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Reagan as a Presidential candidate today

by Mike Kimel

A very interesting video from Think Progress juxtaposes a speech by Barack Obama with a speech by Reagan. In it, Reagan says:

We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying ten percent of his salary, and that’s crazy. […] Do you think the millionaire ought to pay more in taxes than the bus driver or less?

Here’s the video.

Its been said that Reagan couldn’t win the Republican nomination for President today. Its probably true.

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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.

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Ross Douthat and the cocoon

Robert Waldmann

Douthat is worried about the Republican information cocoon. He thinks that conservatives should not rely so much on Fox News and should be open to media which they consider unfriendly (such as his employer the New York Times). He argues that Republicans achieved more back before Fox
In the age Before Fox News, on the other hand (B.F.N., to historians), the American Right managed to lower taxes, slow government’s growth to a crawl , whip inflation, and deregulate important swathes of the American economy, among other Reagan-era accomplishments.

After the jump, I click Douthat’s link and consult an obscure source called the Wikipedia.

Douthat shows how people who live in cocoons make fools of themselves. First click *his* link. You will find that the graph does not show a slowdown in the growth of government spending under Reagan. I assumed that he had defined government as not including the military and so had a misleading graph which supported his claim, but, in fact, he just showed a graph which shows slow growth of spending after the end of the cold war and during the Clinton Presidency including the 6 years of Republican control of congress. I think he is counting the Reagan years as starting at the trough of the Volker recession and he definitely doesn’t count Bush Sr as a pre-Fox Republican. He’s really definitely measuring trough to peak and timing presidencies by looking at recessions. And this is the conservative warning about living in a cacoon.

Oddly, I mean to post about another gross historical error in that brief quotation. It is the claim that under Reagan “important swathes of the American economy” were deregulated. I don’t know what Douthat has in mind. I certainly don’t recall any such important deregulation under Reagan (well there was deregulation of S&Ls and you know how that turned out). I think he is thinking of Airline Deregulation Act of 1978. I’m sure that all Republicans agree that Reagan deregulated the airlines and that Carter didn’t deregulate anything, but they are wrong. Note there was an even huger Democratic majority in the Senate in 1978 than there is now. Or maybe it was the deregulation of interstate trucking via the motor carrier act of 1980 . Or maybe it was the phased deregulation of oil prices which began on April 5 1979 . Sure seems like the deregulating conservative hero Ronald Reagan had a Southern accent and grew peanuts.

But Reagan must have deregulated. Everyone knows Reagan deregulated. What exactly ? I have used “refuted by 5 minutes of googling” as my standard for rejection of reality for years now. This time, I stuck to Wikipedia. Recall this is from a post arguing that Republicans ought to be reality based.

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Taxation’s Rhetoric: Today and yesterday’s economic crap

by: Divorced one like Bush

In a posting regarding which presidents would be considered socialist I found the following curious:
1921 – 4% 73% Census
1922 – 4% 56% Census
1923 – 3% 56% Census
1924 – 1.5% 46% Census
1925-1928 – 1.5% 25% Census
1929 – 0.375% 24% Census
1930-1931 – 1.125% 25% Census

1982-1986 12 brackets 12% 50% IRS
1987 5 brackets 11% 38.5% IRS
1988-1990 3 brackets 15% 33% IRS
1991-1992 3 brackets 15% 31% IRS

2001 5 brackets 15% 39.1% IRS
2002 6 brackets 10% 38.6% IRS
2003-2008 6 brackets 10% 35% IRS

Notice anything about these 3 groups of income tax rates? No, I’m not suggesting that the lower rates are the smoking gun of today’s economic crap. Don’t want to run afoul of those scoldings of association is not causation critiques. But, do you not find it just a bit curious that approximately 8 years prior to an economic troubling time we get talked into reducing that tax rates? Three periods in history, all preceding an economy of crap. Varying degrees of crap, but crap just the same. We even had a housing bubble for 2 of them!

None of these tax changes can happen without convincing. A dialog has to have happened to convince the people that it is a good idea. And, I bet that the rhetoric of tax reduction is only part of a package regarding the overall idea of what is best to “grow the economy”. I bet, that tax reduction presentations have never been presented as a stand alone, single issue, unrelated to accomplishing a larger money shift. Being that we are relating today to the Big One, while at the same time hearing muttering that we are in “new territory”, my Angry Bear side asked: What else is similarly presented in the 20’s as part of a sales job of an over all ideology that preceded today’s and yesterday’s crap?

Installment Sell

Manufacturers realized they could expand their profits if they could grow their markets and so installment selling was introduced. The increased production volumes reduced the unit cost of items making them more affordable, and easy terms made for easy sales.

There is a reprint of an article specifically looking at the pros and cons of credit purchasing. Rather fascinating reading.

PAYING FOR THINGS ON “EASY” TERMS has become such a conspicuous element in American life, and so large a factor in our prosperity, that the economists have been doing a great deal of worrying about it. Source: The Literary Digest for March 5, 1927

Sub-prime anyone? Oh, did you notice that it was a concerted effort to sell the consumer that installment purchasing was good? I wonder if blaming the consumer for spending what they did not have was part of the discussion when the economy turned to crap then?


Christmas distribution of bonuses in Wall Street, when finally added up, is expected to prove the most generous ever made except during some of the flush World War years.

No accurate account of sums paid out can be made, according to the New York Times, because many firms do not announce their benefactions, but last year’s total was estimated at $50,000,000, and it is expected that the Wall Street firms paying bonuses are being no less generous this year. In fact, some firms which have never paid bonuses will start the custom this Christmas. Probably the largest distribution, we read, is being made by banks, which have been exceptionally prosperous.

Converting that $50 million we get various amounts: $586 million via CPI, $494 million via GDP deflator, and (drum roll please), $1.999 million via unskilled wage factor.

There was one perspective that was not accurate in their prophecies for America:

America has played square in China, and will have an inside track in China against the commerce of other nations.
China buys one billion dollars worth of outside goods every year. But that’s only, a drop in the bucket compared with what this customer may buy some day. “When the per capita foreign trade of China,” runs one government report, “is equal to that of Australia, the total will be sixty-five billion dollars a year which China will pay to the outside world for her imports.
“You can’t help seeing American business grow in China,” a business man from China told me. “Why, it has multiplied itself by four within the past dozen years. It’s eight times bigger than it, was thirty years ago.

The inaccuracy? The quotes are from a perspective of the American selling to China, not from China. And you thought Nixon opened up China.

Getting back specifically to the tax reductions, this web site offers a lot: The Tax History Museum
From reading the site, it appears a progressive tax system was put in place for the WW I war effort. They even put in a munitions tax to “appease” opponents of American involvement in the war; levied on manufacturers of military equipment, it was designed to prevent war profiteering”. There was an “excess profits” tax put in place which appears to be what the later progressive income tax became. Arguments for it were as today: equality. Against it:

It attracted bitter opposition from business groups, who considered the tax a threat to managerial prerogatives. They were certainly justified in their suspicion, since both Wilson and his allies in Congress considered the levy a legitimate means of business regulation.

Well slap me silly! A tax used to curb the excess of business. I hear some of you saying: Excessive CEO compensation regulation please?

After the war, the argument was that such high rates were “unsustainable”. It was the party of today’s tax cuts who yesterday cut the taxes:

Republican lawmakers joined with a series of GOP presidents to engineer tax cuts in 1921, 1924, 1926, and 1928. Andrew Mellon — who moved into his Treasury office in 1921 and stayed their until 1932 — was the principal architect of these reforms.

Certainly some Democratic elected joined in (early Blue Dogs, DLC’s of their time?).

In 1980 we got schooled in the Stockman trickle down theory of economic growth which included lower taxes will raise collections and bolsters economic growth. It was all about cutting taxes by his confession though. So, as I look to find evidence of selling tax cuts as a part of an ideology sell job regarding how an economy should run, such being clues that in the near future we will have economic crap, the following regarding Mr. Mellon’s position just confirms how ignorant we have been in our recent times (post 1981) to have followed those who suggest tax cuts as part of their economic program:

“Any man of energy and initiative in this country can get what he wants out of life,” he wrote. “But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.”

Worse yet, Mellon argued, high rates didn’t even raise money. By encouraging both legal tax avoidance and illegal tax evasion, they eroded the tax base and reduced overall revenue. Lower rates, he said, would actually raise money by spurring economic growth and reducing the incentive for tax avoidance. “It seems difficult for some to understand,” he complained, “that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may actually be obtained by lower rates.”

Can we have been any more stupid, shown our ignorance more than to have taken as a new idea, language regarding taxation’s need to be reduced and it’s effect on filling the government coffers that is as old as almost the day progressive taxation came into existence? Unfortunately, our stupidity has been worse than accepting Mr. Mellon’s similar arguments to those used by Reagan et al suggests. That is because, back in Mr. Mellon’s day he at least understood what Mr. Buffet of today understands but congress and by extension US do not:

Of particular note, he suggested taxing “earned” income from wages and salaries more lightly that “unearned” income from investments. As he argued:

The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs.

Surely we can afford to make a distinction between the people whose only capital is their metal and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.


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