Krugman vs. Reagan

by Ramesh Ponnuru

And they say we conservatives are obsessed with Ronald Reagan. Earlier this week I argued in the New York Times that Reagan’s policies were responses to the challenges the country faced when he took office, and that rather than simply copy those policies conservatives should apply a Reaganite philosophy to today’s challenges. In response, Paul Krugman wrote a post slamming the implication that Reagan’s economic policies had been successful. His points are only tangentially relevant to what I wrote. But the man can’t let the arguments of the 1980s go.

Krugman’s indictment of Reagan is not, as it happens, persuasive. Who, in speaking favorably of Reaganomics in general, means: The exact years when Reagan was in office had higher economic performance than the years before or afterward? Nobody, that’s who. It’s not as though the top tax rate jumped back up to 70 percent as soon as Reagan left office. Yet that’s the argument that Krugman sets about refuting, and even then he has to pick his data carefully.

Krugman looks narrowly at annual growth in real median family income between 1979 and 1990. (Reagan’s original tax cut, by the way, took full effect starting in mid-1983.) That growth was lower than the same figure for 1973 to 1979, leading Krugman to deride conservatives for claiming that Reagan turned around the economy after “the horrible 1970s.” To see how important Krugman’s choice of dates and measures is, note that median household income rose much more between 1981 and 1990 than it did between 1971 and 1980. By that measure the ’70s look rather, well, horrible.

Back to the op-ed of mine that set Krugman off. Does Krugman challenge any of the specific Reagan policies I mentioned? Does he argue that we should have kept price controls on energy? That we should have stayed with the high and variable inflation that Paul Volcker and Alan Greenspan brought to an end with Reagan’s support? That middle-class income tax rates should have been kept higher and left unindexed for inflation? No, no, no, and no.

Krugman argues as well that the policies I recommend will never be taken up by the Republicans and are a natural fit for the Democrats. Really? I advocated an expansion of the child credit that was enacted by the Gingrich Congress and expanded by George W. Bush’s administration. Has the sort of expansion I have talked about been a priority of the Obama administration? Did Obama spend his first years in office relentlessly making appointments to the Federal Reserve who support NGDP targeting? Have congressional Democrats grilled Bernanke about his failure to adhere to it? Is there a Democratic push to end software patents? If I missed all of this, I’m sorry I did but glad it happened.