Reaganomics vs. Obamanomics
Peter Ferrara had an excellent article in yesterday’s Wall Street Journal contrasting Reagan’s and Obama’s economic policies. Here are the key points of the article.
In his inaugural address, President Barack Obama said, “The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.”…
Unfortunately, this rhetoric is not true. Mr. Obama’s economic policy is following not what has been proven to work but liberal ideology.
The best way to understand this is to compare what’s being proposed now with what Ronald Reagan accomplished.
The four components of Reagan’s economic plan were:
- “Across-the-board reductions in tax rates to provide incentives for saving, investment, entrepreneurship and work.”
- “Deregulation to remove unnecessary costs on the economy.”
- “The control of government spending.” (Nondefense discretionary spending was down 14.4% in 1988 compared to 1981 when Reagan took office.)
- “Tight, anti-inflation monetary policy.”
The results of Reagan’s economic policy were remarkable. His policy worked. And this shouldn’t be a surprise to those familiar with the basic principles of economics. Ferrara states:
We know such policies work because they turned around in just two years an economy far worse than today’s. We were suffering from multiyear, double-digit inflation, double-digit unemployment, double-digit interest rates, declining incomes, and rising poverty. In fact, what we suffer with today is not the worst economy since the Great Depression, but the worst economy since Jimmy Carter — the last time liberals were dominant politically and intellectually.
But what is Obama’s plan?
The Obama administration’s economic policies do not include any of the four Reagan components. In fact, the stimulus plan is the greatest increase in government spending in the history of the planet. Meanwhile, the Fed is furiously reinflating, sowing more havoc down the line. Mr. Obama is still promising future increases in tax rates by letting the Bush tax cuts lapse, because for ideological reasons he thinks even current rates are too low. And instead of deregulating for more energy production, he is still promising massive increases in regulatory barriers — through global warming cap-and-trade legislation — to increased production from proven energy sources to serve an extreme environmentalist ideology.
What is the current result of Obama’s plan?
This is why America seems so hopeless right now, and so depressed. We are stuck going in exactly the wrong direction on economic policy because of currently dominant ideological fashions.
What will the longer-term results of Obama’s plan be?
A natural economic recovery will begin sometime this year, not because of the president’s policies, but because soon this will be the longest recession since World War II. However, thanks to the administration’s retrograde policies — cut from the cloth of the 1970s and even the 1930s — the recovery will not be what it should be. Rather, unemployment will remain too high, and inflation will resurge, recreating the disastrous economic results we suffered the last time Keynesian policies were dominant.
(HT: Justin Taylor)