Many Republicans refer to the Ronald Reagan era as a demonstration of what tax cuts for the very wealthy can accomplish, however when you look at the Reagan era in some detail, we can get a better picture of what specifically happened and it is not at all the picture painted by Republicans. When you look at the conversation President Jimmie Carter had with Paul Volcker who was at that time Chairman of the Federal Reserve (Fed), you begin to see what I am talking about.

Volcker stated in an interview on the Federal Reserve Bank website under the subject titled “Commanding Heights,” that he asked President Carter if he had cost him the presidential election and Carter’s response, as he smiled, was “…there were a few other influences as well.” What Volcker was referring to was his raising the prime interest rate creating a recession, which pushed the national unemployment rate to 10.8 percent. The unemployment rate started rising during the Carter administration and would reach 10.8 percent in November, 1982.

The appointment of Paul Volcker by President Carter as Federal Reserve Bank Chairman in August of 1979 was the major factor in the rise of interest rates. Volcker as Fed Chairman would push the prime rate to 21% by 1981 to bring inflation under control caused by the OPEC (Organization of Petroleum Exporting Countries) oil embargo just as Ronald Reagan was coming into office. Raising the prime rate to 21% brought inflation under control. Thus Reagan, not Carter; although Carter appointed Volcker, got the benefit of seeing the unemployment rate fall from 10.8 to 5.3%, as Volcker lowered interest rates from 21% during Reagan’s term in office, igniting an expansion of the economy.

Additionally, President Ronald Reagan used the Social Security trust fund to cover any holes left in his budget as a result of extending a tax cut to the wealthy. So the bottom line was that the economy perked alone without experiencing any shortages due to the wealthy paying less taxes, while interest rates were coming down introducing cheap money into our economic system. Here is the simple truth and its just a fact, wealthy people do not spend as much money on every day goods and services as the bottom eighty percent of society does. So, pushing more money to the top is not going to expand the economy.

Additionally, what the Trump administration is asking corporations and businesses to do is something that is just basically not a part of their DNA and that is hire workers and expand output in advance of a resurgence of American consumer demand. Even with a cut to an effective tax rate of 10 percent in the corporate tax rate, past behavior signals that that is not enough of a tax cut for corporations and businesses to take such a risk. He is essentially asking them to put the cart before the horse. Corporations and businesses usually respond to consumer demand by expanding, they don’t initiate it!

(“Excerpts from the book titled, “The Fix This Time” @ amazon.com/dp/B00MI3PD2M)