|An editor thinks that this article may not be neutral. (May 2013)|
Voodoo economics is a negative term that is used to describe any prescribed economic action where the predicted future outcome is not directly traceable to that action. It was used to criticize supply-side economics. Keynesian economic multipliers and quantitative easing have also notably been described by their critics as being voodoo economics.
The term originated from George H.W. Bush, who criticized Ronald Reagan's plan for the economy during the Republican Party (United States) presidential primaries, 1980. Reagan's plan for the Federal Government Budget was to reduce taxes - mostly to equalize tax burdens across income classes - while increasing some spending. The stated reasoning behind this plan was that Americans would reinvest their tax savings into expanding their economic activity, creating new jobs and increasing GDP, which would offset the initial loss of tax revenue while also producing growth. Accordingly, Reagan promised an economic revival that would affect all sectors of the population. Bush and others argued that this would not produce a balanced budget and would result in an increased national debt, which George Bush Sr. famously labeled "voodoo economics".
Reagan was elected president in 1980 with George H.W. Bush as his Vice-President, and in his eight years as president Reagan would largely fulfill his campaign promises of lowering taxes. However as Bush and others predicted this led to increased Federal Budget deficits.