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Updating the Reagan v. Obama Economic Rout

Comparing economic legacies.

by
Tom Blumer

Bio

August 6, 2014 - 12:00 am
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The Hill reported last week that President Obama wants to “pivot to his economic legacy.”

Specifically, “the White House hopes to ride the wave of an economic recovery to improve Obama’s approval numbers over the final two years of his presidency, setting up a possible Democratic successor at the White House.” If The Hill’s Amie Parnes and Peter Schroeder had submitted their writeup to The Onion, they would have gladly run it.

Unfortunately for the president, one good quarter — assuming it even survives subsequent revisions, and especially following a quarter of contraction which was originally reported as positive before the heavy-duty erasers came out — does not a positive legacy make. Nor will another two years of the 2.4 percent economic growth seen during the past four quarters, again before revisions to the most current quarter.

By the three key measures of economic, job and income growth, Barack Obama’s economy, also known to yours truly as the POR (Pelosi-Obama-Reid) economy to identify the three parties most responsible for  both the depth of the Great Recession and the historically awful “recovery” which has followed it, has been historically horrid.

Obama’s economic policy, with the help of a pliant Federal Reserve, has been built on the notion that massive deficit spending and easy money would bring the economy roaring back and “stimulate” job growth.  The former strategy was tried during the 1930s. It only succeeded in lengthening the Great Depression, as the nation’s unemployment rate never fell below 12 percent. The fact that Team Obama insisted on making the same mistakes, while at the same time unleashing the federal government’s regulatory apparatus to harass the economy’s productive participants, is enough to make reasonable people question whether this president and his administration have ever truly wanted to see a genuine recovery occur.

On the other hand, five years of strong, solid and uninterrupted economic performance following a serious recession is how you create a positive economic legacy. Ronald Reagan’s post-recession economy — an economy which faced arguably greater challenges when he took office, particularly double-digit inflation and a prime interest rate of 20 percent — did just that.

Reagan’s economic policy, conducted in the face of necessarily painful anti-inflationary Federal Reserve monetary policy, was premised on supply-side tax cuts and regulatory restraint. A third element, getting federal spending under control, didn’t occur because (surprise) Democrats reneged on promises to cut spending made during budget negotiations. Today, Obama’s crew anticipates annual budget deficits which will never fall below $450 billion and will balloon back to $1 trillion within a decade.

Five years after the early-1980s recession ended, the U.S. economy was almost 26 percent larger. The Obama economy, in the worst five-year recovery since World War II by miles, hasn’t achieved even half of that.

The difference is, well, graphic, as the two images below highlight.

ReaganVsObamaGDPthru20quarters

 

ReaganVsObamaCumulGDPthru20quarters

 

Top Rated Comments   
More like comparing Lou Gehrig to Helen Keller.
11 weeks ago
11 weeks ago Link To Comment
Comparing Reaganomics to Obamanics is like comparing Lou Gehrig to Mario Mendoza.

Reagan loved America and believed we were exceptional.

Obama, Soros, Ayers, Frank Marshall Davis, the Midwest Academy...despise the free market and always intended to destroy it.

In that sense, both Reagan and Obama successfully advanced their goals.
11 weeks ago
11 weeks ago Link To Comment
I remember all the booing from the DemokRat peanut gallery about "vodoo economics" etc. They did not make Reagan's work easy. Everyone in the administration was investigated, sued, persecuted by any means at hand. In spite of that they did a great job. If the rats would have behaved like Americans and supported Reagan there is no telling how great things could have been accomplished.
11 weeks ago
11 weeks ago Link To Comment
All Comments   (29)
All Comments   (29)
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Gee, with the $619 billion the Obamacare department "lost", we could pay off most of our Chinese debt!
11 weeks ago
11 weeks ago Link To Comment
Aren't we in like the 4th summer of economic recovery? I think that's Obama's economic legacy right there.
11 weeks ago
11 weeks ago Link To Comment
Reagan's true legacy was the booming economy of the 90's. Now if the Reagan recovery was good and set the stage for a fantastic surge in the 90's ... my question is: what are we to expect five or ten years after the destroyer is gone. Those thoughts make me shudder. We will need five Reagans in a row to recover from the BCO (Bush-Clinton-Obama) era. God have mercy on us!
11 weeks ago
11 weeks ago Link To Comment
Pivot from what exactly?
11 weeks ago
11 weeks ago Link To Comment
'President Obama wants to “pivot to his economic legacy.”'

This will be as great a triumph as the "pivot to Asia".
11 weeks ago
11 weeks ago Link To Comment
Pivot? Or Pirouette?
11 weeks ago
11 weeks ago Link To Comment
During Reagan, if I left a job on Monday, it'd be highly likely I'd have another the following week. Today, leave a job, it's problematic if you even have another one a year down the road.
11 weeks ago
11 weeks ago Link To Comment
I was working independently and I could not stop the phone from ringing. At one point I was booked solid for almost 2 years in advance. Bush Sr. came and the silence was deafening. Then the glorious Contract with America recovered Reagan's principles and work was even more abundant. After that came Dubbya. I never saw anything resembling full employment from 2004 to 2008 when I closed my last contract. I haven't worked since then. I am surviving doing menial work but I use my abundant free time to fight this abomination, reminding people everywhere that we can overcome this new kind of tyranny.
11 weeks ago
11 weeks ago Link To Comment
One guy believed in free markets, human initiative and unlimited possibilities and the other believes in absolute control over all aspects of human activity through bureaucratic edict.

Throughout Obama's term in office, business has been generally wary of expansion for fear of being overwhelmed by that bureaucracy and its endless repressive rules and regulations.

It was ironic last week when an ignorant president attempting to put down his nemesis said "Russia doesn't build anything" when said president himself has claimed that America doesn't build anything without beneficent government enabling it.

He himself has built nothing but dissension and carefully cultivated mistrust.
11 weeks ago
11 weeks ago Link To Comment
There's another point that isn't in these charts.

The jobs that became available under Reagan were good full-time jobs: High-tech jobs, aerospace jobs, etc.

Even the jobs that have been created during the Obama Administration tend to be service jobs and temp jobs, which don't pay well. You can't make up a loss of jobs at Maytag and General Motors with jobs at McDonald's and Merry Maids.

And that's one of the reasons that the American people "don't feel" a recovery. The children and grandchildren of the men who used to work in the auto industry and the steel industry and the major appliance industry are now working as coffee baristas and babysitters.

Having said that, there is ONE problem that neither FDR nor Reagan really had to confront: A major world power that is outstripping us economically. Under Reagan, Russia was military competition, but never economic competition. And America was NEVER in debt to Russia.

But today, China is giving us a real run for our money. Literally. They hold $700 billion of our debt, while their economic growth rate is two or three times more than ours and and they are now taking out more patents than America.

Neither FDR nor Reagan had that kind of problem to deal with.
11 weeks ago
11 weeks ago Link To Comment
Just to amp your point Sinz, according to David Stockman, the economy under Obama has lost somewhere between 5 to 6 million "breadwinner" jobs- those jobs that make over $45,000 a year. ( Which is still peanuts if you live in a deep Blue City).

Btw, Dubya wasn't too hot in that department either. Dubya essentially created no new "breadwinner" jobs - he really didn't lose any, but he didn't create good jobs. During that stint of time from 2000 to now, approximately 35 million Americans should have entered the workforce and no new net good jobs were created for them. So in effect the Dems and the Rinos have colluded to deny a whole generation the opportunity for goods jobs.

A large part of the problem is the enormous and comprehensive putative Regulatory overreach, on all levels of government, that has happened during the last twenty five years- since Reagan. Thousands of regulations have been written that when confronted with the real world cannot be reasonably or easily complied with. Much of the regulatory landscape is an ever changing gotcha game. It is an impossible situation for a small business just starting out to endure.

Add to that the corporatist captured banking system that has essentially shut small business start ups out of possibility of getting start up capital and you have a situation where one should not expect good jobs to created.

Neither the Republican Party as presently constituted nor of course the Marxist Democrats want to change this deplorable situation anytime soon.
11 weeks ago
11 weeks ago Link To Comment
Dubbya sucked in all fronts even more than his glorious daddy. And now his team -- including Porky and his portable whiteboard -- is fighting the Tea Party tooth and nail. One of these days I have to kick myself real hard for having voted for that clown.
11 weeks ago
11 weeks ago Link To Comment
yes, but what was your alternative? (In the general election I mean)
11 weeks ago
11 weeks ago Link To Comment
I'd be very interested in hearing more specifics. I'd love to identify a few big regulatory changes that have huge impacts on small business startups and job creation and yet serve little constructive beyond creating new bureaucracies. Is that's what is happening, as you imply? Or are the regulations actually "positive" in many cases, like preventing workplace deaths or illness from pollution or so forth?

Ranting about excess regulation is too vague in my opinion. I think we need specifics that show the foolishness of the regulations and the very bad effect they have on the economy. I think a lot of people will be motivated to vote conservative if they learn that hypothetical Law 12345 forces every company and startup to spend 5% of their gross income on filling out forms to declare that the snail darter is not endangered by their activity, even if their activity is to sell things online.
Or finding that their insurance premiums went up, say, 25% because regulations insist that every plan cover gynecological exams, even if the sole policyholder is male.

Factoids like that are things people can rally behind and dismiss as ridiculous overreach. Vague formulations of 'excessive regulation' don't really have the same effect.
11 weeks ago
11 weeks ago Link To Comment
I'd be very interested in hearing more specifics. I'd love to identify a few big regulatory changes that have huge impacts on small business startups and job creation and yet serve little constructive purpose beyond creating new bureaucracies. Is that what is happening, as you imply? Or are the regulations actually "positive" in many cases, like preventing workplace deaths or illness from pollution or so forth?

Ranting about excess regulation is too vague in my opinion. I think we need specifics that show the foolishness of the regulations and the very bad effect they have on the economy. I think a lot of people will be motivated to vote conservative if they learn that hypothetical Law 12345 forces every company and startup to spend 5% of their gross income on filling out forms to declare that the snail darter is not endangered by their activity, even if their activity is to sell things online. Or finding that their insurance premiums went up, say, 25% because regulations insist that every plan cover gynecological exams, even if the sole policyholder is male.

Factoids like that are things people can rally behind and dismiss as ridiculous overreach. Vague formulations of 'excessive regulation' don't really have the same effect.
11 weeks ago
11 weeks ago Link To Comment
I believe Sarbanes Oxley is a big factor he economy's failure to create many "breadwinner" jobs during the previous decade. Since then, far more tech startups have sold out to Google, Microsoft, Apple, and the like instead of going public, leading I believe to far less revenue growth, job growth, and innovation than would otherwise have occurred.
11 weeks ago
11 weeks ago Link To Comment
Actually, Reagan contended with a thriving Japan that was going to overtake America according to many Dems and much of academia because of voodoo economics.
11 weeks ago
11 weeks ago Link To Comment
"China...They hold $700 billion of our debt..."

Much larger. figure from Nov. 2013 article and elsewhere:

"China (which owned nearly $1.3 trillion of the total debt, or about 8 percent)"
11 weeks ago
11 weeks ago Link To Comment
Comparing Reaganomics to Obamanics is like comparing Lou Gehrig to Mario Mendoza.

Reagan loved America and believed we were exceptional.

Obama, Soros, Ayers, Frank Marshall Davis, the Midwest Academy...despise the free market and always intended to destroy it.

In that sense, both Reagan and Obama successfully advanced their goals.
11 weeks ago
11 weeks ago Link To Comment
More like comparing Lou Gehrig to Helen Keller.
11 weeks ago
11 weeks ago Link To Comment
Catino, would be hesitant with this comparison as Helen Keller accomplished so much, with such handicaps.

With B.O. in power she may have never accomplished anything.
11 weeks ago
11 weeks ago Link To Comment
I was referring to Keller's ability to play baseball. I admire the lady since infancy. Now that I think of it ... she probably had better eyesight than many umpires I've seen!
11 weeks ago
11 weeks ago Link To Comment
I remember all the booing from the DemokRat peanut gallery about "vodoo economics" etc. They did not make Reagan's work easy. Everyone in the administration was investigated, sued, persecuted by any means at hand. In spite of that they did a great job. If the rats would have behaved like Americans and supported Reagan there is no telling how great things could have been accomplished.
11 weeks ago
11 weeks ago Link To Comment
...and administrations since then would still have found a way to screw it up.
11 weeks ago
11 weeks ago Link To Comment
Yes. My America had 40 presidents. Then came the usurpers.
11 weeks ago
11 weeks ago Link To Comment
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