A week after Ronald Reagan’s 100th birthday celebration, comparisons between presidents Obama and Reagan continue.
The conversation began when Obama praised Reagan in a USA Today op-ed. He commended Reagan’s leadership, his confidence in and optimism for America, and his great ability to communicate his vision for the country. Reaganites like myself appreciate these sentiments.
But so far, the differences between the two presidents are still huge.
Begin with the economy. Reagan and Obama both inherited deep and brutal recessions. But the first six recovery quarters look completely different for each president.
So far, real GDP has averaged only 3 percent annually for Obama. Employment as defined by nonfarm payrolls has increased by a paltry 121,000.
On the other hand, going back to Reagan’s first six recovery quarters, real GDP averaged 7.7 percent annually while nonfarm payrolls rose by 5.3 million.
No two situations are exactly alike. Reagan inherited massive double-digit inflation with 20 percent interest rates. Obama was left with a colossal financial meltdown. But Reagan’s economic vision put private-sector free-enterprise at the center. Obama has chosen a massive expansion of government power.
These are huge differences. One succeeded, while thus far the other has not.
While Obama’s first act was an $800 billion government-spending package, one of Reagan’s first decisions was a near $50 billion domestic-spending cut ($100 billion constant dollars today). Obama went for a nationalized health-care plan, energy cap-and-tax-and-trade, and pro-union card check. Reagan ended wage and price controls, deregulated all energy prices, terminated the Synthetic Fuels Corp., and fired the striking air-traffic controllers. Big differences.
Drawing from the work of Arthur Laffer and Robert Mundell, Reagan saw the economic-growth benefits of limited government, lower tax rates, and a dollar as good as gold. Gold prices plunged as Reagan and Paul Volcker worked to vanquish inflation. Ever-soaring inflation was the cruelest tax hike of all. But in the Reagan years the inflation rate dropped from near 13 percent to as low as 2 percent — a huge disinflation tax cut. Accompanied by lower marginal tax rates, the Reagan policies sparked a powerful recovery in business and jobs.
Reagan slashed tax rates across-the-board for individuals, investors, and businesses. At the margin, his reforms lowered the top personal rate from 70 percent to 28 percent. And he left a simple two-bracket tax code that cut thousands of pages of IRS rules and regulations.