Moore’s Idol Worship of Reaganomics

Stephen Moore has dusted off some of his silliest claims in his NRO salute to Reagan:

Reagan was truly blessed by the incompetence of his predecessors. The cumulative policies of LBJ, Nixon, Ford, and Carter had atrophied America’s economic muscle. Their legacy was big bureaucratic government expansionism, easy money, soaring expenditures on Great Society income-redistribution programs, a regulatory regime with tentacles that invaded every industry, and most insidious of all, confiscatory state-federal tax rates that in some cases exceeded 80 percent…And what exactly were those ideas so scorned by the Left and ridiculed as Reaganomics? The Reagan prescription consisted of tax-rate cuts, free trade, a light hand of regulation, tight money to make the dollar once again as good as gold, and unconditional victory in the Cold War. The jewel of the Reagan economic package was the famous Kemp-Roth 30 percent income-tax cut. Conservative intellectuals — among them Laffer, Robert Bartley, Jude Wanniski, and Jack Kemp — had made the case for supply-side policies; Reagan was the only leader of significance who listened and understood. When the economy hit rock bottom in the summer of 1982, Reagan’s adversaries joyously proclaimed Reaganomics a scam. Even many of Reagan’s most trusted advisors wanted a reversal of direction. But it was Reagan who insisted that we stay the course. Thankfully we did — Reagan’s policies spawned the greatest economic and wealth expansion in the history of the western world…The economy also created 15 million new jobs under Reagan and grew in real terms by 40 percent…Federal tax collections rose from $500 billion in 1980 to $1 trillion in 1990.

In reverse order – if one looks at Federal income taxes (excluding that large increase in payroll contributions from the Greenspan commission plan to make Social Security solvent), real revenues rose by a mere 17% over the decade as long-term economic growth suffered as a result of the Reagan fiscal stimulus. And the Reagan expansion only reversed the 1982 recession. Moore et al. would have you believe Reagan took office on January 20, 1983 instead of in early 1981. Yes – there was a Carter recession but they omit that real GDP grew by almost 4.3% from July 1, 1980 to June 30, 1981. And Paul Volcker run his second dose of tight monetary policy to offset what he saw was the irresponsible fiscal stimulus from the 1981 tax cut. Alas, this macropolicy mix resulted in a very deep recession with employment falling by almost 3 million from July 1981 to December 1982. But bragging about employment gains and forgetting the prior employment losses is something Bush-Cheney ’04 is doing as well.

The simplest way to look at long-term economic growth under Reagan-Bush is to compare the economy when Reagan took office and the economy when Bush41 left office since the state of the business cycle was quite similar when Clinton took office as when Reagan took office. The average annual growth in real GDP over this 12-year period was a mere 2.9% as compared to the 3.5% average annual growth from the late 1940’s through 1980. The claim of “the incompetence of his predecessors” does not hold much weight in light of the historical record.

Then again – it is hard to defend long-term fiscal stimulus which lowers savings and investment as a pro-growth program. And maybe Mr. Moore confused Reagan’s speeches endorsing free trade with his actual policies, which were unfortunately quite protectionist. Some will say that criticizing Reagan’s economic policies with 48 hours of his unfortunate death is cold. But why does Mr. Moore have to so misrepresent the record in his attempt to praise President Reagan?