A Few Graphs Describing the Reagan Presidency

by Mike Kimel

A Few Graphs Describing the Reagan Presidency
Cross posted at the Presimetrics blog.

On February 6, 2011, Ronald Reagan would have been turned 100 years had he been alive. In this post I’d like to share a few graphs from Presimetrics (the book I wrote with Michael Kanell, with graphs and illustrations by Nigel Holmes) which hopefully will give you an idea of how Reagan did as President.

Figure 1 below shows growth rates in real GDP per capita for every administration beginning in 1929, the first year for which the BEA provides data:

Figure 1.

(Note – FDR I was through 1940, FDR II was most of the War years. We broke up the sample that way because there are a lot of people who either out of ignorance or some odd desire to spread BS insist that under FDR, the Great Depression got worse or that growth only picked up with the start of WW2. Either way, I’ve found it is safe to use a person’s pronouncements about FDR as a signal about the accuracy of other things they choose to share. Also note – the remaining graphs in this post focus on the period from 1952 – 2008, as that was the main focus of the book from whence they come.)

As the graph shows, when it comes to real economic growth, Reagan did better than other Republicans. But growth under Reagan was also slower than it was under most of the Democrats since 1929. While the growth rate under Reagan is far less impressive when that last detail is mentioned, it is less impressive still if you remember the definition of GDP:

GDP = Private Consumption + Private Investment + Gov’t Consumption & Investment + Net Exports.

Put another way – if the government borrows a lot and spends what it borrows, it will boost GDP, and that in turn causes real GDP per capita growth to increase. And that is precisely what happened under Reagan:

Figure 2

As we note on page 50 of Presimetrics, early in his term Reagan noted:

Our national debt is approaching $1 trillion. A few weeks ago I called such a figure, a trillion dollars, incomprehensible, and I’ve been trying ever since to think of a way to illustrate how big a trillion really is. And the best I could come up with is that if you had a stack of thousand-dollar bills in your hand only four inches high, you’d be a millionaire. A trillion dollars would be a stack of thousand-dollar bills sixty-seven miles high. The interest on the public debt this year we know will be over $90 billion, and unless we change the proposed spending for the fiscal year beginning October 1st, we’ll add another almost $80 billion to the debt.

We also noted this:

By the time he left office, the national debt, which had been “approaching $1 trillion” had more than doubled to $2.7 trillion, and the stack of thousand-dollar bills that had been 67 miles high was now 193 miles high and rising fast. Interest payments on the debt—“over $90 billion” in 1981—were just shy of $200 billion in Reagan’s last year in office.

Using more relevant measures, real debt per capita (in 2008 dollars) grew from about $10,620 in 1980 to $19,860 in 1988, and from 32 percent of GDP to 51 percent of GDP over the same period. However you slice it, Reagan’s profligacy bore no resemblance to his promises.

All that increased debt creates an obligation to taxpayers, who will, after all, have to repay that debt eventually. One measure we used in the book looks at the impact of that debt obligation – that is, the real net disposable income (i.e., income after current taxes less the increase in the debt per capita):

Figure 3

When you take into account future obligations to pay back debt, Reagan no even longer looks as good as Jimmy Carter. A rising tide, fueled by debt, wasn’t so great at lifting at most people’s boats… unless compared to the tide generated during other Republican presidencies.

But concluding that Reagan was someone to emulate means more than just ignoring the fact that he underperformed most Democrats on economic issues. It also requires means ignoring the fact that Reagan also didn’t particularly care about Republican ideals either, not even the ones he parroted frequently and loudly. For instance, a big source of state and local funding is the federal government. Presidents who truly want to move power away from Washington generally try to increase the transfers from the Federal government to state and local governments. But that is most definitely not what Reagan did:

Figure 4

So what did Reagan excel at, other than outperforming other Republicans on economic issues? Well, it turns out that he was very, very good for the public mood:

Put another way, some Presidents are better with reality, some are better with perception. Reagan was better at the latter.

And if I may, a quote from the book (page 178) about another way Reagan’s administration stood out:

And it’s not just the quantity of crime in Washington that is noteworthy. Some of the plots these folks engage in are—let’s call it like it is—cartoonish. Consider, for instance, the Iran-Contra affair, a convoluted scheme by which American weapons were sold to Iran in exchange for Iran’s exerting influence on Hezbollah, Iran’s terrorist buddies in Lebanon, to release American hostages. (Hezbollah, not incidentally, is thought to be the group responsible for the 1983 U.S. barracks bombings in Lebanon, in which 220 U.S. Marines and 79 international peacekeepers were killed.) To bring the complication of the scheme to the level worthy of a comic-strip villain, much of the loot resulting from the sale of American weaponry to an extremely hostile country would go toward funding the Contras, a rebel group in Nicaragua, thus providing the Contras with a much-needed source of funding that did not involve drug trafficking. A number of administration officials were convicted for their role in the affair. This included the secretary of defense (that would be our friend Weinberger, previously featured in Nixon’s White House), as well as two successive national security advisors (Robert McFarlane and John Poindexter).

The folks who believe, who truly believe, won’t let facts stand in the way of their faith. And the cult of Reagan will continue to live on. Anyone who says Sarah Palin is no Ronald Reagan don’t have the facts on Ronald Reagan.

At this point, I’d normally give you my sources. Since everything here comes from Presimetrics, you’ll find the source for all the data and all the quotes there.