An economic theory that advocates reducing taxes and decreasing regulations to stimulate business investment.
- Stagflation: A portmanteau of stagnation and inflation; a period of slow economic growth and high unemployment accompanied by rising prices.
- Fiscal Policy: Government policies regarding taxation and spending.
Suggested Reading
- “An American Life” by Ronald Reagan – A memoir including his insights and perspectives on his economic policies.
- “The Age of Reagan: The Conservative Counterrevolution 1980-1989” by Steven F. Hayward – Delivers an in-depth analysis of Reagan’s presidency and its impact on the U.S.
- “Volcker: The Triumph of Persistence” by William L. Silber – Explore how Federal Reserve policies in the Reagan era shaped the economy.
In the ledger of history, ‘voodoo economics’ scribbled itself into the margins, a note that economic theories often walk the line between innovative and incantatory. Whether it’s a spell of growth or a curse of debt, the alchemy of economics continues to bewitch and bedevil policymakers and pundits alike.
