Obamanonics vs. Reaganomics

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Obamanonics vs. Reaganomics
« on: August 26, 2011, 03:55:09 AM »

Obamanonics vs. Reaganomics
One program for recovery worked, and the other hasn't..
By STEPHEN MOORE
http://online.wsj.com/article/SB10001424053111904875404576530412322260784.html


If you really want to light the fuse of a liberal Democrat, compare Barack Obama's economic performance after 30 months in office with that of Ronald Reagan. It's not at all flattering for Mr. Obama.

The two presidents have a lot in common. Both inherited an American economy in collapse. And both applied daring, expensive remedies. Mr. Reagan passed the biggest tax cut ever, combined with an agenda of deregulation, monetary restraint and spending controls. Mr. Obama, of course, has given us a $1 trillion spending stimulus.

By the end of the summer of Reagan's third year in office, the economy was soaring. The GDP growth rate was 5% and racing toward 7%, even 8% growth. In 1983 and '84 output was growing so fast the biggest worry was that the economy would "overheat." In the summer of 2011 we have an economy limping along at barely 1% growth and by some indications headed toward a "double-dip" recession. By the end of Reagan's first term, it was Morning in America. Today there is gloomy talk of America in its twilight.

My purpose here is not more Reagan idolatry, but to point out an incontrovertible truth: One program for recovery worked, and the other hasn't.

The Reagan philosophy was to incentivize production—i.e., the "supply side" of the economy—by lowering restraints on business expansion and investment. This was done by slashing marginal income tax rates, eliminating regulatory high hurdles, and reining in inflation with a tighter monetary policy.

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Ronald Reagan talks taxes, 1981.
.The Keynesians in the early 1980s assured us that the Reagan expansion would not and could not happen. Rapid growth with new jobs and falling rates of inflation (to 4% in 1983 from 13% in 1980) is an impossibility in Keynesian textbooks. If you increase demand, prices go up. If you increase supply—as Reagan did—prices go down.

The Godfather of the neo-Keynesians, Paul Samuelson, was the lead critic of the supposed follies of Reaganomics. He wrote in a 1980 Newsweek column that to slay the inflation monster would take "five to ten years of austerity," with unemployment of 8% or 9% and real output of "barely 1 or 2 percent." Reaganomics was routinely ridiculed in the media, especially in the 1982 recession. That was the year MIT economist Lester Thurow famously said, "The engines of economic growth have shut down here and across the globe, and they are likely to stay that way for years to come."

The economy would soon take flight for more than 80 consecutive months. Then the Reagan critics declared what they once thought couldn't work was actually a textbook Keynesian expansion fueled by budget deficits of $200 billion a year, or about 4%-5% of GDP.

Robert Reich, now at the University of California, Berkeley, explained that "The recession of 1981-82 was so severe that the bounce back has been vigorous." Paul Krugman wrote in 2004 that the Reagan boom was really nothing special because: "You see, rapid growth is normal when an economy is bouncing back from a deep slump."

Mr. Krugman was, for once, at least partly right. How could Reagan not look good after four years of Jimmy Carter's economic malpractice?

Fast-forward to today. Mr. Obama is running deficits of $1.3 trillion, or 8%-9% of GDP. If the Reagan deficits powered the '80s expansion, the Obama deficits—twice as large—should have the U.S. sprinting at Olympic speed.

The left has now embraced a new theory to explain why the Obama spending hasn't worked. The answer is contained in the book "This Time Is Different," by economists Carmen Reinhart and Kenneth Rogoff. Published in 2009, the book examines centuries of recessions and depressions world-wide. The authors conclude that it takes nations much longer—six years or more—to recover from financial crises and the popping of asset bubbles than from typical recessions.

In any case, what Reagan inherited was arguably a more severe financial crisis than what was dropped in Mr. Obama's lap. You don't believe it? From 1967 to 1982 stocks lost two-thirds of their value relative to inflation, according to a new report from Laffer Associates. That mass liquidation of wealth was a first-rate financial calamity. And tell me that 20% mortgage interest rates, as we saw in the 1970s, aren't indicative of a monetary-policy meltdown.

There is something that is genuinely different this time. It isn't the nature of the crisis Mr. Obama inherited, but the nature of his policy prescriptions. Reagan applied tax cuts and other policies that, yes, took the deficit to unchartered peacetime highs.

But that borrowing financed a remarkable and prolonged economic expansion and a victory against the Evil Empire in the Cold War. What exactly have Mr. Obama's deficits gotten us?

Mr. Moore is a member of the Journal's editorial board.


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Re: Obamanonics vs. Reaganomics
« Reply #1 on: Today at 08:03:45 AM »

Obama vs. Reagan : In historical match-up, Reaganomics trounces Obamanomics, 280,000 to 0.
National Review ^ | 09/12/2011 | Deroy Murdock


President Zero.

The brand-new nickname for Barack ObamAA+ symbolizes America’s total net jobs created in August: Zippo.

So, how many jobs emerged in August 1983, the analogous point in Ronald Reagan’s presidency? 280,000. Proportional to today’s population, that equals 367,360 new hires last month.

Citizens pondering Obama’s latest jobs speech and how to get America working again should focus on today’s great Keynesian experiment. Ronald Reagan’s supply-side mixture of tax cuts, deregulation, and sound money competes directly against Obama’s big-government blend of Keynesian stimuli, rampant red tape, and promiscuous printing of money — as if dollars were wallpaper. The late Reagan trounces the leisurely Obama.




President Ronald Reagan signing the Economic Recovery Tax Act on August 14, 1981 at his southern California ranch. On economic dynamism, he still has the last laugh. Photo: Associated Press.

Reagan’s Economic Recovery Tax Act of 1981 slashed the top federal income-tax from 70 percent to 50, and sliced business levies. Today, it would cost $1.86 trillion. (For consistency, I converted all of the historical numbers for 1981, 1983, and 2009 into 2011 dollars. Nominal figures appear in an analysis available here.) Meanwhile, Obama’s “stimulus,” formally called the American Recovery and Reinvestment Act of 2009, cost $829 billion.


Reagan deregulated America’s economy, as demonstrated by the relatively low 30,522 pages of rules added to the Federal Register in 1981 and 1982. Reagan continued President Carter’s loosening of restrictions on airlines, trucking, and other industries. The 45,696 pages that swelled the Register in 2009 and 2010 reflect Obamacare, Dodd-Frank, EPA guidelines, pro-union favors, and other regulations — atop Sarbanes-Oxley, farm programs, lighting standards, and other hurdles that Bush-Rove erected.


Confirming Reagan’s commitment to reliable currency and monetary restraint, gold’s price fell 33 percent — from $1,396.79 per ounce during Reagan’s Jan. 20, 1981, inauguration to $937.37 on Sept. 7, 1983. By converting the Bureau of Engraving and Printing into a veritable currency copy shop, Obama helped gold climb 201.4 percent through Wednesday, from $898.53 to $1,810.00.

Reagan accelerated Carter’s deregulation of oil prices and encouraged domestic production, as underscored by gasoline’s 6.75 percent fall from $3.11 per gallon on inauguration day to $2.90 in late August 1983. Obama’s domestic drilling limits and anti-carbon fetish helped gasoline climb 87 percent — from $1.93 when he arrived to $3.60 on August 29.


The economic and political consequences of these conflicting visions are stunning.




President Zero: In Barack Obama’s third August in office, the stimulus-fatigued U.S. economy created no jobs. In August 1983, thanks to Ronald Reagan’s pro-market reforms, America generated 280,000 new positions.

At the two-and-a half-year mark (Jul. 20, 1983), Gross Domestic Product under Reagan grew at 9.3 percent. Under Obama, GDP crawled forward last July 20 at 1 percent.


At that stage in Reagan’s presidency, non-farm productivity blossomed at 9.6 percent. Under Obama, it shriveled at negative 0.7 percent.

After Reagan’s first 30 months, unemployment stood at 9.4 percent, down from a 10.8 percent recessionary peak. Under Obama, top joblessness of 10.1 percent has dropped to 9.1 percent, but seems stuck there. And the fact that America yielded zero net jobs last month (versus 280,000 in August 1983) confirms the bankruptcy of Obamanomics.


These respective developments swayed America’s mood. In August 1983, under Reagan, the Consumer Confidence Index sparkled at 90.2. Last month, under Obama, it flickered at 44.5.

In a June 1983 CBS News poll, 47 percent of adults said America was “on the right track,” while 44 percent saw the nation “on the wrong track.” In a June 2011 CBS News study, 28 percent of Americans chose “the right track,” and 63 percent voted “wrong.”


Similarly, an Aug. 8, 1983 Gallup survey found 35 percent of Americans “generally satisfied with things in the U.S.” and 59 percent “generally dissatisfied.” On Aug. 14, 2011, 11 percent were satisfied, while a whopping 88 percent were dissatisfied.

Progress earned Reagan 48 percent approval in a September 1983 Gallup survey, while Obama stood at 40 percent last August 20. On managing the economy, ABC News documented Reagan’s 48 percent approval on May 18, 1983. On September 1, ABC gauged Obama’s approval on economics at 36 percent.


Obama’s triumphs include last week’s dismissal of 1,100 workers at Solyndra, a now-defunct solar-panel manufacturer that he stimulated with a $535 million loan guarantee. (Search-warrant wielding FBI agents raided Solyndra’s Fremont, Calif., headquarters late last week, seeking evidence of criminality.) Another “green-jobs investment” hatched 14 posts and weatherized exactly three Seattle homes. Cost: $20 million.




Ronald Reagan savored a landslide re-election in 1984, scoring 525 Electoral College votes to Democrat Walter Mondale’s 13. As Barack Obama crawls from the wreckage of his Keynesian vehicle, disappointed voters in November 2012 just might make him hand the keys to an adult who knows how to drive.

— New York commentator Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University. Manhattan financier Brett A. Shisler contributed analysis for this piece.