Obama, Reagan, and the economy
www.politico.com
By: Frank J. Donatelli
July 27, 2010 04:34 AM EDT ________________________
______________________
It’s easy to understand why President Barack Obama’s friends don’t want to acknowledge that July represents 17 months since Congress passed the $787 billion economic stimulus bill — the president’s signature measure to jump-start the economy and fight unemployment.
Obama says the economy is headed in the right direction; jobs are being created, not lost, and he is doing everything possible to revive the “worst economy since the Great Depression.” Most of the national press has been remarkably accepting of this narrative — even if the president has been vague, at best, about when we might finally see an uptick in economic growth and job creation.
But in another economic time, President Ronald Reagan’s economic recovery program took 17 months to take hold. It took from the time Congress passed his tax cuts, in August 1981, until the recession he inherited finally ended in January 1983.
Unemployment hit a high of 10.8 percent in December 1982. But then economic growth spiked, and the unemployment rate began a long, steady decline throughout the 1980s. It was obvious the program was working when people stopped calling it “Reaganomics.”
Tax cuts were a part of Reagan’s effort to cut the size and scope of government to fight economic stagnation. “Government is not the solution,” Reagan said in his remarkably clear inaugural address. “It is the problem.”
In addition to tax cuts, Reagan reduced domestic discretionary spending and streamlined regulations to make them less of a burden on businesses seeking to create jobs. He believed that government should give individuals and businesses the proper incentives to grow and expand and not inhibit the private sector with high taxes and cumbersome regulations.
Reagan faced obstacles that Obama did not. The House he had to work with was always controlled by Democrats. More ominously, inflation was running at double-digit rates, and it took nearly a year for the Federal Reserve to squeeze those pressures out of the system.
Regardless, in the end, Reagan’s program worked. The turnaround began 17 months later.
Fast-forward to today. The Obama administration says that government-directed investment, via huge spending increases, can revive the economy. It’s now stimulus plus 17. Is there a turnaround in sight?
Apparently not. Obama’s own budget estimates, released just last week, project trillion-dollar deficits, anemic economic growth coming out of a recession and unemployment near 9 percent for 2011 and 8 percent for 2012.
You have to go back to the 1930s to find a period in which unemployment has been so high for so long. This economic record would make former President Jimmy Carter blush.
Yet Obama continues to get a pass on his version of recent economic events. He has said that he inherited the worst recession since the Great Depression. He didn’t. The economies inherited by both President Gerald Ford in 1974 and Reagan in 1981 were far worse.
Obama has said the stimulus has saved 3 million jobs. It hasn’t. We have nearly that many fewer jobs than before the stimulus was passed in February 2009, and the unemployment rate is 1½ percentage points higher than what he claimed would be the high point once his program was enacted.
Obama has said he is doing all he can to revive the economy. Actually, he’s doing too much. The economic uncertainty that his “historic” health care and budget bills have created is doing more to hold back economic growth than anything else. Companies are hoarding cash rather than invest in Obama’s uncertain economic climate.
As a result, the recovery is anemic by historic standards.
So we have two historic presidents. Both inherited bad economies. One cut spending and taxes, and then, 17 months later, the economy boomed. The other increased taxes and spending. It’s now 17 months later.
Mr. President, we’re waiting.
