President Barack Obama’s 53-minute “major address” on Thursday was so bad that even some of his knee-jerk cheerleaders in the establishment press couldn’t stand it. A desperate Associated Press photographer thought that fitting Obama for a new halo might distract from the disaster. Nice try, buddy. No sale.
Obama was right about something, though not in the sense he intended, when he told his audience that “we can’t afford to jeopardize our future by repeating the mistakes of the past — not now, not when there’s so much at stake.” We’ve been repeating the New Deal-”inspired,” stimulus-driven, regulation-overloaded, class warfare-motivated, uncertainty-inducing mistakes of the 1930s for 3-1/2 years (or four, if you want to include President George W. Bush’s $94 billion distribution of IRS checks in 2008, which in historical perspective represents a tiny drop in what is now a dangerously deep debt bucket). It’s well past time to stop doing what hasn’t worked, especially when we have an historical blueprint which, when appropriately adapted to our current situation, can free us from our current malaise.
Both Ronald Reagan and Barack Obama faced deep recessions. The problems Reagan inherited from hapless predecessor Jimmy Carter and which immediately followed his inauguration were arguably more severe. Inflation in 1979 and 1980 averaged 13%. The prime interest rate was 20% the day the Gipper was inaugurated (imagine this economy, which can’t get going with the prime rate at an all-time post-World War II low of 3.25%, trying to recover in the face of double-digit interest rates). Unemployment was soaring. Reagan, while facing a Congress controlled by the party of tax and spend, needed to somehow revive the economy even as the Federal Reserve under Paul Volcker was of necessity taming inflation with a very tight monetary policy, creating a double-dip recession.
Our current president can only claim that “the private sector is fine” if he pretends that what Reagan’s policies accomplished never happened. It did, with the following results after the double-dip recession ended in November 1982 compared to how the current economy has performed since its recession officially ended in June 2009 (data used is from Uncle Sam’s Bureau of Labor Statistics [BLS]):
Despite the Obama-Pelosi-Reid stimulus, which was so flipping important that it had to be rushed through Congress without giving anyone time to read it, and which was falsely sold as a way to jump-start commerce with shovel-ready jobs which existed only on paper if at all, the economy kept on losing jobs for eight awful months after the recession ended. Under Reagan, despite arguably much more severe headwinds — you try to bring back an economy with interest rates still above 10%, as they were until the last few months of the period involved — robust job growth resumed almost immediately after the recession’s end and kept going and going.
Team Obama likes to talk about what has happened since February 2010 (the yellow mark in the chart), bragging about all the private-sector jobs “we’ve created” (as if they can take credit for decisions employers have made independently). The fact is that even if you ignore (which you shouldn’t) the first eight months after the recession ended (actually, decisions made, laws passed, and policies implemented by Democratic administrations, Congresses, and government-sponsored enterprises created the recession, while President-elect Obama’s frightening “They’re absolutely right” endorsement of the occupiers at Chicago’s Republic Windows and Doors worsened it), the 4.27 million private-sector jobs added during the past 27 months pales in comparison to the 7.14 million created under Reagan.
The difference is even starker when you compare the results expressed in terms of post-recession workforce growth:
The private workforce shrank by a bit more than 1% during the first eight months after the most recent recession’s official end. In the 27 supposedly magical months after that, it grew by less than 4%. Big whoop: During the analogous 27 months under Reagan, private-sector employment grew by 9.6% — and the economy didn’t have to lose 1.16 million jobs before any kind of recovery appeared.
Oh, and I almost forgot. Data from the BLS’s Household Survey tells us that the number of part-time workers during the first 35 months of the Reagan era’s post-recession boom grew by 1.6%. That’s almost a rounding error compared to the same period’s 10.7% growth in full-time employment. During the same number of months after the most recent recession officially ended, part-time employment has grown by 1.9%, while full-time employment is only up by an I’m-not-kidding 1.3%.
The boom years under Reagan primarily resulted from supply-side tax cuts accompanied by a healthy dose of deregulation. A President Mitt Romney would not have to go with major tax cuts to replicate a Reagan-like boom. Instead, on Day 1 he and Congress should first make the income-tax structure created in 2003 during the presidency of Bush 43 and under which we have essentially functioned for the past nine years permanent. If he wants to be more aggressive, fine, but in my view it’s not as important as the next necessary step.
It is crucial that a Romney administration do the regulatory equivalent of what the Kemp-Roth tax cuts did when they pulled down rates by 25% over three years. Team Romney should carefully target the elimination and revision of regulations with the goal of reducing their overall cost to the economy by 10% each year for the next three years. After that, we can ask “Why stop there?” (Free advice to Romney insiders: Put a task force together to address this matter right now, so you can hit the ground running on January 20, 2013.)
A regulatory Kemp-Roth would free up millions of hours of private-sector time for productive tasks and would over time move hundreds of thousands of federal workers who add nothing to the country’s gross domestic product into the economy-contributing private sector. A 10% annual reduction in the yearly regulatory burden, which the SBA estimated as costing the economy $1.75 trillion a few years ago and which certainly approaches or exceeds $2 trillion now, would be the rough equivalent of an annual $200 billion tax cut. You can write it down that we will see an economic boom if our government ever implements this common-sense idea.
Unlike now, the private sector was really fine under Ronald Reagan. Additionally, once inaugurated, the Gipper almost never complained about the insufferable mess predecessor Jimmy Carter had left or moaned about the high interest rates the Fed had to impose to tame inflation.
Evidence is growing that the American people have had more than their fill of our current ineffective whiner- and regulator-in-chief and those he has chosen to work for him, and that they intend to express that displeasure at the polls in November. If that’s really the case, Election Day can’t come soon enough.
Also read: Trust Me, Reagan Would Win the Nomination