What past teaches us

The science of economics teaches us that spending is the lifeblood of the economy. Spending consists of business spending, governmental spending, and consumer spending. I learned in Economies 102 in 1967 that the economy grows fastest when total spending is one-third of each. When this three-legged stool gets out of balance, the economy will slow.

Since 1980 we have been obsessed with reducing taxes on the job-makers, hoping they will hire more workers, pay higher wages, and create more jobs. Ronald Reagan cut taxes on the rich from 70 percent to 28 percent. He famously said, “Government is not the solution … government is the problem.” Consumer spending jumped to about 70 percent of GDP. Expected revenue fell. The federal debt exploded from $998 billion to $2.9 trillion in 1989 due to deficit spending. Unintended consequences!

Compare the growth of our GDP from 1945 to 1980 with the growth from 1980 to 2015. We had fewer people in the first 35 years, but grew faster than in the second 35 years. In the first 35 years, the top tax bracket was about 90 percent until 1964 when it dropped to 70 percent. It stayed there until Reagan reduced it.

For the last 35 years, our nominal GDP has grown only about half as fast as in the previous 35 years, even though we have far more people. We have cut taxes to the bone and run up a $20 trillion debt. People say we can’t afford infrastructure and investment spending for our children’s future. The Republicans say, “We have to cut Medicare, Social Security, and Medicaid,” apparently not realizing that when the government cuts spending, that directly reduces our GDP, and indirectly reduces it due to re-spending and the velocity of money.

We used to teach economics as a science. It still is. RUUD DuVALL Fayetteville