Tackling a tax myth

The GOP is pushing the idea that Reagan lowered taxes and that prompted the economic recovery in 1983. Rob Tisinai pulls that idea apart.

The GOP says lowering taxes (Reagan's "trickle down economics") will boost corporate investment, which will boost the economy. But the economy started to improve before investment did.

Perhaps the current Dem idea of boosting personal consumption by extending unemployment taxes would work. Yes, at the end of 1982 a boost in consumption was followed by an improvement in the economy at the start of 1983 (Tisinai was careful not to claim causation).

What about a federal stimulus? Yes, increases in spending were followed by an improved economy.

Conclusion: Did gov't spending boost the economy during the Reagan years? Possible, but inconclusive.

Did corporate investment boost the economy in those years? Definitely not, because the increased spending came after the economy started to improve. If there is a cause-and-effect, the cause must come first.