[Opinion] Reaganomics

“I am sorry to declare that we are in the worst economic mess since the Great Depression.” Ronald Reagan, president of the United States, opened his mouth with these words just two weeks after his inauguration when he stood up at the State of the Union speech. It was in early 1981, and the U.S. economy was in a quagmire with excessive inflation and a high unemployment rate it inherited. “It’s time to try something different.” It marked the birth of Reaganomics, the most epoch-making change in the economic policy of the U.S. government since the New Deal. The speech was appropriate for the “Cold War Cowboy,” who admitted the reality and thrust a solution, instead of spending time by disputing whether the economy was in a crisis or not.

▷When he entered the White House, Regan had three firm beliefs: the government was too huge, tax was too high, and the Soviet Union was the “evil empire.” Jimmy Carter, his predecessor, had high morality, but due to the economic instability and military weakness, even the people were depressed. President Reagan initiated the “creative destruction,” starting with tax cuts. It reflected his logic that tax cuts would increase investments and savings and therefore lead to economic development. “Government is not the solution.” With this, he declared that the poor should find their own welfare through work.

▷Reaganomics was derided by former president George Bush as “voodoo economics,” who said it was absurd logic before he became Regan’s vice president. However, the “voodoo” gradually wielded its power. Inflation and unemployment rate went down, and stock prices increased. The government focused on military defense known as “Star Wars.” In the end, the Soviet Union fell, and the economic boom continued to the Bill Clinton administration.

▷It does not mean that Reaganomics had no dark side. There are criticisms that it marked the “Greed Decade,” by widening the disparity between the rich and the poor with the welfare budget reductions, including those in medical care, education, and the environment. The economic policy of President George W. Bush, which followed Reaganomics, has been attacked, stating that it threatened the global economy by increasing financial deficits. However, President Reagan’s solution, “It’s economy, in the end,” was correct. Whether through supply-side economics or vice versa, it is an essential virtue of a leader to revive the economy with the most needed policy of the time. That is why he is remembered as a president, loved and respected by the American people, even though he passed away, leaving behind his numerous merits and demerits.

Kim Soon-duk, Editorial Writer, yuri@donga.com