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All Da King's Men

Reagan's Economic Recovery Worked

By Da King Published: February 7, 2009

I've grown weary of President Obama referring to the GOP's "failed theories." It's time for a history lesson from the one actual Conservative to inhabit the White House in my lifetime, Ronald Reagan. (FYI: 'Republican' does not equal "Conservative." Not in my book. For example, I considered Dubya to be an economic liberal. Party designation is just a meaningless label.)
Liberal Democrats mostly detest former Republican president Ronald Reagan. The only viable reason I've been able to deduce for their hatred is this:

Reagan's policies worked.

When Reagan took office in 1981, the country was mired in a deep economic slump, just like now. What came before Reagan was many years of bad policy, just like now. Nixon instituted price and wage controls, tax and tariff hikes, and devalued the currency. Stagflation (stagnant economic growth and high unemployment, coupled with high rates of inflation) actually began to rear it's ugly head with Nixon. It continued through Gerald Ford's presidency, and reached epidemic levels under Jimmy Carter. Carter's bad policy contributions were - raising taxes, increasing government spending, enacting his own voluntary wage and price controls, putting restrictions on domestic oil production even as OPEC was cutting back production (prompting the 70's energy crisis), the Federal Reserve jacking up interest rates in an already stagnating economy...I can't even remember them all anymore. It seemed that if there was a misstep to be made, Jimmy Carter made it. The one atypical move Carter made was to begin the deregulation of industry, which Reagan continued.

Reagan mostly abandoned the previous principles, which were based upon the faulty notion that the government can effectively micromanage something as large as the American economy (from what I've seen so far, I predict the term 'Obamanomics' will one day become synonomous with epic big government failure, because he's bent on taking the government to a magnitude never seen before). Instead, Reagan freed the economy and allowed the market to run with less government interference.

Reagan's economic recovery program (Reaganomics) had four main components: Reduce taxes on labor and capital, reduce government spending, control the money supply to reduce inflation, and reduce government regulation of the economy.

Reagan was successful on three of those four components. He didn't reduce government spending as he would have liked. He had an opposition Democratic Congress to contend with who didn't like spending cuts, and Reagan himself raised defense spending (which, btw, resulted in the USA winning the Cold War). Reagan raised spending in a few other areas as well, such as with his jobs program to help with high unemployment. Reagan also considered balanced budgets of secondary importance to getting the economy going again. Reagan looked at it as temporary deficits to get over the bad times, which has become a sadly familiar refrain that never seems to end.

The results of Reagan's policies stand in such stark contrast to the previous policies and turned the economy around so well that it takes mountains of liberal spin to attempt to deny it (and lord knows, they DO spin and spin about Reagan. Soooo many lies). They'll try to tell you that Reagan's policies had nothing to do with the economic turnaround, that it was all a mere coincidence, some kind of magical economic alignment of the planets. Don't believe it for one second. Here are the numbers:

Unemployment - January 1981 (when Reagan took office) - 7.5%
Unemployment - January 1989 (when Reagan left office) - 5.4%
Inflation - January 1981 - 11.83%
Inflation - January 1989 - 4.67%
Real GDP (adj. for inflation in 2000 dollars) - Jan 1981 - $5.3 trillion
Real GDP (adj. for inflation in 2000 dollars) - Jan 1989 - $6.9 trillion

Reagan's economic principles resulted in the creation of over 20 million jobs after the recession he inherited bottomed out in 1982 (with unemployment reaching 9.5%), according to the Bureau of Labor Statistics. Reagan oversaw the largest peacetime economic expansion in American history from 1983 to 1989. Gee, who'd want to emulate his "failed theories" ??? Uh, I would.

The economic situation Reagan inherited was bad, like the current one. There were some differences. Reagan inherited a severe inflationary cycle, and in our current downturn, the economy is too frozen for inflation to occur. I expect if we follow the big government spending path that Obama is recommending, we will begin to experience hyperinflation within a few years, wiping out the benefits of any recovery that takes place. Obama is directing a course precisely opposite of what Reagan did. It has much more in common with what Jimmy Carter did, though Obama is going well beyond Carter into utterly insane big government spending solutions.

Please look at history to see what works and what doesn't. Democrats love to tout FDR's New Deal as a solution to the Great Depression, but HELLO, the Great Depression lasted a DECADE, only ending with the onset of WWII. Reagan turned the economy around in two years with his solutions. Secondly, FDR wasn't starting with a country already $10 trillion in debt, and with massive unfunded liabilities to boot. Obama may talk about hope, but if early indications are a guide, he'll be sounding the death knell for the American standard of living and the capitalist system.

The Left is using this severe recession to fool you all into buying into socialist nonsense. Nothing more, nothing less. And that will be the real disaster, almost impossible to turn away from once it's implemented (until it collapses, that is, which it will). Socialism has failed virtually everywhere it's been tried, but somehow, liberals never learn the lesson. They still think the government can give us all "free stuff" with no consequences, as if resources are unlimited. It's irresponsible and inane. What goes into the public sector comes out of the private sector, and in a capitalist system it's the strength of the private sector that determines our collective wealth. That's how we became the most powerful country on earth. Socialism is a freedom crushing inferior design which saps initiative as the citizenry becomes subservient to the all-powerful state. Everybody becomes less well off. Don't let it happen here. Stop them before it's too late.

Reagan turned our economy around with the principles of freedom, and he didn't have to spend the country into oblivion to do it. Far from being "failed theories" or "discredited ideas" or whatever spin the Obama administration is pushing as it's daily scare tactic, Reagan's ideas worked. The real problem is, we haven't been following them for years. The government has insinuated it's way into too many areas of our economy, from health care to housing. Don't forget, it was the government that built the housing bubble in the first place, by interfering with a previously stable financial system. It was the government that setup Fannie Mae and Freddie Mac to bundle and peddle those subprime mortgages that Wall Steet went wild with. It was the government that created the subprime market in the first place, by forcing the banks to make loans to unqualified persons. It was the government that didn't practice sound monetary policy, which let the housing bubble grow and grow. It was POLITICS that created our economic crisis. Then after it all blows up in their faces, what do the politicians say ? They absolve themselves of all responsibility and say, 'it was a failure of the free market.' And they count on Americans being dumb enough to believe them.

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