Obama vs. Reagan, Cont’d

by Stephen Spruiell

Dan Balz had a piece in Sunday’s Washington Post about the Reagan-Obama comparisons that the editors also noted in Friday’s editorial:

The economy began to grow rapidly in the first quarter of 1983 and continued through the 1984 election. The quarterly increases were 5.1 percent, 9.3 percent, 8.1 percent, 8.5 percent, 8 percent, 7.1 percent and finally 3.9 percent in the third quarter of 1984.

Real disposable income, another politically sensitive indicator of the public’s mood, also rose significantly during those two years. Larry Bartels, a political scientist at Princeton and author of “Unequal Democracy,” noted that real income grew by more than 6 percent in 1984. “Is anyone forecasting that sort of growth in 2012?” he said.

No one is. To the contrary, the outlook for 2011 and 2012 is far more modest. The Congressional Budget Office said in its latest forecast last week that the pace of growth in the coming years “is likely to be slower than usual” compared with past recessions.

The report noted that recessions caused by financial crises linger longer because of the shattered confidence of consumers and businesses. It went on to state: “In addition, under current law, both the waning of fiscal stimulus and the scheduled increases in taxes will temporarily subtract from growth, especially in 2011.

This is as close as Balz gets to a discussion of the extent to which policy choices affected the economic growth that followed Reagan’s first two years in office versus the stagnation projected to follow Obama’s. But I don’t think the stimulus or even the looming expiration of certain of the Bush tax cuts are as important, in terms of what Obama could have done to help speed up the recovery, as his extend-and-pretend policies toward the banking and housing sectors, the Democrats’ let’s-turn-everything-upside-down legislative agenda, and a general uncertainty over tax rates have been. A separate piece in the Post found a number of business owners unhappy with Obama’s agenda:

What role is government policy playing in fostering corporate caution?

The executive class in the Chicago region is none too pleased with many of the policies of President Obama, their former hometown senator. They criticize his willingness to let Bush-era tax cuts expire at year’s end for households that make over $250,000 and allow the capital gains tax rate to increase. They dislike aspects of his landmark health-care law, and some fear that the financial overhaul legislation enacted this summer will make it harder for them to get loans.

The Post notes that “None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring,” but I don’t think this discredits their criticism as much as the Post seems to think it does. The blizzard of legislation from Washington has created a climate of uncertainty that is more destabilizing for business than even the sum of the individual bills.

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