EVER WONDER WHY THE RECOVERY from this current recession is taking so long? Historically, sharp economic declines are followed by steep bounces back up. But not this time.
The other night I was listening to the Mark Levin Show on the radio, which I do sometimes, even though he is often so strident that it is hard to hear the substance. This particular night the substance trumped the stridency. I caught his talk in the middle so I was not sure but I thought he was reading something written by someone else. A little research via Levin’s website showed he was. He was reading an article entitled "Reaganomics vs. Obamanomics: Facts and Figures" by Peter Ferrara published in Forbes magazine. My column this week is little more than a summary of Ferrara's.
Here is Reagan's four-point economic program: Cut tax rates, reduce government spending, restrain money supply growth and deregulate the economy.
What was the result? The Reagan Recovery (which started in November 1982 and lasted 92 months, the longest peacetime expansion ever).
What happened during the Reagan Recovery? The economy grew by almost one-third as nearly 20 million new jobs were created and the American standard of living increased by almost 20% in seven years, and as this happened rich and poor and middle class benefited together, with the poverty rate declining every year from 1984 to 1989 (dropping by one-sixth from its peak), while the stock market more than tripled in value from 1980 to 1990. Further, inflation, the bane of every man, collapsed not to revive for decades.
Meanwhile, what has been Obama's economic program? (These policies may sound familiar, in an inverted sort of way.) Raise tax rates (on the rich mostly), increase government spending (the Stimulus), increase money supply growth (quantitative easing) and re-regulate the economy (e.g., healthcare reform, financial industry regulation, oil drilling moratorium).
What about the Obama Recovery? History will show the Obama Recovery never happened.
As economist John Lott has said, “For the last couple of years, President Obama keeps claiming that the recession was the worst economy since the Great Depression. But this is not correct. This is the worst 'recovery' since the Great Depression.”
Is this non-existent recovery all President Obama's fault? No, Ben Bernanke and John Maynard Keynes deserve some of the credit as well. (Not to mention the Democrat-controlled Congresses of 2007 to 2010.) Presidents are always given more blame and more credit for cyclical macro-economic events than they deserve -- but government actions do matter. Policies do have an impact.
This is true with local business climate. (Ask any business person who ever tried to do business in Chapel Hill/Carrboro.) This is true with state business climate. (If you were paying attention back then, you may have noticed that North Carolina avoided to a large degree the recession that preceded the Reagan Recovery.) And it is clearly true with the economic influence of our current, massive federal government.
While Obama isn't solely responsible for the Obama Non-Recovery, isn't it interesting that opposite policies do appear to correspond to such distinct economic trends? Personally, I don't blame Obama or the Democrats. I blame the Republicans -- for not nominating anyone who held firmly to Reagan's economic philosophy since they last nominated Reagan.
Gary D. Gaddy recommends reading the original Ferrara article on which this column is based, which may be done by Googling "Reaganomics vs. Obamanomics facts and figures" and by Googling "Editorial: A Tale Of Two Recessions" to see clear illustration of some of these data.
A version of this story was published in the Chapel Hill Herald on Friday June 24, 2011.
Copyright 2011 Gary D. Gaddy