Both President Reagan and President Obama had to deal with serious economic dislocation upon taking office.
But they used radically different approaches to deal with the problems they inherited. Reagan sought to reduce the burden of government, whereas Obama viewed government as an engine of growth.
So who had the right approach? This image, taken from an op-ed in today’s Wall Street Journal, shows quarterly economic growth (adjusted for inflation) for the seven quarters after the recession ended.
At the risk of sounding unscientific, Reagan mops the floor with Obama. Growth was much more robust under Reaganomics. The policy of Obamanomics, by contrast, is associated with sluggish economic performance. (Indeed, see this post, based on Minneapolis Fed data, for an even starker comparison.)
Most worrisome, the weak growth over the past seven quarters means the economy has not recovered the lost output caused by the recession. This is in contrast to past downturns, where a temporary fall in output was offset by a period of rapid growth when the recession ended. And since there’s no reason to expect a sudden boom now, this means a permanent loss of income for the American people.
To be sure, we have no idea what would have happened in the early 1980s without Reaganomics, just like we have no idea what would have happened the past few years if America had taken a different approach.
But when theory and evidence both point in a certain direction, perhaps it’s a good idea to at least consider the possibility that small government is better for prosperity than big government.
Quite frankly, I’m a little surprised that the backdrop of a permanently and relentlessly compounding low growth economy trendline for America seems to be already showing up through the significantly compromised recovery numbers.
Surprised because the year when the 400 lb gorilla jumps on the back of the American economy (and stays there forever) has not yet arrived. That is year 2014 when a new 15-20K per year ObamaCare transfer of wealth work dis-incentive (which phases out between $30K and $90K of income) starts subjecting a large swath of the population to compound 60-70% marginal tax rates and thus essentially immerses a large portion of the American middle class into European incentives to produce.
I have been saying that for a while now, but you can finally read more about it here from someone who is more eponymously willing to put his reputation behind the obvious precipice facing American prosperity:
http://online.wsj.com/article/SB10001424052748704628404576265692304582936.html
Indicative of how difficult it is to directly tell the voting public that decreased incentives to produce represent not comfort but decline, even Mr. Kessler calls incentives to laziness and life choices leading to permanent mediocrity by the sanitized name of: “reduced labor supply”. I find it hard to believe that Mr. Mitchell’s colleagues at the Cato institute have failed to notice this fact of ObamaCare’s effect on effective marginal tax rates. They simply do not mention it because it is hard to go directly face on against voters by telling them how foolish their choices are.
But that is the true below the belt punch to the American economy which nobody dares mention. The lost productivity of a public that will most likely find it not worthwhile to work for 30-40 extra cents to the dollar. Couple that with the taxation that will be required to sustain this new entitlement and you see why America’s fate of decline is sealed. Once that cycle starts, an ever more desperate electorate in decline will make ever more redistributionist and central planning choices of self-destruction.
These are permanent mistakes, dear Americans. A permanent transition to the compounding effect of slow growth. These mistakes cannot be undone. Heck, once I take early retirement compliments of ObamaCare, even I will start voting Democratic! Why do you think republicans are so timid about attacking entitlements. The world does not consist of high integrity Hank Reardens and slimy Jim Taggarts. Under the incentives of the welfare state, Reardens become Taggarts – in droves. If Americans think they got it bad now, wait until healthcare is free and any extra achievement only yields 30 more cents to the dollar.
For the past century, Americans have had the strongest correlation in the world between achievement and reward. That allowed the famously mediocre, by international standards, average American to produce more than every other more competent citizen in the developed world and consequently rise to the top of the worldwide prosperity scale.
The new product of American Individual sup-par competence times French incentives to produce is not going to be a pretty one. Brace yourselves for the decline.
No, today the performance of the economy is superbly good because austrians said that the housing bubble would bring Great Depression II.
But there has been no Great Depression II
So Obama, Krugman, Roubini and Keynes are all geniuses because they saved us from Great Depression II with their “stimulus”. Thank God we had Obama, Krugman, Roubini and Keynes to save us from another Great Depression !!.
………..
Of course I am joking in what I just said. But it is crystal clear how nonsense austrian theory is perfect for making people say “Keynesians are geniuses” . Thanks to nonsense austrian theory in the 1930s people said “Keynes is a genius”
Criminally “tight” money in the second part of the 1920s triggered the 1929 recession. Exorbitanly high new taxes and regulations and new spending and tight money turned it into the Great Depression.
But austrians recommended pouring gasoline into the fire with even tighter money. Keynesians softened the depression with looser money so people would say “Ah! keynesians are geniuses. Austrians are nonsense”. And so Keynes became mainstream in the 1930s.
It is crystal clear that money was tight after 1925 because the world biggest economies entered the gold standard after 1925 and that appreciated gold . Such appreciation happened before when big countries entered the gold/silver standard. It is explained by Supply Sider Robert Mundell in his Nobel Prize winning lecture http://robertmundell.net/nobel-prize/. The little increase in prices in the high growth period 1925-1929 is another sign of tight money: Prosperity brings higher prices, when a country becomes richer prices get higher. But bad ecomomic theories try to artificially lower those prices by increasing, through “tight money”, the value of the currency, triggering recessions with such interventionnist “tight money”.
Reagan performance was superb, but nonsense monetarist theories almost destroyed Reagan’s miracle with criminally high interest rates -tight money- that was not needed in at such exorbitant levels.
Supply Side Rules. Robert Mundell rules. Hayek and Friedman did horrifying damage with their bad theories. After the 1981s Mundell-Reagan tax cuts keynesianism stopped to be mainstream because Supply Side solved the crisis that Friedman bad theories helped to create and could not solve. Now, thanks in part to austrian theory, keynesianism is mainstream, as it was after the Great Depression.
Many austrians predicted Great Depression II after the 2000 stock market bubble. Well, it never happened. And it is crystal clear that money was very tight after 1995, short interest rates were brough to such high levels that they were almost as high as long term interest rates. And the stock market bubble developped under such tight money, it is crystal clear how after 1995 the SP500 price got divorced from profits, in what was clearly a bubble that bursted.
But we never had the Great Depression II predicted by austrians, we had only one of the mildest recessions that was totally over with the 2003 Bush tax cuts.
So it is crystal clear that austrian theory is nonsense. It demonizes private investment, the foundation of growth, by calling “malinvestments” what are perfectly sound investments destroyed by the crazy “tight money” policies that the Federal Reserve (FED) gaves us every few years. In 2007 and 2008 the FED gave us -again- tight money triggering a wild crisis made much worse by the housing bubble, CRA, government taking private risks, etc. Mundell explanation can be read here http://www.normangirvan.info/wp-content/uploads/2009/03/mundell.pdf and here http://www.heritage.org/events/2010/04/the-dollar-the-euro-and-the-international-monetary-order
[…] saw a quick analysis over at International Liberty via Wall Street […]
[…] growth. Obama’s policies have led to anemic growth (see the chart nearby, lifted from an excellent comparison of Reaganomics and Obamanomics by Daniel J. Mitchell) Problem is, Obama’s not inclined to do any of the things we need to […]
[…] At first, I was going to post it and contrast it with this superb Reagan video and compare how one President’s policies kept America mired in a depression while the other implemented policies that triggered an American renaissance. […]
TRY COMPARING 8 TO 8–LIKE THESE NUMBERS
Comparing Democrat’s hero-CLINTON—versus Republican’s hero–REAGAN
———————————————————————————————————–
1.JOBS—grew by 43% more under Clinton.
2.GDP—grew by 57% more under Clinton.
3.DOW—grew by 700% more under Clinton..
4.MARKET CAP INCREASE—Clinton + 330%–Reagan + 136%
5.NASDAQ-grew by 18 times as much under Clinton.
6.S&P500—grew by 370% under Clinton and 140% under Reagan
7.SPENDING–grew by 28% under Clinton—80% under Reagan.
8.DEBT—grew by 43% under Clinton—187% under Reagan.
9. DEFICITS—Clinton got a large surplus–grew by 112% under Reagan.
10.NATIONAL INCOME—grew by 100% more under Clinton.
11.PERSONAL INCOME—grew by 110% more under Clinton.
12.MEDIAN FAMILY INCOME-grew by 75% more under Clinton
13. DEFENSE BUDGETED-Clinton -2311B—Reagan-2062B (current $)
14.UNEMPLOYMENT—AVG—Clinton 5.2%–Reagan 7.6%
(I admit averaging averages can be dumb. I dumb.)
SOURCES—Bureau of Labor Statistics (www.BLS.Gov)–Economic Policy Institute (EPI.org)—Global & World Almanacs from 1980 to 2003 (annual issues)
http://www.the-hamster.com (chart taken from NY Times)
National Archives History on Presidents. http://www.nara.gov
LA Times 10-11-00 on Market–www.Find articles.com
Federal Budget.Com 2009
A vote for a Conservative is a vote for Less Success.
A vote to reduce the Standard of Living for all Americans.
Recall 1920’s and Wall Street under Conservative control?
Recall 2000-2008 and Wall Street under Conservative control?
Want more of those years? It will take many years to recover.
CLARENCEACHMEDSWINNEY
political historian
Lifeaholics Of America
author-unpublished
“All American Party”
How Democrats created a great Middle Class
and Conservatives are determined to destroy it
SHOW ME ONE GREAT NUMBER UNDER REAGAN.ONE?
I VOTED TWICE FOR HIM.
LIKE HIM BUT FACTS NOT OPINION JUDGE IN HISTORY
ONE=DOW INCREASE
[…] done a few comparisons of economic performance under Reagan and Obama, sometimes using the interactive data from the […]
[…] done a few comparisons of economic performance under Reagan and Obama, sometimes using the interactive data from the […]