Both Ronald Reagan and Barack Obama entered office during periods of economic misery. But they adopted dramatically different solutions. Reagan reduced the burden of government and Obama increased the burden of government. So which approach worked best? In his Washington Times column, Richard Rahn compares the economy’s “recovery” performance under both Presidents. As you can see, Reaganomics is much better than Obamanomics.
What is your answer on the comments by Ezra Klein and Paul Krugman? Thanks!
I doubt you will get a response from Dan. Conservatives don’t like being reminded that facts have a distinct liberal bias.
[...] 4, 2010 by Dan Mitchell I seem to have touched a raw nerve with my post earlier today comparing Reagan and Obama on how well the economy performed coming out of recession. Both Ezra Klein and Paul Krugman have [...]
Reagan emphatically did not reduce the “burden” of government, he merely shifted it around, then worked for 8 years to enlarge the military-industrial-private-contractor complex. In particular, while he lowered marginal income tax rates on Americans with large paychecks, he quietly supported and passed into law several increases in the FICA tax rates which affect pretty much everyone except the wealthy. (Interestingly, this is also where the fairy tale about low income tax rates produces higher revenue gets its legs, by cheating and pretending the higher FICA revenues were actually income tax revenues)
The consequence of Reagan tax policy was not decreased federal spending (by any reasonable measure, whether per-capita, relative to GDP, whatever), but merely a shift in the tax base from a small group of people with enormous amounts of money, to a very large group of people with relatively little. Also, much much more borrowing.
Obama, on the other hand, has done almost nothing in the way of significantly altering the shape or size of the tax burden. Thus, this comparison is essentially meaningless nonsense.
What did Democratic President Bill Clinton’s Joint Economic Committee have to conclude about the Reagan Tax Cuts? In their own words (see the link to read the entire report):
“The Reagan tax cuts, like similar measures enacted in the 1920s and 1960s, showed that reducing excessive tax rates stimulates growth, reduces tax avoidance, and can increase the amount and share of tax payments generated by the rich. High top tax rates can induce counterproductive behavior and suppress revenues, factors that are usually missed or understated in government static revenue analysis. Furthermore, the key assumption of static revenue analysis that economic growth is not affected by tax changes is disproved by the experience of previous tax reduction programs.”
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm
If Krugman concludes, “Reaganomics was basically irrelevant,” then there is no reason not to conclude that “Obamanomics is irrelevant.” If irrelevant, then there’s no reason NOT to return to the fiscal policies the majority of Americans prefer: low taxes, small government, deficit reduction, national debt reduction, and less regulation leading to visibility and business confidence. It is Obamanomics and his regulatory policies that have businesses confused and uncertain at best, scared and deeply alarmed at worst, and hence sitting on top of $2 Trillion. Businesses were spending and investing under Reaganomics, they’re hoarding and laying off under Obamanomics.
It is time for radicals to admit their failure and get back to the tried and true rather than the iconoclastic hubris and uncertainty of the modern derivatives of Marx, Engels, and Lenin.
[...] seem to have touched a raw nerve with my post earlier today on my International Liberty blog, comparing Reagan and Obama on how well the economy performed coming out of recession. Both Ezra Klein and Paul Krugman have [...]
William J. Green wrote:
If Krugman concludes, “Reaganomics was basically irrelevant,” then there is no reason not to conclude that “Obamanomics is irrelevant.”
FALSE.
As Krugman said, the causes of the two recessions were totally different. The first induced by the Fed to lower inflation, the second the result of the collapse of the housing sector and the system financing it.
You evidently don’t remember, during September 2008, when funds were being withdrawn from the financial system at the rate of $500 billion per hour. I do.
And that’s why the Obama stimulus package was necessary. If it hadn’t been for that stimulus, all of us would be on street corners selling pencils right now.
And we may end up doing that anyway, because the stimulus wasn’t large enough.
And you can thank some Republican senators for that.
You folks are either totally unaware of economics is all about, or you’re being totally disingenuous.
Full Disclosure:
I’m a Goldwater Republican, who hasn’t spoken with a true conservative, other than Jameson Campaigne, in over 20 years.
Bill Buckley, RIP
William J. Green’s reasoning (“if Reaganomics was not the crucial factor in driving the early 80′s recession/recovery cycle, then ergo Obamanomics doesn’t matter today”) is fallacious. The situation then was that the effects of fiscal and tax policy was completely swamped by extraordinary monetary policy (very very high interest rates), thus the irrelevancy. Today no such situation obtains, and fiscal & tax policy matter very considerably.
As for the fiscal policies that a majority of Americans “prefer”, you do not mention steep spending cuts on education, health care, social security, transportation, security, veterans, etc. I presume you meant to include these oh-so-popular spending cuts, since you insist on both a) tax cuts (lower revenue) and b) debt reduction (surplus revenue)?
Polls may show that Americans favor spending cuts in the abstract (that is, no cut in particular), there is virtually no big-ticket item for which more than a quarter of Americans think we over-spend on.
[...] Reagan 05 augusti 2010 av admin Stefan Karlsson's blog Responding to people who note (See Dan Mitchell's take here, see my own here) that the recovery we have seen so far after the 2007-09 recession is a lot weaker [...]
Dan Mitchell: living proof that the certainty of a hack’s opinion is inversely proportional to the amount of actual data he can marshal to its support.
Great comparison.
[...] If I was organized enough to send Christmas cards, I would take Richard Rahn off my list. I do one blog post to call attention to his Washington Times column and it seems like everybody in the world wants to [...]
I know you are comparing the “bottom of the recession to the bottom of the recession” but you are also comparing the first and second year of presidential policy after an almost depression to the second and third year of presidential policy to a recession. Doesn’t seem like a fair comparison.
[...] I was organized enough to send Christmas cards, I would take Richard Rahn off my list. I do one blog post to call attention to his Washington Times column and it seems like everybody in the world wants [...]
[...] If I was organized enough to send Christmas cards, I would take Richard Rahn off my list. I do one blog post to call attention to his Washington Times column and it seems like everybody in the world wants to [...]
“What did Democratic President Bill Clinton’s Joint Economic Committee have to conclude about the Reagan Tax Cuts? In their own words (see the link to read the entire report):”
Mr. Green is totally confused. The Joint Economic Committee is part of Congress which in 1996 was controlled by Republicans and a glance at the link shows that this report was prepared by the chief economist for the Vice Chairman for a subset of the total committee all of whom were Republicans.
I’ll leave the adjective at ‘confused’, after all I am a stranger here and don’t want to pick any fights. But this is hardly a ringing endorsement of Reagan by Clinton as the comment suggests.
[...] dealing with the statist echo chamber, having been hit with two additional attacks for the supposed sin of endorsing Reaganomics over Obamanomics (my responses to the other attacks can be found here and here). Some guy at the Atlantic Monthly [...]
[...] dealing with the statist echo chamber, having been hit with two additional attacks for the supposed sin of endorsing Reaganomics over Obamanomics (my responses to the other attacks can be found here and here). Some guy at the Atlantic Monthly [...]
[...] and has been catching hell for it. He responds in his post When Keynesians Attack, Part II: In my original post (the one he was attacking), I commented on the “burden of government” rather than the “burden [...]
[...] dealing with the statist echo chamber, having been hit with two additional attacks for the supposed sin of endorsing Reaganomics over Obamanomics (my responses to the other attacks can be found here and here). Some guy at the Atlantic Monthly [...]
[...] dealing with the statist echo chamber, having been hit with two additional attacks for the supposed sin of endorsing Reaganomics over Obamanomics (my responses to the other attacks can be found here and here). Some guy at the Atlantic Monthly [...]
[...] benefits of spending cuts. Another column compared today’s anemic expansion with the strong growth under Reagan. And another economist recently reviewed America’s long-run fiscal danger caused by [...]
[...] happened after previous recessions. This is an important issue, particularly when you compare the economy’s tepid performance today with the strong recovery following the implementation of Reaganomics. But there was another part of [...]
[...] happened after previous recessions. This is an important issue, particularly when you compare the economy’s tepid performance today with the strong recovery following the implementation of Reaganomics. But there was another part of [...]
[...] Previous posts on this blog have featured charts showing that Obama’s policies are not working (see here and here). I even showed a cartoon making the same point.And I cited a column with data comparing Reagan and Obama. [...]
[...] Previous posts on this blog have featured charts showing that Obama’s policies are not working (see here and here). I even showed a cartoon making the same point.And I cited a column with data comparing Reagan and Obama. [...]
[...] did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein [...]
[...] did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein [...]
[...] did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein [...]
[...] did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein [...]
[...] Sometimes I even get attacked because I cite someone else’s work, as happened when a bunch of Keynesians went after me for posting some data on Reaganomics vs. Obamanomics put together by Richard Rahn. [...]