Team Obama vs. Team Reagan 31 comments
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Need a break from the breathless media coverage of Tuesday's big event? Here's a level check from Sunday's Kelly Letter end note:
Let's hope Team Obama does as good a job as Team Reagan did back in the early 1980s.
When Reagan took office, unemployment was passing 7% on its way to 11% in late 1982. As Obama takes office, unemployment just hit 7.2% and is probably on its way to double digits as well.
Reagan faced an inflation rate of 12.5% as oil came off a 600% price increase in the 1970s. Interest rates in the high teens didn't help, and are part of why stocks had been in a 14-year funk. You read that right: 14 years.
Reagan cut taxes and built up the military, while the Federal Reserve under Reagan's urging cranked credit down hard. The combined decrease in revenue and increase in spending produced a record deficit of 6% of GDP. After more pain and two quarterly GDP drops of 5% and 6%, unemployment hit the aforementioned 11%, and then at long last the economy began recovering. Reagan was given credit, and won re-election to his second term in 1984.
Obama's stimulus plan is equally ambitious. He, too, is planning increased spending. His spending will go mostly toward infrastructure improvement instead of the military, but will also produce a record deficit when added to the enormous deficit Bush leaves behind. The projected FY 2009 deficit is 9.2% of GDP.
So, while the media is already putting Obama's face on Mount Rushmore as the man who saved us from our worst moment in history, it's just not true. Other presidents faced equally challenging times, indeed tougher times. We got through those and we'll get through this, but nobody has any idea yet who the heroes will be.
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Fiction. Volcker began the incredibly restrictive monetary policy during the Carter administration. I recall seeing a quote attributed to Volcker that during 1980 he asked if he (the Fed) was costing Carter the election.
On Jan 19 01:49 PM H.J. Huneycutt wrote:
> I agree with Zeus up to the point where he talks about Obama. Reagan,
> more than any other President, is responsible for the change in direction
> of government that has led to our own economic downfall. But it's
> too early to know how the Obama Administration will turn out. To
> be totally honest, my perception of Obama right now is that he is
> extremely similar to Reagan:
>
> (1) He has a large number of fanatical, ideological supporters who
> would believe he was the greatest President ever no matter what he
> did
>
> (2) He likes cutting taxes and raising spending with little regard
> to the national debt and future generations
>
> (3) He relies on "voodoo economic" theories if his vote on TARP is
> any indication
>
> (4) He's an outstanding and charismatic public speaker, but seems
> to have little substance behind his rhetoric
>
> (5) He understands diplomacy.
>
> Thank God for #5 --- at least that will make Obama an improvement
> over Bush the Younger. But I'm not optimistic about Obama's economic
> policy. I hope I'm proven wrong, but thus far, it looks to me that
> Obama is simply continuing with the same economic policies from the
> Clinton and Bush II years that got us in this mess to begin with.
This one is actually pretty easy to explain. The IMF does not collect social security taxes, as domestic employers do. So it is the responsibility of the employee to pay the employer's share, similar to the self-employed. Geithner
didn't do that. This was discovered in a 2006 audit. But the statute of limitations on the IRS assessing taxes is three years from the date of filing, so only the tax years 2003 and 2004 were subject to tax. Geithner did not legally have to pay the tax and penalty for 2001 and 2002 because the IRS didn't catch it in time. He did exactly what any of us would have done; he paid what the IRS said he had to pay, and didn't pay what the IRS didn't tell him to pay.
Sigh. Haven't we been through this before?
Even without adjusting for inflation, even with the economy recovering from a deep recession, this doesn't hold true. Individual and corporate income tax revenue: 1981 - $347M; 1989 - $549M. [It's almost true for Social Security taxes, which Reagan RAISED enormously: 1981: $183M; 1989 - $359M.] Factor in inflation, and the increase in revenue diminishes substantially: nominally during Reagan's two terms, income tax revenue increased 58%; in real terms it was 16%. (source: EROP tables B-80 and B-60)
"Remember the Laffer curve, They were right. Tax revenue went up after tax cuts by Kennedy, Reagan and Bush."
The Laffer curve is great in theory. But we're far to the left of the peak, and have been since before Reagan. As I keep saying over and over, NOBODY believes this nonsense about lower tax rates generating higher revenue. Even Greg Mankiw, who was a leading proponent of the charade as Bush's head economics honcho, stated quite plainly in an academic paper that even using "dynamic scoring," tax cuts couldn't result in higher revenue through increased economic growth.
"Reagan fought and failed to control spending of the Democratic congress."
This one is just plain funny - that you want Reagan to take all credit, and avoid all blame. The budgets submitted by Reagan to Congress called for more spending than was eventually passed.
"Probably the worst thing that Bush has done s destroy the Reagan legacy.
"...do your homework dude."
Are you talking to yourself? Seems like it.
"...it was the Republican congress and Gingrich that made the Clinton years... Contract with America and a balanced budget was congress(R)."
Surprise, surprise. You want the Republicans to once again get all credit and no blame. The fact is that the balanced budget was a happy coincidence made possible in large part by the divided government of the later 1990s.
"...recently we hear that Congressional spending pulled us out of recession in the 80's, how convenient."
Well, this is the same nonsense as Reagan pulling us out of the recession. The recessions of the early 80s were caused and ended by the Federal Reserve. The growth of the 1980s was in large part the normal cyclical recovery from the deepest recession since the Great Depression.
Oh no, he's on to us! Somebody call in a black helicopter strike, pronto!
living through the carter era was torture. miserable foreign policy, incredible interest and inflation rates and a dispirited public to the nth degree.
if reagen did nothing, just changing the mood of the country was enough. and remember, on swearing in day, a message was received by reagen and broadcast across the usa that the americans seized and jailed for over a year by iran were on a plane and just crossed into usa controlled airspace. talk about a pick me up.
obama has his hands full and even republicans (most) want him to have a chance. if that isn't the case, the possible new secy of treasury would have zero chance to get elected.
lastly, as far as reagen trading weapons for prisoners, it was a calculated gamble that worked. the weapons never were of any use in the whole scheme of things. it was just like the chances being taken on the secy of treasury nominee. maybe he'll straighten out the economy.
The program was not just illegal, did not just prove the lie of Reagan's very public bluster about not negotiating with terrorists, it was an abject failure.
You might want to read some of the Tower Commission report: www.presidency.ucsb.ed...
i fail to see a possible defense for this kind of action when you are being nominated to run the irs. if he was going to be secretary of defense i would feel differently.
On Jan 19 04:05 PM CLH wrote:
> Obama is a socialist --the same as Germany in the 1930s. He will
> bring in the draft and even those not drafted will work for the common
> good. His whole philosophy is evil.
On Jan 19 09:10 AM Ferdinand E. Banks wrote:
> I wonder what's wrong with me. I thought Reagan was one of the worst
> presidents the US ever had, but now I don't think it: I know it.
> Why the US had to get involved in Afghanistan at that time is something
> that no intelligent person could possibly understand, but the results
> of that involvement should be clear to everyone. The war in Afghanistan
> should have been left to the Soviets. They deserved it.
>
> . Maybe that involvement and the enormous borrowing of money by his
> government, is what the 'Reagan revolution' is all about.
On Jan 20 12:01 PM Tom B wrote:
> Germany in the 1930's was nationalist; not socialist.
On Jan 19 09:52 PM ezduzit wrote:
> it would be nice to find out how old some of the posters on this
> blog are. if you are not around 60 or 70 then you were too young
> to feel what was going on and you only know what you hear or read
> in the media.
Actually, U.S. involvement in Afghanistan was started by the Carter administration. Look it up.
Imagine you are on the cusp of bankrupcy. Your employer is cutting wages several times a year, so you are earning less and less. At the same time, your cost of living is actually increasing, and your debts are mounting. You have passed the point of no return. Then someone comes along and says, "Hey, let's try to restructure your finances. We'll move some money around, refinance some debts, and see if you can't work your way out of this."
Several years later, you end up having to file bankruptcy anyway. Do you blame the guy who helped you restructure? ("Well! THAT didn't work! It's all his fault I'm bankrupt!") Or do you place the blame correctly, and realize that you were financially doomed long before that?
Reagan didn't create the disaster, he inherited it. And he did a pretty good job of making life MUCH better for the vast majority of Americans, if "only" for a couple of decades.
I propose that the POTUS is a less influential factor in macro economic performance than everything that can be measured numerically. Seriously, I can't believe that people fall into the trap of selecting for one factor that has tangential relation to much more easily determined factors that have solid causal relations to other factors.
As for my own beliefs, I think Reagan was a charlatan of fiscal responsibility and only get's a pass because he was comparatively better than Carter at the time and he provided a character map for Republicans to emulate. He's the polar opposite of a Goldwater Republican, the kind of Republican I could in good conscience vote for, and hold out hope for in the future. Reagan was an enabler of poor government under the guise of being
P.S. People that believe in the Laffer Curve believe we are on the right of the apex which has no compelling evidence behind it. What if we are to the left? Stop trying to use basic algebra to obfuscate what you believe is a moral issue; excessive taxation where excessive is anything beyond some arbitrary single digit number (and conveniently where you believe tax revenue would be at its highest. Despite the absurd numbers you would have to use to justify this belief.). This also makes we wonder if people that believe we are to the right fell asleep during the unit on elasticity as it pertains to demand and taxes?
On Jan 19 08:19 AM john s. gordon wrote:
> reagan also violated the law (boland amendment) but was never impeached.
>
>
> we have a right to expect that law will be observed under an obama
> administration.
Unfortunately when government employees are in the forefront of robbing th government 9not paying taxes)- it basically means -its time to leave the country. If anyone has a good country in mind- let me know- I am out.