The Reagan Recovery vs. The Obama Recovery

Discussion in 'Economy' started by PoliticalChic, Dec 16, 2011.

  1. PoliticalChic
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    PoliticalChic Diamond Member

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    The following is from a speech given by Former Senator Phil Gramm, vice chairman at UBS, and B.A. and Ph.D in Economics, October 3, 2011.

    1. Reagan cut the top tax rate from 70 percent to 28 percent. And yes, high income earners benefitted from these cuts. And despite lower rates, the rich ended up paying a greater share: In 1979, the top one percent of income earners in America paid 18.3 percent of the total tax bill. By 2006, the last year for which we have reliable numbers, they were paying 39.1 percent of the total tax bill. The top ten percent of earners in 1979 were paying 48.1 percent of all taxes. By 2006, they were paying 72.8 percent. The top 40 percent of all earners in 1979 were paying 85.1 percent of all taxes. By 2006, they were paying 98.7 percent. The bottom 40 percent of earners in 1979 paid 4.1 percent of all taxes. By 2006, they were receiving 3.3 percent in direct payments from the U.S. Treasury.

    a. In the 12 years prior to the Reagan program, economic growth averaged 2.5 percent. For the following 25 years, it averaged 3.3 percent.

    b. In the 12 years prior to the Reagan program, per capita GDP, in real terms, grew by 1.5 percent. For the 25 years after the Reagan program was implemented, real per capita income grew by 2.2 percent. By 2006, the average American was making $7,400 more than he would have made if growth rates had remained at the same level as they were during the 12 years prior to the Reagan program. A family of four was making $29,602 more.

    c. During the 12 years prior to Reagan, America created 1.3 million jobs per year. That number is pretty impressive compared to today’s stagnant economy. But during the Reagan years, America added two million jobs per year. That means as of 2007 there were 17.5 million more Americans at work than would have been working had the growth rates of the pre-Reagan era continued.

    d. Inflation, which had been 7.6 percent for the previous 12 years, fell to 3.1 percent. Interest rates plummeted. The average homeowner in America had a monthly mortgage payment of $1,000 less as a result of the success of the Reagan program.

    e. Poverty, which had grown throughout the 1970s despite massive increases in anti-poverty programs, plummeted despite cuts to these programs. The poverty level fell from 15 percent to 11.3 percent.

    2. How does the Reagan Recovery compare to the Obama Recovery? In sum, this is the most disappointing recovery of the post-World War II period by a large margin. If the economy had recovered from this recession at the rate it recovered from the 1982 recession, which was roughly the same size in terms of unemployment, there would be 16.3 million more Americans at work today—in other words, all those who say they are unemployed plus almost 60 percent of “discouraged workers” who have dropped out of the labor force. If real per capita income had grown in this recovery at the same rate it grew during the Reagan recovery, real per capita income would be $5,139 higher today. Both the Reagan program and the Obama program instituted dramatic changes. One program worked. The other is failing.

    6. Why? A basic understanding of both human nature and of the American character. What is unique about America is an understanding of freedom and limited government that lets ordinary people achieve extraordinary things. We have been getting away from that view recently, but if we can get back to that understanding, which was Reagan’s, our nation will be fine. Given the freedom to pursue his own business and to be the best he can be at it, the average American is the equal of any man. He’s proud, he’s independent, and he knows his trade as well as anybody else in America knows theirs. That’s what America is about. For me, today’s battle, as it was in 1980, is not just about prosperity or goods and services. It’s about freedom, and it’s about the kind of character that only freedom creates. https://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2011&month=11
     
    Last edited: Dec 16, 2011
  2. edthecynic
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    edthecynic Censored for Cynicism

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    Now hold on a minute there Slick! St Ronnie cut taxes in 1981 and the economy went into the Reagan Recession immediately afterward. By 1982 U3 unemployment was almost 11%. Reagan then raised taxes the most of any peacetime president and suddenly the economy improved and all the things you listed above happened after Reagan RAISED taxes. Of course, dishonest CON$ always leave out the tax raising part when they tick off the economic improvement during the Reagan error.

    To recap, Reagan cut taxes and the economy tanked, Reagan then raised taxes and the economy improved, and to CON$ that means you cut taxes!!! :cuckoo:
     
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  3. PoliticalChic
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    PoliticalChic Diamond Member

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    Now, I realize that you are very busy, what with Rush being on at this time, but I did provide the link to the speech.

    From that link:

    "To be sure, there were a couple of major impediments to the economic success of Reagan’s program. First, the Federal Reserve Bank clamped down on the money supply in 1981 and 1982, in an effort to break the back of inflation, and subsequently the economy slipped into the steepest recession of the post-World War II period. Second, Soviet communism was on the march, the U.S. was in retreat around the world, and President Reagan was determined to rebuild our national defense as part of a program of peace through strength. All of these factors worked strongly against Reagan in the battle to revive the American economy. Nor was it a forgone conclusion that his program would get through Congress. We shouldn’t forget that it was a tough program. For example, it eliminated three Social Security benefits in one day: the adult student benefit, the minimum benefit, and the death benefit. Reagan’s program represented a dramatic change in public policy."


    Interesting that a Reagan-denier like you pretends that items a, b, c, d, e in the OP either did not occur, or that they were unimportant.

    Your ignoring of them is the best evidence that they were dispositive as to the exemplary nature of the Reagan Boom.

    Not exactly what you were aiming for, huh BeetsAndSpinach?
     
  4. edthecynic
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    edthecynic Censored for Cynicism

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    Reading comprehension is obviously not your strong suit. No surprise there.

    Obviously I said what you attribute to tax cuts actually happened after tax increases. What happened after the tax cuts was the Reagan Recession. We got out of the Reagan Recession with tax increases and deficit spending on the military. That's right, Reagan went Keynesian, deficit spending and increased taxes, to pull us out of the Regan Recession!!!
     
  5. PoliticalChic
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    PoliticalChic Diamond Member

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    1. So, you agree that every one of the numerous benefits of Reagans' program were amazingly successful....

    2. But you are puzzled as to how your claim that "tax increases and deficit spending on the military. That's right, Reagan went Keynesian, deficit spending and increased taxes, to pull us out of the Regan Recession!!!" seems abysmally unsuccessful in the hands of der wunderkind?

    3. Reagan cut taxes. Maybe this will help:
    "Reagan is remembered for his tax cuts, owing to his signature Economic Recovery Tax Act of 1981, which slashed the top marginal rate to 50 percent from 70 percent. And even with the later increases, he was a net tax-cutter: He didn’t rescind the marginal cuts, and lowered the rates again in a 1986 overhaul that traded rate reductions for the elimination of individual tax preferences. By the end of his administration, the top marginal rate had been dropped to 28 percent."

    And, faced with deficits:
    "Reagan’s biggest deficit came in 1983 when it reached 6 percent of the gross domestic product -- about two-thirds the size of the shortfalls the government has run in each of the past three years. The Tax Equity and Fiscal Responsibility Act of 1982, then criticized as the largest tax increase in history, scaled back corporate tax breaks, increased unemployment-insurance levies, and raised excise taxes on cigarettes, among other changes.
    Reagan

    So, are you convinced that the Reagan agenda is the plan that Obama should have adopted?
    Yes?
    Good.
     
  6. edthecynic
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    edthecynic Censored for Cynicism

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    Again you show your complete lack of reading comprehension. Where exactly did I agree with St Ronnie's Recession causing tax cuts???

    But I do agree Obama should have gone the same TAX, BORROW, and SPEND route Reagan adopted to pull the economy out of the Reagan Recession.
     
  7. PoliticalChic
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    PoliticalChic Diamond Member

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    1. "Where exactly did I agree with St Ronnie's Recession causing tax cuts?"

    Not as simple as you, but simple to document all the same.

    Since you are as rabidly anit-Ronaldus Maximus as you are toward Rush, if you could find some error with the OP homage to the results of the Reagan plan, no doubt you would have.
    So, since you didn't disagree....you must agree.

    2. Further proof: "But I do agree Obama should have...blah, blah, blah...."

    3. You might like this, too:
    "The Keynesians in the early 1980s assured us that the Reagan expansion would not and could not happen. Rapid growth with new jobs and falling rates of inflation (to 4% in 1983 from 13% in 1980) is an impossibility in Keynesian textbooks. If you increase demand, prices go up. If you increase supply—as Reagan did—prices go down.

    The Godfather of the neo-Keynesians, Paul Samuelson, was the lead critic of the supposed follies of Reaganomics. He wrote in a 1980 Newsweek column that to slay the inflation monster would take "five to ten years of austerity," with unemployment of 8% or 9% and real output of "barely 1 or 2 percent." Reaganomics was routinely ridiculed in the media, especially in the 1982 recession. That was the year MIT economist Lester Thurow famously said, "The engines of economic growth have shut down here and across the globe, and they are likely to stay that way for years to come."

    The economy would soon take flight for more than 80 consecutive months. Then the Reagan critics declared what they once thought couldn't work was actually a textbook Keynesian expansion fueled by budget deficits of $200 billion a year, or about 4%-5% of GDP."
    Stephen Moore: Obamanonics vs. Reaganomics - WSJ.com



    4. In light of the above, would you like to genuflect to the success of the great man in ending the threat of the Evil Empire without firing a shot!

    Wadda guy, eh?


    What's that sound?....

    Oh, you gnashing your teeth, huh.
     
    Last edited: Dec 16, 2011
  8. CrusaderFrank
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    CrusaderFrank Diamond Member

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    The American Left continues to embrace an economic philosophy too far left for the Vietnamese and Chinese Communists
     
  9. Dragon
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    Dragon Senior Member

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    CrusaderFrank is a liar.
     
  10. Dragon
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    Dragon Senior Member

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    Just a quick note: a tax increase during a recession is not Keynesian. The Keynesian formula is deficit spending (including spending increases and tax CUTS) during a recession but surplus or at least a balanced budget during good times. The idea behind this is to flatten the business cycle.

    My belief is that the Reagan recovery was not due either to the policies PC likes to claim (the obvious mistake in that having already been pointed out), nor to the policies he instituted later, but rather to the drop in oil prices that occurred in 1983. As the entire problem of the late 1970s had been caused by the steep prices imposed by OPEC, the introduction of cheap oil to the market and consequent loss of OPEC's control ended those problems. This was completely independent of the Reagan policies, just as the economic problems of the late '70s were independent of the policies of Nixon, Ford, and Carter.

    Essentially, the same policies had also given us the incredible prosperity the nation enjoyed under Truman, Eisenhower, Kennedy, LBJ, and Nixon term 1, so it's myopic to blame them for the problems of the late '70s. On the other end, the same policies that presided over the relatively tepid boom of the late 1980s and the stronger one (but still lackluster compared to the Golden Age of the postwar decades) in the 1990s, have now given us the two more severe recessions since the Great Depression (early 1980s and the Great Recession), and are producing the problems we're experiencing at this time -- which closely mirror the problems of the pre-Depression economy, unsurprisingly.

    The U.S. economy experienced one type of bad economy or another for ten years, from 1973 until 1983. First were seven years of "stagflation." These were followed by two-plus years of severe recession. And those ten years EXACTLY match the years from the OPEC oil embargo of 1973 until the introduction of North Sea oil to the market in 1983. And so there's your explanation for what happened: Carter's policies didn't cause the problem, and Reagan's didn't cure it. It was all about the international politics and economics of oil.
     

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