Voodoo economics is a derogatory term first used during the 1980 presidential primaries by George H.W. Bush, then a candidate, to criticize his opponent Ronald Reagan’s economic proposals. Following Reagan’s presidential victory, his economic policies, prominently recognized as Reaganomics, came to the forefront.
Reaganomics was a policy that merged substantial tax cuts, domestic market deregulation, reduced government spending, and a tightened money supply.
Key Insights
- Voodoo economics is a pejorative term first spoken by George H.W. Bush to describe Ronald Reagan’s economic policies.
- Over time, Reaganomics became the antithesis moniker used by both critics and proponents of Reagan’s policies.
- It was predicated on the belief that tax cuts for corporations and the affluent would stimulate economic expansion benefiting everyone.
- The term voodoo economics is often cited today to cast doubt on grand political economic promises.
Delving Deeper into Voodoo Economics
Ronald Reagan, a Republican, ascended to the U.S. presidency after an enduring period of economic stagflation, which originated under Republican President Gerald Ford in 1976 and persisted through Jimmy Carter’s term. Reagan’s vice president in the ensuing administration was George H.W. Bush.
Reagan advocated the virtues of supply-side economics, favoring income and capital gains tax rate reductions to propel economic advancement. The central assertion was that corporate savings from tax reductions would eventually “trickle down” – thereby advancing smaller enterprises, spurring innovation, creating new employment opportunities, and ultimately benefiting society at large. Furthermore, a thriving economic environment would ostensibly lead these rejuvenated companies to pay more taxes, thereby replenishing government reserves.
Bush Sr., in 1980, famously lambasted these economic tenets as “voodoo economics,” suggesting that supply-side reforms alone would falter in revitalizing the economy and would exponentially swell the national debt.
Despite rebuking his initial criticism upon being elected vice president, the phrase indubitably encapsulated critics’ views on Reaganomics thereafter.
Critiques Surrounding Voodoo Economics
Bush Sr. faced criticism for branding Reagan’s policies as voodoo economics, which many perceived as an embittered endeavor to defame Reagan during the Republican primaries.
The pillars of supply-side economics rested on the conviction that unleashing the wealth potential of the affluential segments would invigorate spending, propagate confidence, and amplify job security among the workforce.
In a languishing economy, sentiments favored these dynamics as beacons capable enough to resuscitate the economy from protracted stagflation. Proponents held that reduced governmental oversight and spending would afford a necessary rejuvenation to critical sectors like the financial industry.
Actual Impacts and Outcomes
Although some initial optimism fueled by Reaganomics crystallized, including plunging unemployment rates, rising disposable incomes, and stabilized inflation, other anticipated outcomes didn’t transpire as envisaged. Primarily, anticipated escalations in spending on goods, services, and wages due to tax reprieves didn’t materialize robustly. Further concerns were pointed towards President Reagan’s relaxed regulatory perspective, which notably underpinned the savings and loan crisis.
The accrued impact saw the U.S. national debt burgeon dramatically. While committed to military expenditure and deterred by successive tax reductions, Reaganomics couldn’t stave off a recession by the early 1990s. Voodoo economics indelibly earned its place as a popular term alluding to cynical views on spectacular political economic promises.
Special Considerations
As president subsequent to his vice-presidency, George H.W. Bush re-calibrated priorities slate favoring broader fiscal responsibility over designated tax cut commitments. In a pivotal move in 1990, he implemented a tax surge, confronting a clamped promise helmed only two years prior – catalyzing criticisms from his party affiliates and partly influencing his single-term presidency concluded by Bill Clinton’s election in 1992.
The Bottom Line
Voodoo economics reflect a stigmatized phrase envisaging economic policies accentuating tax reductions on businesses and affluent groups to spur comprehensive economic growth purportedly benefiting all. In economic terminologies, the theory encapsulates what is recognized as supply-side economics – driven by the axiom that enhanced goods and services production monumentalizes the gateway to overall economic fruition.
Further Reflection on Economic Theories
Supply-Side Economics: This theory encapsulates the belief that escalating goods and services supply augments economic growth. Given that businesses amping up production expend capital, such dynamics Goldberg employment proliferation, capital expansion, amplified raw material purchases, all conducing economic ascension.
Demand-Side Economics: Seen as the contrary camp, demand-side economics purveys the fulfillment of bolstering goods and services demand as principal to economic growth. Policies advocated might include extensive governmental embarkation on infrastructure for heightened production, purchases, and recruitment. The approach resonates closely with Keynesian economics sculpted under the philosophy of John Maynard Keynes - majorly seen through initiatives in the wake of battling the 1930s Great Depression.
Related Terms: Reaganomics, Supply-Side Economics, Demand-Side Economics, Trickle-Down Theory, National Debt.
References
- WDSU News. ‘“A man of the highest character’: Family, leaders, world reflect on former President H.W. Bush’s legacy”.
