So, a funny thing happened in the early 80s; America elected a former actor, and former California governor, Ronald Reagan. I was too young to vote in the 1980 election, but I remember it well. Many of my friends were Reagan supporters, and I was not. I was a democrat, or at least I thought I was. My parents were democrats, although they were not political people. My father was a FDR democrat, and my mom was a JFK democrat, which is understandable given their age difference.
I was always interested in politics, but to understand the 1980s, and basically every period before the turn of the millennium, you have to understand how people got their news back then. You had three TV networks, a handful of big newspapers, two large news services, and news radio. Long before social media, before blogging, before Reddit, the news came from these same sources. Everyone listened, watched, and read the same news. We had no choice.
Here's a fun fact, all of those entities listed above, hated Ronald Reagan. I mean they hated him. He was a stupid Hollywood 'B-actor' who was just a sock-puppet for the republican machine. That's kind of what I thought of him in his first term too.
He was a bumbling buffoon, according to every news anchor reading words off a teleprompter each evening. He was destroying the economy, the country, and was going to blow up the world. That is what every media outlet told America, day after day. The thing is, in his first two years, it looked like they may have had a point.
Ronald Reagan inherited a tremendous train wreck of an economy. If you think the 9% Biden inflation was painful back in the summer of 2022, early into the Reagan presidency, inflation was around 12% and even worse, interest rates were close to 18%. Think about that for a second, an 18% interest rate on a new home mortgage. All that, and unemployment was high, right around 9%. That is a catastrophic economic situation. What did Reagan do? He cut taxes. I mean he really cut them. The top income tax bracket fell from 73% to 28%. He eliminated taxes on low income earners too.
The news media went crazy. This was just a big tax-money giveaway to Reagan's rich republican friends. If you watched the evening news, this was going to cut all the money for Social Security, Welfare, and Food Stamps, etc. Stop me if this sounds familiar.
What happened in that first two years? Well, there was some real pain. As interest rates finally started to come down, and inflation started to drop, unemployment went higher. From around 9% to around 11%. That meant a lot people lost their jobs as the economy was regrouping, rebuilding, and adjusting.
Again, the media told everyone that Reagan was an idiot, and if they would have only listened to their trusted, expert opinions, America wouldn't be in this mess. Basically is what the media always says, 'We the professional media are right, you the ignorant voters are wrong.'
When Americans went to vote in the 1982 midterms, some had seen enough of the Reagan revolution, or at least the felt it may not be working the way Reagan said it was going to. They voted democrat, and democrats gained 26 seats in the House, but republicans just kept control of the Senate.
There's a lot of details in the Reagan economic policies that we could cover, but one thing Reagan kept saying is these policies would take a bit of time to work. Was he right?
Yes, yes he was.
They did work, and by the time 1984 rolled around, the American economy was booming. Reagan went on to trounce Senator Walter Mondale in the presidential election, winning 49 out of the 50 States.
So why am I telling you this? Well, one of the good things about getting older, is you become better at pattern recognition. Or, at least you should. The human brain is basically a very intricate, very powerful, patter recognition engine. We look at things, and try to recognize where we might have seen them before. It's how you learn to spot danger, spot opportunity, as you try to imagine the future. It's pretty simple, you either get better at pattern recognition, or you get blasted in the face by reality again and again.
This brings us full-circle to 2025.
If you insert President Trump for President Reagan, keep the professional legacy media the same, then add in social media, and a 24-Hour news cycle, your patter recognition should start pinging.
The problem is the same in many ways, and different in many ways. There is however, one thing that is absolute, and without debate; our economic situation is much worse that America's back in the 1980s. Sure you can say that interest rates are lower, inflation is lower, and unemployment is lower, but those are the short-term indicators. What you terrify you right now isn't the price of eggs, it's the amount of federal debt we owe. That bill is coming due right now.
In fact, of that 36 TRILLION dollars of the US debt, we are going to have to refinance 9.2 trillion of that in 2025. We will still owe that money, but we need to refinance it. Think of it as being behind on you credit card bill, and when it comes due, you take out another new credit card to pay that monthly payment....
There is a great piece written on Substack written by Tanvi Ratna about this refinancing problem. She also writes about what she thinks Trump is doing, how it might work, and how it might fail. It also covers the Trump Tariff plan as she sees it, and the thinking behind it. It's a very thoughtful piece.
The Trump economic plan, as I see it (and this is coming from a former working cowboy, so,,,,,) is a way to remake the US economy, and to reshape the world. The one thing that worries me is Americans won't understand that there will be some real short-term pain, as we try to turn our nation around from the disaster it's facing. The other issue I have with the president right now is he has not made his plans understood, or at least he hasn't told Americans there will be some real pain as tries to balance the books and keep us from the disaster that awaits if we keep on borrowing and spending.
Here are the three issues I've taken in as I've listened to President Trump the last few years.
- Manufacturing: We shipped half of our manufacturing industry overseas in the past 30 years. We need to bring that back, along with the jobs, and defense capability that comes with it.
- Government Spending: We have grown the government to the point where we are spending more on our government than at any point since WWII. It is also so big, one agency doesn't know what the another agency is doing. It needs to shrink or we be bankrupt in 10 years.
- Trade Fairness: We are letting the world take advantage of our economy, but that economy is being propped up by debt and borrowing these days.
1: So let's look at that first point; manufacturing.
Growing up in the those same 1980s, the economy was different. American made a bunch of stuff back then. Real, tangible materials that you mined, extracted, and refined into materials that you could make into other real products. We made steel, aluminum, and all kinds of things back then. We then refined, smelted, stamped, weaved, mixed, and milled those products into other more refined products. Then we turned those products into US manufactured goods that we sold right here at home and around the world.
The downside to these manufacturing jobs, is the hard work. Not that hard work is a bad thing, I've done plenty of it. From being a working cowboy, building fence, checking cows everyday, to breaking and loading concrete all day in the 100 degree heat. I've done some work that many people wouldn't even consider doing. Then again, I had new family, so off to work I went.
However, if I could make the same money working in an airconditioned office, or working in a coal mine, I'd pick the office. The only problem with those kinds of 'service' jobs is, you only need so many people to shovel paper.
Unless you are the government; then you invent new paperwork to shovel. This is basically a system where you need to keep the government workforce growing so you can pay for all the wonderful retirement benefits all the retired government employees get. (I will be one soon, so I know of which I speak)
Manufacturing used to employ about 16% of all US workers back in 1990. Today, that number is about half, at 8%. Now, much of that decrease is offshoring our manufacturing, but a good portion of that decline in manufacturing jobs is robotics, and automation in factories. No matter how we got here, there's a lot of people who used to work in the Midwest, the rust-belt, and small-town America who don't have factories or assembly plants to work in.
You may ask, why isn't the unemployment number higher if we lost all those jobs?
You can look at all kinds of numbers and statistics to try to see where we are these days. Real, inflation-adjusted wages are about the same for the 50% median income American, from 1990 to now. The lower earners are maybe 1 to 1.5% higher today, but very close. You can look at buying power, home affordability, and all kinds of stats, but here is one statistical number that you should take to heart: The Labor Participation Rate.
In 1990, the LPR was 66.6%. The labor force participation rate is the percentage of the working-age population that is either employed, or actively seeking employment. Today that number is 62.4%. That is why our unemployment number isn't as high as it should be. People just stopped looking for work, and if they are not looking, they are not considered unemployed.
You might say, so what, that's 4%, that not a big deal right? Well, that 4% of the workforce not working comes to about 10 Million people that were working in 1990, that are not working today. That's a big deal. How did we get here? Why are 10 million American's just sitting around? How do they live? How do they pay for rent, food, or Netflix? That's a good question. I wish I had an easy answer. Public benefit programs are growing every year and you can sign up for a bunch of them, but one of the things that made it easier for people to not work was Social Security Disability Insurance.
Of that ten million more Americans not working right now, four million are on SSDI. How did we get a 64% increase in the number of people receiving SSDI? I wish I knew. I don't think it's because the jobs are harder than they were in 1990. In fact, it's the opposite. There's more we could look into, but remember we have 10 million less working aged adults than we did in the 90s.
2: How about that second one? The growth of government.
Another thing I remember from the Econ 101 class I took, in my short stint as a college student, was how to determine GDP.
The formula is GDP= C + I + G + (X - M) net exports
(C ) = Consumption (household spending on goods/services)
( I ) = Investment (business spending on capital, residential construction, inventories)
( G ) = Government spending (federal, state, local)
( X ) = Exports (goods/services sold abroad)
( M ) = Imports (goods/services bought from abroad, subtracted because they’re not domestically produced)
So if you ever want to see some fun math, just review how President Biden tried to keep the US from a recession during his presidency. If the economy is going down, and you have an election coming up, you just borrow and print a few TRILLION dollars. You then hand it out to your friends and contributors, and bam! That G number goes way up. Magic!
Well, until the bill comes due with 9% inflation.
Here is another fact to take home and ponder. Throughout my life, I have heard from democrats that we spend way too much money on defense. If there are any cuts to had anywhere in the government, that is where they want it cut. Well, at least they used to. Today, the democrats are the pro-war party as they have turned full Neo-Con when it comes to Ukraine war spending.
Anyway, here is that fact to ponder. Today in 2025, we are spending more federal tax money paying the interest payment on our national debt than we are on the entire defense department. The worse news, is that figure is going to climb as we adjust to the new higher interest rates on borrowed money.
We need to cut government spending back to where we were a few years ago. If we went back to the 2019 budget numbers, before Covid, all the bailouts, the build-back-better grift, and the borrowing, we could have a balanced budget in no time. But as soon as you want to cut the growth in spending, the media and the democrats (but I repeat myself) will say you are slashing money for poor people and grandma. Even if we froze last year's budget, they would consider it slashing the budget. For democrats, the government always needs to grow.
3: Let's look at trade fairness.
The strange thing about growing up in the post WWII world was, as a kid, you didn't know any better. You thought this was the way the world worked, and it had always been this way. Becoming curious about history opened my eyes to the unique world I grew up in.
When I thought of cars, I thought of American cars. In the 50s, and 60s, America made some of the best cars on the planet. It seemed natural. We had almost invented the car, and and the car factory. Same with bulldozers, refrigerators, electronics, guitars and TV dinners. Our stuff was just the best there was.
I didn't really understand that after WWII, most of the industrialized world was in ruin, save one nation, the United States. While Europe was a smoldering pile of ruin, and Asia was being rocked by communist expansion, the US had transformed itself into the one place in the world where the top designers, architects, builders, and manufacturers, (along with artists musicians) were making everything the world needed.
What about trade? Well, America got together with most of the world, and we made them a deal. You can trade with us, and if you oppose communism, try to hold elections every so often, and be pro-American, we will keep the seas free for trade shipping, and stop any incursions from your neighbors. By the 80s and 90s, our economy was so big, a trade deficit with other smaller countries was thought of as the price of admission to the big-peace game. It worked for decades, but that deal has fallen apart.
Europe, Canada, and many of our NATO allies do not spend the minimum 2% of GDP on their own defense. They know that America will be there to defend them, come hell or high-water. Canada spends about 1.3% of their GDP on defense. They have America sitting next to them, so why should they spend tax-money on defense when you can buy votes with government handouts?
So we spend 3.38% of our GDP to defend the world, and they place high tariffs on our goods? They place high tariffs on US products so they can keep their inefficient, and mostly corrupt, workers paying taxes to their governments? Why would we keep doing this?
China is a big player in the world economy, especially since they manufacture so much of what we depend on. All those steel and aluminum plants that closed down in the 2000s, along with everything from ship building to electronics, makes us dependent of people outside the US. That is not good when it comes to televisions, it terrifying when it comes to defense.
All this boils down to these three things: (at least in my book)
Manufacturing: We need to make things again in our nation, real things. Things you make in factories, not side-hustles working from an app delivering packages and semi-warm food. We need to get our nation back to work, doing important things, not government things, but building things. Tens of thousands of new homes, new bridges, new highways, new water storage dams, new 24/7 power plants for the huge AI driven data centers we will need.
Government Spending: We need to look at how much our government is spending, and take it back to our 50 year average of spending about 21% of GDP. We are currently at 24% of GDP,. We need to lower that spending back to average. That would be a huge savings. We also need to look at revenue. While we have taxed at higher rates, that hasn't always meant more tax revenue. In fact when you look at the 80s, when Reagan cut taxes, the revenue flowed into the treasury. It was right around 19-20%. We need to sit down with everyone at the dinner table, show them the Visa bills, and the coming bankruptcy, and say, I will cut this if you cut that. I will take heat from side, you take heat from your side, but if we don't, one day we will have to stop paying everyone, or pay them with million dollar bills as we inflate our way out of debt. .
Trade Fairness: We need to stop letting nations protect their workers while punishing ours. Yes, this is going to cause some upset. Yes, there will be some pain. However, President Trump didn't become a billionaire by not knowing how to negotiate. He will make some great deals early, and tell everyone, the longer you wait to make a fair trade deal, the worse it will be for you.
Well, that's it for me on this early Saturday. We will see down the road if I saw the pattern correctly or I'm just blind as a bat.
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