Throughout the debt ceiling debate (and prior thereto) you and members of your administration have repeatedly referred to the “mess [you] inherited” and the “economic headwinds” you faced upon taking office. You’ve also made frequent comparisons to Ronald Reagan.
Speaking of economic headwinds, Reagan “inherited” a GDP rate of -3.2 percent. You inherited a GDP rate of -4.9 percent. Two and a half years after Reagan took office, however, GDP was at 5.1 percent (and exploded to 9.3 percent the next quarter). Two and a half years after you took office GDP growth is at 1.3 percent (and as likely to implode as explode next quarter).
Reagan inherited an inflation rate of 11.8 percent. You inherited an inflation rate of 0.3 percent. Two and a half years after Reagan took office inflation shrank to 2.46 percent. Two and a half years after you took office inflation has risen to 3.56 percent.
Reagan inherited interest rates of 20.5 percent. You inherited interest rates of 3.25 percent. Two and a half years after Reagan took office interest rates dropped to 11 percent. Two and a half years after you took office interest rates remain unchanged.
Reagan inherited a national debt (adjusted for inflation) of $908 billion. You inherited a national debt of $10.1 trillion. Two and a half years after Reagan took office, $390 billion more had been added to the national debt. Two and a half years after you took office $4.4 trillion more has been added to the national debt.
Reagan inherited an unemployment rate of 7.5 percent. You inherited an unemployment rate of 7.3 percent. Two and a half years after Reagan took office the unemployment rate was 9.4 percent, but fell to 7.6 percent within a few months and declined steadily thereafter to 5.3 percent. Two and a half years after you took office the unemployment rate is 9.2 percent. To fall to 7.6 percent by the end of this year, however, more than 1,000,000 jobs per month would need to be created. Only 18,000 were created in June; 25,000 in May.
Reagan slashed tax rates, encouraged American entrepreneurship, and didn’t complain incessantly about the mess he inherited. Will you ever do the same?
“A graph titled ‘Private Sector Job Creation’ on the Obama-Biden campaign website… announces proudly that 4.4 million private sector jobs have been created over the past 28 months.”… At the same point during the Reagan recovery, the economy had created 9.5 million new jobs.
Reagan’s recovery produced job growth in 81 out of its first 82 months, with 20 million new jobs created over those 7 years, increasing the civilian workforce at the time by 20%.
The relevant streak of Obamanomics was extended in the June jobs report. That report established that under President Obama America has suffered 41 straight months of unemployment over 8%, which the Joint Economic Committee of Congress confirms is the worst recovery from a recession since the Great Depression almost 75 years ago. Indeed, the last time before Obama unemployment was even over 8% was December 1983, when Reaganomics was bringing it down from the Keynesian fiasco of the 1970s. It didn’t climb back above that level for 25 years, a generation, which is a measure of the spectacular success of Reaganomics.
Obama’s tragic jobs record reflects the dismal economic growth under his administration’s throwback, Keynesian economic policies. For all of last year, the economy grew by a paltry real rate of 1.7%, only about half America’s long-term trend. The average so far this year has been no better. That dismal growth is further reflected in the Census Bureau reports of falling real wages under Obama, kicking median family income back over 10 years, with more Americans in poverty today than at any time in the more than 50 years that Census has been tracking poverty.
In sharp contrast, in the second year of Reagan’s recovery, the economy boomed by a real rate of 6.8%, the highest in 50 years. Real per capita disposable income increased by 18% from 1982 to 1989, meaning the American standard of living increased by almost 20% in those first 7 years of the Reagan boom alone. The poverty rate, which had started increasing during the Carter years, declined every year from 1984 to 1989, dropping by one-sixth from its peak. That is the proper comparison for Obama’s economic performance.
“The Distribution of Household Income and Federal Taxes, 2008 and 2009,” issued by CBO on July 10, reports that the top 1% of income earners paid 39% of federal individual income taxes in 2009, while earning 13% of the income. That means their share of federal income taxes was three times their share of income.
And that is down from 2007, before President Obama was even elected. In that year, after 25 years of Reagan Republican tax policies, the top 1% paid 40% of federal individual income taxes. That was more than double the 17.6% of federal individual income taxes paid by the top 1% when President Reagan entered office in 1981.
Ronald Reagan suffered a severe recession starting in 1981, which resulted from the monetary policy that broke the back of the roaring 1970s inflation. But all the job losses of that recession were recovered after 28 months, with the recovery fueled by traditional pro-growth policies. By this point in the Reagan recovery, 64 months after the recession started, jobs had grown 9.5% higher than where they were when the recession started, representing an increase of about 10 million more jobs. By contrast, in April, 2013, jobs in the Obama recovery were still about 2% below where they were when the recession started, about 2 ½ million less, or a shortfall of about 10 million jobs if you count population growth since the recession started, as discussed below.
In the 10 post depression recessions before President Obama, the economy recovered the lost GDP during the recession within an average of 4.5 quarters after the recession started. But it took Obama’s recovery 16 quarters, or 4 years, to reach that point. Today, 21 quarters, or 5 plus years, after the recession started, the economy (real GDP) has grown just 3.2% above where it was when the recession started. By sharp contrast, at this point in the Reagan recovery, the economy had boomed by 18.6%, almost one fifth.
The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months.
During this seven-year recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third-largest in the world at the time, to the U.S. economy. In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years. Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20%. Unemployment fell to 5.3% by 1989.
The shocking rise in inflation during the Nixon and Carter years was reversed. Astoundingly, inflation from 1980 was reduced by more than half by 1982, to 6.2%. It was cut in half again for 1983, to 3.2%, never to be heard from again until recently. The contractionary, tight-money policies needed to kill this inflation inexorably created the steep recession of 1981 to 1982, which is why Reagan did not suffer politically catastrophic blame for that recession.
Real per-capita disposable income increased by 18% from 1982 to 1989, meaning the American standard of living increased by almost 20% in just seven years. The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak. The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade.
In The End of Prosperity, supply side guru Art Laffer and Wall Street Journal chief financial writer Steve Moore point out that this Reagan recovery grew into a 25-year boom, with just slight interruptions by shallow, short recessions in 1990 and 2001. They wrote:
We call this period, 1982-2007, the twenty-five year boom–the greatest period of wealth creation in the history of the planet. In 1980, the net worth–assets minus liabilities–of all U.S. households and business … was $25 trillion in today’s dollars. By 2007, … net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.
Regarding my title, yeah, I like overkill.
By Michael Ramirez: