Ronald Reagan’s Stimulus
As the price tag for the Democrats’ stimulus packages continues to climb, even as the federal governmetn faces a record budget deficit, I ask Obama supporters, who have such hope that their man will change things in Washington, if they can provide any evidence of such hefty stimuli actually providing anything more than a short-term boost to the economy.
They hem and they haw, perhaps a few will mention the New Deal, but none can come up with more recent examples. I mean, if additional federal spending stimulated the economy, we’d be enjoying boom times today. And FDR’s New Deal would have caused a steep drop in unemployment. Instead, unemployment remained pretty steady through the 1930s, spiking up in 1937 and remaining high until World War II.
If the president-elect and the Democrats really want to “grow the economy,” they need not look so far back for plans to emulate. They just need look at Ronald Reagan’s record, but alas Democrats are loath to admit the success of Republican ideas and the failure of their own.
Ronald Reagan’s stimulus was simpler than the Democrats’ proposed boondoggle — and successful. He didn’t increase federal outlays, but instead held the line on them, while returning money to the people:
The difference between Reagan’s and Obama’s policies is striking. Reagan stressed private investment. With Obama, as with FDR, it’s public investment. Reagan cut spending in the worst days of the recession in 1981. Obama favors radically increased spending. Reagan sought to boost employment in general. Obama has particular jobs in mind.
If the Democrats had it within themselves to admit that the policies of one of their icons fail to foster economic growth and bringing down the employment rate and to acknowledge that those of one of their great adversaries succeeded, they would help bring about a new era of prosperity while realigning American politics in their favor.
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You confuse the liberals with people who actually give a shit about the country. It’s not about “you”, it’s about solidifying the absolute rule of Comrade Obama.
Expect the end of term limits to be seriously considered. Or at the very least, a very strong push for Michelle to run.
Comment by ThatGayConservative — January 18, 2009 @ 5:16 am - January 18, 2009
i.e. Obama is implementing precisely the same set of policies… massive, state controlled infrastructure projects and welfare spending …that kept Europe and Japan mired in recession throughout the 1990’s. And his massive deficit spending raises a very high risk of inflation and/or default.
And just as Nicaragua and Angola fell to the Soviets under Jimmah Cahtuh’s weak and ineffective foreign policy, Obama may well lose Pakistan to Islamists, and Mexico to narco-terrorists. He’s already signaled a belief that Afghanistan is unwinnable, and is setting the stage for a surrender there.
Meanwhile, Democrats move to make Obama president-for-life. I knew there was a reason they adore Hugo Chavez.
Comment by V the K — January 18, 2009 @ 8:13 am - January 18, 2009
I find your post quite odd. Reagan drove up, through his economic stimulus, horrendous budget deficits, increased the poor in this country to where they’ve never recovered and frankly, led to this current economic collapse.
There seems to be some cognitive disanonance here. When Clinton left office there was budget surplus, tons of it. Bush leaves office and the nation is bankrupt, and now you’re going to hark back to Reagan? the one who started this whole ‘debt to make those at the top rich trickle down fantasy’ philosophy.
I don’t buy it.
Comment by Stu Kasius — January 18, 2009 @ 10:07 am - January 18, 2009
<>
Why do you have such little faith in the Constitution and the American people. I’m sorry you’re feeling so afraid and hope you get some counsel for it.
Comment by Stu Kasius — January 18, 2009 @ 10:10 am - January 18, 2009
GPW, great post.
What “stimulates” the economy is the productive activity of the people: the destructive-creative activity of its best entrepreneurs and business people, using the capital (savings) of the people, for which the people are paid with new jobs, consumer innovations, and interest payments of real value.
Government can “stimulate” the economy by doing two things: (1) Getting out of the way – reducing regulation and taxes; letting the successful entrepreneurs do their thing, including ‘eating’ the failures; and (2) Letting the markets set interest rates – which in today’s world means, letting interest rates rise.
That’s what Reagan-Volcker did. (Interestingly, Volcker is very much a Democrat and he may have done his part – slowing money creation and letting interest rates rise – in a failed effort to torpedo Reagan. But that’s a story for another time.)
Bush got it half right, for seven years: at least he held the line on regulation and taxes. Now Obama-Bernanke-Pelosi-Reid, insanely aided by Bush in year 8, are getting it all wrong. They are jacking up government in every way: jacking up spending, regulation, and money creation (which discourages savers). They will have a short-run success in 2009, with loud hosannas in the media. Followed by… stagflation on steriods, combining the worst of the 70s and the 30s. Will America finally learn what doesn’t work? Let’s hope. And, let’s try to make the learning process happen.
Comment by ILoveCapitalism — January 18, 2009 @ 11:00 am - January 18, 2009
(Stagflation On Steroids – SOS – I am going to have to make that a ‘thing’.)
Comment by ILoveCapitalism — January 18, 2009 @ 11:12 am - January 18, 2009
P.S. What are the implications of my claims for personal investing?
- Right now is a good time to diversify abroad, i.e., into foreign stocks or stock mutual funds, while the dollar is still relatively strong. This is hard to get right, because large parts of Europe are under long-term threat of Islamization, and mainland China is still run by Communists. But any 2009 stock market rally will benefit world markets (not just U.S.); then when the dollar crashes in 2010-12, you see some dollar-denominated gains (or smaller losses).
- Consider owning some gold. Again this is tricky, because gold is a non-productive asset, and is currently expensive at $840/oz. The right time to get in was 1999-2002, at around $300/oz. If it swings down to $700 or less in 2009, you’ve lost in the short run. But five years from now, when I believe gold will be at $2000/oz. or more, it shouldn’t matter.
- If you can acquire real estate *for cheap* (think foreclosure bargains) and with *light debt*, in a low-tax state… something to consider.
Disclaimers: Am I an investment advisor? No. – Am I following my own opinions here? Yes.
Comment by ILoveCapitalism — January 18, 2009 @ 11:39 am - January 18, 2009
If Bush is as secretly smart as many here (not me) seem to think he is, maybe all of this Year 8 deficit spending is Bush’s way of setting up Obama for failure, so the Republicans can have a renaissance when the spend and spend policies fail.
I doubt Bush is that clever, but I’m putting it out there.
Comment by V the K — January 18, 2009 @ 12:54 pm - January 18, 2009
Stu, where, in my post, do I show a lack of faith in the Constitution and the American people?
Yeah, Reagan did drive up budget deficits because he had to compromise with a Democratic Congress and could not cut spending as much as he would have liked. Recall, this post isn’t about deficits, but government policy and economic recovery.
When Clinton left office, there was a surplus because for the last year’s of Clinton’s tenure, he was required to work with a Republican Congress determined to hold the line on spending, much different from the Republican Congresses of the following six years. Bush’s problem as president was that he failed to follow Reagan’s fiscal policies.
And check the record, the Gipper didn’t increase the poor, but expanded the middle class.
Feeling so afraid, huh? Please, Stu, before your comment, read my post and check your facts. Thanks.
Comment by GayPatriotWest — January 18, 2009 @ 1:27 pm - January 18, 2009
unemployment did decline during the 30s under roosevelt from a high of 25% to around 13-14% in the middle of the decade. still higher than the unemployment rate today, but i take issue with your claim that there wasnt a significant drop in unemployment under the new deal, and as a corollary, the argument that government spending doesn’t grow the economy over the long term. there was a spike in unemployment in 1937, when roosevelt caved into pressure from the opposition party to balance the budget. in other words, when the government spent less money during the recession economy, the unemployment rate went up.
Comment by Chad — January 18, 2009 @ 1:52 pm - January 18, 2009
Dems/libs DON’T have it in them to admit that a conservative could ever be right or that they could ever be wrong. Don’t hold your breath for that one, GP.
Comment by Seane-Anna — January 18, 2009 @ 2:51 pm - January 18, 2009
We cannot let the politicizing of, for example, the Justice Department to go unreviewed. – Nancy Pelosi (D- Mordor)
I have to agree with TGC in #1. The Dems really don’t give a carp. I read a report this morning that the Dems are considering criminal prosecutions and commissions to go after the Bushies for policy differences. I suspect that this is an effort to deflect attention away from likely Obama failures to work promised miracles.
I resist the urge to label someone with different political views as evil but what other explanation is there for Pelosi?
Note that no one is prosecuting various Dems for tax evasion (Rangel and Geithner, for instance) or bribery (Dodd and Frank).
The Dems are steering this country into a continuous low-level civil war where political “enemies” are prosecuted, the populace is encouraged to Balkanize, and a growing government class enriches itself while pretending to serve the national interest.
Reagan’s failure was that he assumed that Dems were telling the truth when he compromised with them on spending reforms.
Comment by SoCalRobert — January 18, 2009 @ 2:53 pm - January 18, 2009
Chad, check the record. Unemployment did decline in the early years of the New Deal, but never below 20%. The spike upwards in 1937 was when FDR tried to implement the New Deal, Part II.
It was only the beginning of WWII where the country saw a decline in unemployment. So, maybe Obama should increase military spending.
And the real surge in unemployment begin not with the Crash of 1929, but with the Smoot-Hawley tariff and other interventionist policies of Herbert Hoover.
Had FDR just done nothing, the nation would likely have recovered more quickly from the Depression.
Comment by GayPatriotWest — January 18, 2009 @ 4:21 pm - January 18, 2009
Roosevelt has the worst economic record of any President in American history.
Hoover is up there, because of the damage he did in 4 years. But note the continuity of Hoover and Roosevelt’s policies. In the name of the New Deal, Rosevelt did an intensifying “second round” of many bad Hoover policies. Examples: tax increases, tariffs, and massive increases in regulation. As GPW says, had Roosevelt done nothing, the economy would have recovered much faster. Instead, Roosevelt stretched out the Great Depression for another 9+ years (1933-1942 inclusive).
The irony (or warning) for today is that we are about to see Obama do an intensifying “second round” of some damaging Bush policies – such as massive government spending increases.
Comment by ILoveCapitalism — January 18, 2009 @ 4:35 pm - January 18, 2009
FDR’s ill-advised tax and spend policies were accompanied by extreme, strong-arm regulatory abuses. An immigrant clothier named Jack Magid was thrown into prison by FDR for charging 35 cents to press a pair of pants instead of the government-mandated 40 cents.
Modern Day Demonrats are proposing similarly draconian laws; including stripping the right of workers to unionize by secret ballot elections, mandatory government “mediation” of all labor disputes, eliminating the statute of limitations in wage dispute cases, legislation that will put the government in charge of determining “fair” wages. Not to mention whatever schemes Carol Browner is cooking up at the EPA.
Comment by V the K — January 18, 2009 @ 4:47 pm - January 18, 2009
GP. You are right. The depression did not end until WW2. I was born in 1922 therefore I am well aware of living through the 30s. There were more people unemployed in 1937 than in 1930 UNLESS you counted those on WPA, CCC or some other form of welfare. The sad thing is that many people that I knew, who never voted Democratic, voted for FDR on the 2nd and 3rd time around because they did not take a chance on losing their welfare check.
John W
Comment by John W — January 18, 2009 @ 5:04 pm - January 18, 2009
That says it all.
Comment by ILoveCapitalism — January 18, 2009 @ 8:11 pm - January 18, 2009
It was FDR who taught the voting public they really could vote themselves a share of the public treasury. It’s been downhill ever since.
Comment by V the K — January 18, 2009 @ 9:50 pm - January 18, 2009
And that is exactly the plan. Pelosi, Obama, and Reid know that, once a person is dependent on a welfare check, they will always vote for someone who promises them more of it.
What it will take in this country is for someone who is willing to be in office for only one term to radically slash welfare and require everyone who doesn’t have or refuses to get a job to work. If you want a welfare check, you show up at 8 AM with a shovel and bag to pick up dog poop in the public park.
Comment by North Dallas Thirty — January 18, 2009 @ 11:03 pm - January 18, 2009
Or human poop, if you live in San Francisco, Seattle, or some similar bastion of liberal enlightenment.
Comment by V the K — January 18, 2009 @ 11:47 pm - January 18, 2009
#1″
” You confuse the liberals with people who actually give a shit about the country. It’s not about “youâ€, it’s about solidifying the absolute rule of Comrade Obama.
Expect the end of term limits to be seriously considered. Or at the very least, a very strong push for Michelle to run.”
TGC, if you dared to take an honest look in the mirror you would see a screeching liberal in the week leading up to W’s taking office. You look just as ridiculous and are just as completely wrong. It’s too bad that our tradition of the people electing their President is so disturbing to you. Four years is a lot of Depends, maybe you should just get over it.
Comment by a different Dave — January 19, 2009 @ 12:00 am - January 19, 2009
#19: Sorry, NDT, it’s too late. Politicians from both parties have discovered the key to permanent power: the middle class entitlement. With few exceptions, politicians don’t really care what happens as long as they remain in the ruling class.
Direct welfare payments are but a drop in the bucket. The big money is the growth of entitlements and “services” like Social Security, Medicare, education, and (coming to a doctor’s office near you) socialized medicine.
Everybody wants a spot at the trough: rent-seeking CEOs, retirees, parents, students, slackers, immigrants (illegal and legal), natives, investors, employees, employers, sports teams, cities and states, and foreign governments just to name a few.
Comment by SoCalRobert — January 19, 2009 @ 1:04 am - January 19, 2009
Let’s review. TGC said this, among other things:
In the very next comment, V offers this link:
http://www.govtrack.us/congress/billtext.xpd?bill=hj111-5
Which shows that Democrats are, in fact, already proposing to change the Constitution to remove Presidential term limits (repeal the 22nd Amendment).
Sounds like TGC was correct there, and ADD, rather than address it, is doing his own usual screeching and personal insults.
Comment by ILoveCapitalism — January 19, 2009 @ 1:31 am - January 19, 2009
hey GPW, thanks for the tip. at your suggestion, i went back and checked the record, ie, census data from the US govt on unemployment. unemployment peaked in 1933 at 24.9% (the first year of roosevelt’s administration), then decreased the next several years, reaching 14.3% in 1937. in 1938, unemployment spiked up to 19% after roosevelt decreased spending in order to balance the budget. in subsequent years, the spending remained high and unemployment continued to decline. unless we’re looking at different data, i really dont know how you can argue that unemployment was unchanged during roosevelt’s administration. whether the decline was related to increased spending is a different argument, but not one that i think youre trying to make. arguing counterfactuals–like the great depression would have ended faster if roosevelt had done nothing–is pure speculation.
Comment by Chad — January 19, 2009 @ 3:14 am - January 19, 2009
Chad, first note what I said in the post about unemployment remaining pretty steady in the 1930s, spiking up in 1937. Are you sure that FDR decreased spending in 1937? That was when he instigated the New Deal, Part 2.
The data I saw (also from the Census bureau had unemployment peaking in 1933 and declining until 1937, but remaining above 20%.
And note that it wasn’t FDR who began the spending spree. That started under Hoover as a respond to the depression. Unemployment spiked up in 1931, likely as a result of the Smooth-Hawley Tariff Act of 1930. That protectionist act led to a severe curtailment of our trade and certainly exacerbated the depression.
Comment by GayPatriotWest — January 19, 2009 @ 3:27 am - January 19, 2009
here’s the link to the census data:
http://www2.census.gov/prod2/statcomp/documents/CT1970p1-05.pdf
i’ll try to track down a source re: balanced budget in 1937. right now, the best i can give you is the wikipedia entry on the great depression. take it with a grain of salt.
Comment by Chad — January 19, 2009 @ 3:32 am - January 19, 2009
I should have more to say about this as soon as I get to Amity Shlaes’s book. Too tired now (it’s almost 1 AM here in LA) to comment further.
Comment by GayPatriotWest — January 19, 2009 @ 3:45 am - January 19, 2009
Wha….?? Sorry. I can’t read dumbass. Once more, in English, please.
That’s pronounced Pock-eeee-stahn, you racist bigot!
Comment by ThatGayConservative — January 19, 2009 @ 6:13 am - January 19, 2009
GPW, don’t forget Hoover’s punitive income tax increases – later intensified by Roosevelt.
Nope. First, remember unemployment is a lagging indicator; it began spiking in 1937, peaking early in 1938. (As Wikipedia puts it, “personal income was only 15% lower than it had been at the peak in 1937″. Only!!!) Second, its cause wasn’t Roosevelt cutting the budget; its cause was the anti-freedom and anti-production policies Roosevelt had been following throughout the Depression, making it a ‘Great’ one. See #15 by V the K, and #16 by John W.
Yeah… like the 1940s, with World War 2. (No thanks on having a repeat, BTW.)
The Roosevelt Administration was, economically, the worst in United States history. They intensified bad policies of Hoover and added more of their own, stretching out the Depression to 1942-3.
Comment by ILoveCapitalism — January 19, 2009 @ 7:59 am - January 19, 2009
Further in Wiki:
With the Depression proper ending in 1943, according to most economists. Roosevelt took a severe recession and, by terrible policy, stretched it out for 10 years until only a World War finally ended it.
Comment by ILoveCapitalism — January 19, 2009 @ 8:05 am - January 19, 2009
What Chad is arguing is essentially that FDR should have continued his massive deficit spending in perpetuity, rather than stop intervening and let the markets right themselves. Logic says that such massive deficits are unsustainable… especially at the pace the Democrats are proposing. The only possible endgame is default or/and hyperinflation.
Chad also leaves out that in 1936, FDR raised marginal tax rates to 79% of income, and the Social Security payroll tax began in 1937. Those probably had a pretty big impact on unemployment in 1937.
Comment by V the K — January 19, 2009 @ 10:12 am - January 19, 2009
Right. Social Security taxes were another of FDR’s job-busting measures.
Comment by ILoveCapitalism — January 19, 2009 @ 10:44 am - January 19, 2009
And is it just me, or do Democrats basically long for feudalism? By the time all their laws, regulations, taxes and controls are in effect, one’s “job” is basically an entitlement – that one is probably undeserving of and damn lucky to have, and for which one is dependent on political connections to Democrats. Ordinary job creation among consenting private citizens becomes a near impossibility.
Comment by ILoveCapitalism — January 19, 2009 @ 10:48 am - January 19, 2009
And is it just me, or do Democrats basically long for feudalism?
Yes, which is why so many of the rich are Democrats. Socialist policies essentially freeze everyone into whatever social class they are born into. Hence, the rich and privileged don’t have to worry about losing their status to up-and-coming entrepreneurs.
Comment by V the K — January 19, 2009 @ 11:16 am - January 19, 2009
Ilya Somin explodes the myth that Hoover was a laissez-faire capitalist (via Instapundit) and notes some of the ways he promoted federal intervention into the economy ostensibly to forestall the emerging depression. Instead, his policies seem to have exacerbated it.
Comment by GayPatriotWest — January 19, 2009 @ 11:52 am - January 19, 2009
Read the whole thing, as they say. But, for the click-challenged: Hoover’s response to the 1929 recession was to
- hike taxes massively (Somin seems to omit this)
- sign the Smoot-Hawley tariff which destroyed international trade
- establish new government agencies to hand out loans and… bailouts
- hike “relief” spending and run deficits that we would now call “stimulative”.
Sound familiar? Roosevelt merely extended and intensified Hoover’s disastrous policies, and add some perverted new ones like the laws V talked about, where you’d be prosecuted for giving consumers a better price on your product.
Another parallel to today: In the 1932 campaign, Roosevelt denounced Hoover for overspending and promised to enact a balanced budget. In other words: Roosevelt basically lied, selling himself as a prudent centrist. Would the latter remind you of anyone elected recently?
Comment by ILoveCapitalism — January 19, 2009 @ 12:09 pm - January 19, 2009
On term limits – from the right. These folks are Obama haters to the extreme, yet they are able to talk rationally about term limits. Some of you should learn from it.
http://www.oilforimmigration.org/facts/?p=783
“In 1987, during Reagan’s term of office, Earl Michener, R-Mich., also proposed a repeal of the 22nd Amendment.”
http://www.oilforimmigration.org/facts/?p=754
The second article is similar to what I said in a filtered comment. According to the source that V posted Serrano has been doing this since 1997. Hardly an Obama plot.
Comment by a different Dave — January 19, 2009 @ 2:34 pm - January 19, 2009
I read article in the WSJ, once, that the depression lasted into the 50s. Can’t remember much else about the piece and don’t want to spend the money to find it.
Comment by ThatGayConservative — January 19, 2009 @ 3:17 pm - January 19, 2009
VK, i dont think i argued that at all. i guess i assumed that we were talking about deficit spending against the backdrop of a severe economic downturn, since the original post argued that roosevelt’s spending had no effect on unemployment rates during the great depression. i limited my comments to facts regarding the unemployment rate during the 1930s, which simply dont square with GPW’s argument. that’s all i was trying to say. i certainly dont think i implied that government should spend massive amounts of money in perpetuity. a “stimulus” applied to an already growing economy would be…well…silly.
it seems like the biggest difference of opinion we have is whether the 1938 spike in unemployment was caused by roosevelt balancing the budget in 1937, or by some other amalgamation of factors that you identify. regardless of the cause, unemployment continued to decline in subsequent years when roosevelt resumed deficit spending. on these facts, i just dont buy GPW’s argument. be nice.
Comment by Chad — January 19, 2009 @ 5:31 pm - January 19, 2009
All of which has *ABSOLUTELY NOTHING WHATSOEVER* to do with the fact that, in this blog thread, and in this moment in 2009:
- TGC was right in predicting Democrats would want to lift them for the Dear Leader
- Rather than either acknowledge the point or answer the point, ADD stepped in with his standard no-class insults and “Look over there!” distractions.
Comment by ILoveCapitalism — January 19, 2009 @ 6:12 pm - January 19, 2009
That is a total load of crap – it has EVERYTHING to do with it. Every time one of the diaper brigade on here whines about the left and example of the same sh*T from the right is brought up it’s called changing the subject. WTF is wrong with you? Let me borrow the worn out mantra – the truth hurts. And if you would learn how to read you would know that that WAS about 2009. Grow up. The issue IS term limits and the ridiculous conspiracy theories blowing around the ring world. Your
BS analysis of my comments is meaningless. Stop stroking and get a clue.
Comment by a different Dave — January 19, 2009 @ 7:07 pm - January 19, 2009
More screeching ADD hate and insults. Luv to see them true colors flyin’, ADD.
You’re right about one thing only: You did pull your usual “Look over there! An old mistake from a totally inconsequential Republican invalidates the correctness of TGC’s prediction!” bullsh*ts with some facts / links for once. That is rare indeed, for you. Consider that aspect acknowledged.
Comment by ILoveCapitalism — January 19, 2009 @ 7:32 pm - January 19, 2009
P.S. While you’re at it, ADD – Why don’t you also try to minimize the fact that for years now, Charlie Rangel, *D* – New York, has been entering bills in the House to bring back the draft?
You could deny that there’s any similarity than that and Obama’s announced hopes of creating a quasi-military, mandatory youth “service” corps, like Nazi Germany once did. You could deny that the Democratic Party is the party of drafting and enslaving people. You could pretend that Democrat Rangel’s attempts, which never had a chance while Republicans were in power, bear no connection to any “Obama plot”, even though they stand a slightly better chance of being passed (and signed) now, on Obama’s and the Democrats’ watch.
Just trying to help with a constructive suggestion.
Comment by ILoveCapitalism — January 19, 2009 @ 7:41 pm - January 19, 2009
I’ll close this out now with something different. I’d like to project the TGC-ADD exchange into an alternate universe, sort of a Spock-has-a-beard universe where the other universe’s bad guys are suddenly civil and sensible. In that universe, ADD would have responded to TGC gently like this:
I.e., no screeching or insults, just the facts. And then TGC or somebody would have replied:
And ADD might have further replied:
But ADD didn’t want such an exchange. No fun.
Comment by ILoveCapitalism — January 19, 2009 @ 8:03 pm - January 19, 2009
(sorry… “where *our* universe’s bad guys are suddenly civil and sensible”)
Comment by ILoveCapitalism — January 19, 2009 @ 8:03 pm - January 19, 2009
heh to ILC.
We shouldn’t be surprised at PEBO, after all, adDave did conceed he’d do or say anything to get elected.
Comment by The Livewire — January 20, 2009 @ 7:38 am - January 20, 2009