Rewriting Reagan -- again
Barack Obama was way too pro-Reagan during an interview earlier this year with the Reno Gazette-Journal's editorial board, according to Paul Krugman, professor of economics and international affairs at Princeton University and twice-weekly columnist at The New York Times.
"Ronald Reagan changed the trajectory of America in a way that Richard Nixon did not and in a way that Bill Clinton did not," said Obama, asserting that Reagan offered a "sense of dynamism and entrepreneurship that had been missing" in American politics.
Obama's statement hardly seems controversial, given that Ronald Reagan unmistakably changed the course of the United States and considering the weak sense of dynamism and entrepreneurship that was manifestly on display in Reagan's four immediate predecessors --- Johnson, Nixon, Ford and Carter.
Nonetheless, "the furor over Barack Obama's praise for Ronald Reagan is not, as some think, overblown," asserted Krugman. "The fact is that how we talk about the Reagan era still matters immensely for American politics."
What matters, immensely, to Krugman is that Reagan's political and economic accomplishments be denied.
"Bill Clinton knew that in 1991, when he began his presidential campaign," stated Krugman, pointing with approval to a particular campaign pronouncement by Clinton regarding the impact of the Reagan presidency: "The Reagan-Bush years," declared Clinton, "have exalted private gain over public obligation, special interests over the common good, wealth and fame over work and family. The 1980s ushered in a Gilded Age of greed and selfishness, of irresponsibility and excess, and of neglect."
In contrast, Obama stated in the Reno interview that Reagan "tapped into what people were already feeling," and what they were feeling was that "government had grown and grown but there wasn't much sense of accountability in terms of how it was operating."
The New York Observer reported that Hillary Clinton's supporters were "stupefied by Obama's Reagan comments." Similarly, Representative Barney Frank of Massachusetts announced that he was "stupefied by the comments" and found it "baffling" that Obama would say such things about Reagan.
"The best line came from an angry Representative Corrine Brown of Florida," said the Observer. "'Every time I see a homeless person I think about Ronald Reagan,' she said. 'It is very important that young people know about this history.'"
Asked Krugman regarding Obama's comments on Reagan, "But where in his remarks was the clear declaration that Reaganomics failed• For it did fail."
While "the rich got much richer, there was little sustained economic improvement for most Americans" during the Reagan years, 1981 to 1989, Krugman argued.
In fact, a 1990 Bureau of the Census study shows that all income groups realized income gains from 1980 to 1989. More significantly, regarding upward mobility between income groups, a Treasury Department study shows that 86 percent of households in the poorest income quintile in 1979 had moved into higher income quintiles by 1989.
The median income, adjusted for inflation, of black households increased by 17 percent between 1982 and 1989, reversing a 10 percent decline from 1978 to 1982.
Additionally, the inflation rate in 1980 was 13.5 percent, a jump in the cost of living that's least affordable for those at the bottom. By 1983 and 1986, respectively, the inflation rate had dropped to 3.2 percent and 1.9 percent.
The prime interest rate, 15.27 percent in 1980, was reduced to 9.32 percent by 1988.
The unemployment rate in the civilian labor force, rising to 7.1 percent in 1980, was cut to 5.5 percent by 1988, a decline that disproportionately benefited the lowest income households.
Measured in terms of total national output, a -0.2 percent decline in real (adjusted for inflation) GDP in 1980 was reversed to a 4.2 percent growth rate by 1988.
All told, with more jobs and lower inflation, the price-adjusted income of the poorest fifth of U.S. households increased by 12 percent in the 1980s, reversing a 17 percent slide between 1979 and 1983 before the economic recovery of the Reagan era kicked in.
For the overall economy prior to the Reagan period, the Bureau of Labor Statistics reports that wages increased by 35 percent from 1977 to 1981 while prices jumped by 49 percent, producing an average drop of 14 percent in the purchasing power of American paychecks.
Bottom line, Obama basically had it right about Reagan. Unfortunately, his prescription of higher taxes for economic recovery is the exact opposite of what worked in the 1980s.