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President Obama Keeps Forgetting About the Reagan-Clinton Boom
President Obama pushed his “middle class economics” message hard during a Cleveland speech earlier this week. And, in the process, offered his take on recent US economic history:
For the first eight years of this century, before I came into office, we tried trickle-down economics. We slashed taxes for folks at the top, stripped out regulations, didn’t make investments in the things we know we need to grow. At the end of those eight years, we had soaring deficits, record job losses, an economy in crippling recession. In the years since then we’ve tried middle-class economics. Today we’ve got dramatically lower deficits, a record streak of job creation, an economy that’s steadily growing.
The president modified his usual argument just a bit to frame the economic battle as middle-out Obamanomics vs. trickle-down Bushonomics, But in the past, he has subtlety lumped Bushonomics in with Clintonomics and Reaganomics. All part of the same tax-cutting, regulation-slashing, neoliberal wave from 1981 through 2008 that overall benefited the 1% at the expense of everyone else.
Yet despite the president’s critique, many voters probably recall the 1980s and 1990s with great fondness. For instance: A 2014 Quinnippiac survey found Americans consider Ronald Reagan and Bill Clinton to be the best two post-war presidents.
What’s the matter with Kansas? What’s the matter with America?
Both Reagan and Clinton pushed deregulation. Both cut taxes for wealthier Americans. Yes, inequality rose. The share of market income going to the top 1% doubled from 1981 through 2001. But it was also a period when non-farm payrolls increased by 42 million. The employment rate rose to 63% from 59%. Median incomes — when adjusted for transfers, taxes, benefits, and changing household size — rose by 30%. While the middle class shrank, it was “primarily caused by more Americans climbing the economic ladder into upper-income brackets,” the New York Times recently noted. A recent Brookings study found that through the 1980s and 1990s, “households of virtually every type experienced large, steady income gains, whether they were headed by men or women, by blacks, whites or Hispanics, or by people with high school diplomas or college degrees.” Clearly there was a lot happening during those decades other than just the rich getting richer.
Obama’s negative take also ignores what expectations were like when the tumultuous 1970s ended. As I have written: “In 1980, there were plenty of forecasters who thought the American standard of living would decline over coming decades. Just look at all the dystopian films back then: Blade Runner, Soylent Green, Americathon, Escape from New York. Gloomy stuff.” And it wasn’t just Hollywood. Economist Scott Sumner:
Suppose you had gotten a room full of economists together in 1980, and made the following predictions:
1. Over the next 28 years the US would grow as fast as Japan, and faster than Europe (in GDP per capita, PPP.)
2. Over the next 28 years Britain would overtake Germany and France in GDP per capita.
And you said you were making these predictions because you thought Thatcher and Reagan’s policies would be a success. Your predictions (and the rationale) would have been met with laughter.
But that is just what happened. The growth, I mean, not the laughter. And there is this interesting argument for the efficacy of Reaganomics by Bruce Bartlett:
Liberals argue that the real economic effects of Reagan’s policies show that they failed. However, I believe that these critics overlook the enormous importance of breaking the back of inflation at a relatively small economic cost — certainly far less than any economist would have thought possible in 1981. Reagan’s results should be measured against the (incorrect) expectation that a far more severe economic downturn would be needed to reduce inflation. On that basis, his policies were overwhelmingly successful.
Or as Bill Clinton’s Council of Economic Advisers put it in 1994: “It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth.”
Hmm. Maybe it’s smart that the president has changed his argument.
Published in Economics
Barry keeps cherry-picking his comments about the economy because that’s all he can do. We didn’t “try” trickle-down economics; characterizing what “we” did and what we “tried” is laughable, considering the confluence of tax and monetary policy, the private sector, and massive federal borrowing. It’s not as if a President comes into office on a Tuesday and presses the “Trickle-Down” button.
Secondly, if there’s any trickling going on, it’s the fact that half the country pays no income taxes, and of the half that do, the top half of that group pays 97% of all income taxes collected. We’ve been trying that trickle for decades and the result is that we have the lowest labor force participation rate in decades and a record number of people on federal assistance.
If you’re looking for failed policies, Barry, go hold up a mirror and stop smiling into it at yourself.
The reality is that the two biggest/broadest tax cuts in the last 3 decades, under Reagan and Clinton (although Clinton went along with it simply because he knew his veto would get overriden and there was literally zero downside to his not vetoing the tax cut passed by Congress), both helped to usher in huge economic booms. Not all by themselves, but those cuts contributed, because what happens when people keep more of their money?
They save it, they spend it, or they invest it – and those 3 things drive GDP more than the gov’t spending does, and create real jobs, and increases wealth.
That’s why those policies work. It’s simple. It doesn’t have to be complex, because it isn’t.
Reminds me of a 1970’s cocktail napkin drawn in front of Cheney, Rumsfeld and a WSJ columnist by a young, little known economist named Art Laffer.
I recently read a book by a daughter about her relationship with her mother–not a political book at all, but politics came into it because the mother was conservative and the daughter distinctly not. As a consequence, the book was full of political asides. One of the most breathtaking of these to me was when the daughter/author said that in 2008 she was, of course, relieved that now the economy would obviously improve since Democrats were in charge.
This author is old enough that she was a young adult during the Reagan recovery. I simply cannot imagine how anyone lived through the Carter and Reagan years and still remains confident that Democrats are good for the economy. It only goes to show that some people perceive only those things that fit with their worldviews.
I am sick of the president’s demagoguery on economics and taxes.
Dems love to use the term “trickle-down” because it has become a term that many find worthy of ridicule. And because a trickle of anything is a small amount, it suits their purpose of portraying wealth as something that is hoarded by the wealthy, who deign to throw a few crumbs of bread and trickles of water to the lower economic classes. It has the air of a “let them eat cake” concept. The truth is, there is no agreement as to what “trickle-down” means. It is a casual term, rather than precise term that refers to specific policies. It is really just a rhetorical club used by liberals to beat up conservatives.
“Slashed”: a very active verb. Violent. But not very accurate. According to Heritage.org, “[t]he top 10 percent of income earners paid 68 percent of all federal income taxes in 2011 (the latest year available), though they earned 45 percent of all income. The bottom 50 percent paid 3 percent of income taxes, but earned 12 percent of income.”
Once – just once! – I’d like to see an interviewer ask the president, “You imply the current tax structure is not progressive enough, because you say that the rich are not paying their fair share. Well, how much should the top 10% pay, considering they pay 68% now? 75%? 90%? 100%? Please, sir, give me the number that constitues a ‘fair share'”.
“Stripped out”: again, very active imagery. Does anyone with half a brain think that federal regulations are stripped to the bone?
Liberals love euphemisms. “Investments” of course means government spending. Someone needs to explain to the president that the government does not create wealth.
A famous Obama quote is, “I actually believe my own [B.S.]” Clearly, he does, and he is seriously deluded if he thinks that his presidency has been anything other than an economic disaster. The federal budget is nearly balanced, job growth is robust, and the economy is on a tear?
If only… If only.
1) First 8 years of this century, refers to GWB. Not Reagan or Clinton. No reason to lump GWB with those 2 together.
2) He’s wrong only in that Bush didn’t do “trickle down economics”. He did “big government conservatism”.
3) He’s right in so far as the 2000s, as a whole decade, were one of the worst performing decades.
Since I know populist “conservatives” here on Ricochet just love “median income” and “middle class” talk, take a look at the 2000s decade under Bush:
Yes, after the dot-com crash/recession and 9-11 there was a steady increase.
Why do you put quotes around “Conservatives” when referring to the denizens of Ricochet. Ive seen you do this before.
#Curious
Seems to me problem is a lot bigger than the dot com crash or 9/11. It’s the entire decade that is stagnant.
Whatever people want to say, the fact remains, the 2000s were one of the worst performing decades.
I put “conservatives” in quotation marks, because being a “conservative” is an entirely self-labeling process. When people who hold views which are indistinguishable from the left on economics, like certain “conservatives” who don’t need to be mentioned, call themselves that, then it becomes a meaningless label. Hence, since simply calling oneself that, doesn’t make one that…
These weekly economics posts are a good example of that. While on one side praising “trickle down economics”, on the other side they usually advocate for “subsidies” of all sorts, advocate for populist policies aimed at the fictitious “middle class”, which are just a nice way of disguising subsidies.
So we get this strange position where, because people need to call themselves the “conservative” label, then they need to defend “trickle down economics”. But then, they go and advocate policies which are the opposite of that.
Speaking of flaccid performances, let’s take a look at that federal gov’t trickle-down effect, since federal deficits have tripled under Barry, more people are on public assistance of one kind or another at record levels, etc. Oh, there it is. That’s where incomes go to die:
You see where the wages started going up in 2007-2008? And what happened after Barry “Big Boy Pants” strolled into town?
The “trickle” term applies wherever one wants it to apply. I would argue that massive spending done on the backs of borrowing and wage earners is trickling down the backs of its recipients – but I wouldn’t call it rain, either. I’d call that trickle something else.
When Obama/the Democrats say that we have “dramatically lower deficits,” they just mean that the deficits are low compared to the last year of Bush, when the stimulus bill was passed. Compared to every other year of Bush, Obama’s deficits have been higher. Is that correct, or am I misreading the data?