Best of times, worst of times
Running for re-election last year, President Obama repeatedly proclaimed that he had inherited “the worst economic crisis since the Great Depression.”
Perhaps the never-ending repetition of that phrase was supposed to justify the slowest economic recovery since World War II during his first four years.
Candidate Obama was saying the blame for lousy job growth under his leadership belonged on what he inherited rather than his own anti-growth agenda of higher taxes and expanded regulation.
In any case, if we use the misery index as an economic indicator to measure “the worst” economy, the economy Obama inherited in 2009 wasn't even half as bad as the economy Ronald Reagan inherited in 1981.
The misery index, designed to show how much the population is being negatively affected by price hikes and joblessness, is calculated by simply adding the inflation rate to the unemployment rate.
When Reagan was first inaugurated on Jan. 20, 1981, the misery index was 19.3, consisting of an unemployment rate of 7.5 percent and an inflation rate of 11.8 percent.
When Obama was first inaugurated on Jan. 20, 2009, the misery index that month was 7.6, with an unemployment rate of 7.6 percent and a zero inflation rate.
Furthermore, Reagan entered office at a time of falling household incomes, rising poverty rates, a collapsing stock market and double-digit interest rates, with the prime rate hitting 21.5 percent in 1980.
Reagan's prescription for recovery focused on an anti-inflationary monetary policy and tax-cut incentives to boost output by both individuals and companies. The strategy was simple — and successful. Across-the-board tax-rate cuts would enable a higher proportion of production to stay with those who produced it, encouraging more production and more supply, a result that would have the effect of simultaneously lowering inflation and expanding employment.
The result? “Inflation was quickly whipped, cut in half by 1982, and in half again by 1983,” reported Peter Ferrara, a Forbes magazine contributor covering economics and public policy.
The result related to jobs and growth? The economy “took off on a 25-year economic boom from 1982 to 2007,” reported Ferrara, citing National Bureau of Economic Research reports. “During the first seven years of that boom alone, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy.”
Ferrara quoted how Arthur B. Laffer, a member of Reagan's Economic Policy Advisory Board, and Steven Moore, chief financial writer and senior economics contributor at The Wall Street Journal, summarized Reagan's economic record in their 2008 book, “The End of Prosperity”: “We call this period, 1982-2007, the 25-year boom — the greatest period of wealth creation in the history of the planet. In 1980, the net worth — assets minus liabilities — of all U.S. households and businesses … was $25 trillion in today's dollars. By 2007 … net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the 25-year boom than in the previous 200 years.”
All told, revived and sustained economic growth created 17 million new jobs from 1980 to 1989 and another 26 million in the 1990s.
President Obama's response? He says we tried Reaganomics and it didn't work.
Ralph R. Reiland is an associate professor of economics at Robert Morris University and a local restaurateur (firstname.lastname@example.org).
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Wrong-way driver causes head-on crash in Center
- Rossi: After L.A., NFL should tread carefully
- Man taken to hospital after New Alexandria house burns
- Couple attempts theft at North Huntingdon Walmart
- Starter Liriano strikes out 12, leads Pirates to series sweep of Mets
- Pirates notebook: Substance rule a sticky subject
- Gameday: Pirates vs. Marlins, May 25, 2014
- Neighbor arrested after McKeesport house fire, authorities say
- Acme man’s ephemeral sculptures appear to defy laws of physics
- Kennywood fanatic, 82, rides Jack Rabbit 95 times in a row
- Cochran repair center planned in Harrison