Kevin Drum on Reagan’s Fiscal Policy
I agree with most of this piece from Political Animal as it is true that the Reagan deficits were reversed mainly be tax rate increases. But one of his sentences is only partially true:
But even with those seven tax increases and several years of strong growth, he still didn’t get rid of his deficit.
Seven tax increases – yes. But let’s not feed the other myth propagated by the Reagan cheerleaders. Real GDP growth from 1983 to 1989 may have appeared strong but that was mainly offsetting the 1982 recession. To get a sense of long-term growth under Reagan’s free-lunch fiscal reckless (or DON’T “save and invest”), one can do one of two things. Try using some Okun’s Gap estimate to adjust for the impact of the business cycle or simply look at average growth during the entire Reagan-Bush41 period. After all, Clinton inherented from Bush41 an economy that was very similar in terms of unemployment as compared to the economy Reagan inherented from Carter. Either approach leads to a similar conclusion: during the era of “voodoo” aka “supply-side” economics, real GDP grew by an average annual rate of only 2.9%.
But then Kevin’s point was simply that we will not grow our way out of Bush43’s fiscal recklessness either. SO TRUE!