Chart: Reagan recovery vs. Obama recovery

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  • Stockman is right!

    The top marginal tax rate for individuals and corporate tax rates were higher under Reagan than they are under Obama. Perhaps what we need to do to encourage businesses to start hiring new employees is to increase taxes on corporate profits and on high income wage-earners. That would create a disincentive for businesses to hoard money and an incentive for them to start hiring or reinvesting in their companies.

    Interestingly, that’s basically the approach being recommended by David Stockman, the architect of Reagan’s economic Revolution.

    • Rupert in Springfield

      >Perhaps what we need to do to encourage businesses to start hiring new employees is to increase taxes on corporate profits

      And when those corporations move overseas, which is much more possible now than it was in Reagans time, can we count on you to be among those cheering them along?

      Considering that the US corporate tax rate is already non competitive with the rest of the world, this strategy would be a recipe for disaster.

      >That would create a disincentive for businesses to hoard money and an incentive for them to start hiring or reinvesting in their companies.

      And it would also tank the stock market.

      You start taxing profits even more, when our corporate tax rates are already non competitive compared to other countries, you are going to see people start pulling their investments out of US companies so fast it will make your head spin.

      The moral of the story here is if you create economic uncertainty, live with the consequences. Congress put off dealing with the Bush tax cuts until the last minute. We passed the unpopular Obamacare, a bill both the administration and business agree is harmful to economic growth. Live with the consequences. Don’t look to business to bail out poor decision making in Washington.

      • Stockman is right!

        I realize that you may not want to let facts get in the way of perfectly good talking points, but the US corporate tax rate is 1.8% of GDP — lowest among any developed country.

        The effective corporate tax rate, 23.6% is in the lower part of the upper quartile of developed nations, but — of course — our marginal and effective income tax rates are substantially lower than any developed nation, and capital gains tax rates are basically in the 50 – 60th percentile.

        It’s worth pointing out that the marginal tax rate for high net worth individuals was substantially higher during the strongest periods of sustained growth in US history.

        • Rupert in Springfield

          >I realize that you may not want to let facts get in the way of perfectly good talking points, but the US corporate tax rate is 1.8% of GDP — lowest among any developed country.

          And I realize you might not understand math but a tax rate is not expressed as a percent of GDP.

          Tax revenues are.

          Big difference. Tax rates and tax revenues are two totally different things.

          Here is an example – Liquor taxes are probably some of the highest tax rates we have, over 100% I think in Oregon. However liquor tax revenues make up a very small part of GDP.

          Got it now? A tax rate is not a percentage of GDP. Tax revenue can be expressed this way, but not tax rates.

          I spoke to tax rates, not tax revenues. Big difference.

          >The effective corporate tax rate, 23.6% is in the lower part of the upper quartile of developed nations,

          Wrong.

          If we are talking shareholder financed investment the effective corporate rate is higher than the OECD or G7 average. If we are talking financial institution investment the effective corporate rate is slightly lower.

          Source – CBO Corporate Income Tax Rates, International Comparisons 2005.

          http://www.cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf

          >It’s worth pointing out that the marginal tax rate for high net worth individuals was substantially higher during the strongest periods of sustained growth in US history.

          No its not, since the effective rate during most of those periods varied widely from the marginal rate. This point is especially silly considering that when tax rates have been cut, the share of federal income tax revenue paid by the top 10% went up in the 20’s the 60’s and the 80’s. three periods of remarkable growth in this country.

          • Stockman is right!

            >Wrong.

            >If we are talking shareholder financed investment the effective corporate rate is higher than the OECD or G7 average. If we are talking financial institution investment the effective corporate rate is slightly lower.

            LOL… Your data, which I reviewed prior to making my original comment, comports much more closely with my claim “lower part of the upper quartile” than it does with your original assertion: “US corporate tax rate is already non competitive with the rest of the world.”

            Thanks for helping debunk your initial claim.

            As to the rest… there is no correlation between raising and lowering taxes and economic growth unless you cherry pick the data to make your argument. Reagan cut taxes during a recession and raised them during a period of economic growth. Tax revenues grew faster as a share of GDP following the tax increases, and remained constant or shrunk following the tax cuts. We had stronger economic growth following tax increases during the Clinton era than at any point under Reagan.

            http://www.cato.org/research/fiscal_policy/2002/indiv1.html

            Same thing is true if you compare economic growth in the 1940’s and 1950’s than the halcyon days in the 1920’s when the economic policies you seem to prefer led to the great depression. You would think that folks like you would not continue championing them after a reintroduction of similar policies helped to create the current great recession.

            What you are asking people to believe is a fantasy: That tax cuts inherently yield stronger revenue. They don’t. It’s a selfish philosophy that at worst is bankrupting this country, and at best mortgaging our children’s future to the Chinese who have essentially enacted their own version of the Marshall Plan to keep our economy afloat by lending us $2 billion per day.

    • More Freedom = More Prosperity

      You mean “coerce” not “encourage.” The gov’t can’t mandate prosperity and you can’t force people to spend or invest. Reagan lowered taxes, reduced regulations, and got jobs created. Obama won’t reduce taxes on job creators, is ramping up regulations, and is getting higher unemployment. Easy decision, except for soft tyrants like Obummer.

      • Founding Fathers

        You do realize that after taxes for the rich were cut in August of 1981 that unemployment, which had been holding at around 7.5% for over a year, immediately started going up, and just over a year later was over 10%, and it stayed at over 10% for 10 straight months.

        In fact, the term “jobless recovery” was coined during the Reagan administration. 1983 saw a 4.5% increase in real GDP, but the unemployment rate for the year was 9.6%. The following year we had a whopping 7.2% increase in real GDP (the highest since 1951, and still the highest since 1951), yet unemployment for the year averaged 7.5%.

        You’re entitled to your own opinion, you’re not entitled to your own facts.

  • valley p

    The Reagan recession was “induced” by the Fed which raised interest rates to slow inflation. Once inflation came down they lowered interest rates and the economy recovered. The last recession was a collapse of the financial system that underpins the economy, more like what happened in 1929. History shows that recovery from this sort of recession is way slower.

    Nevertheless, employment is growing pretty well of late, so the unemployment curve should start bending in the right direction soon. And anyway, the only way to speed it up is more deficit spending.

  • a retired professor

    The employment situation obviously very disappointing under Obama, if things don’t start doing better, he will be in real trouble in 2012, despite the current very weak Republican lineup.

    If things do improve, though, he could be invulnerable. If the Republicans can’t come up with someone new, we could be in for an historic landslide unrivaled since Reagan in 1984.

    Obama actually looks stronger than Reagan did at comparable times in their presidencies, i.e. Reagan looked like a near-goner in the 1982 elections.

    • Rupert in Springfield

      >Obama actually looks stronger than Reagan did at comparable times in their presidencies

      Keep going with that one. I remember hearing this chestnut starting last summer all the way up to the November elections, LOL!

      • a retired professor

        Sorry, but that’s the way it was. Few people gave Reagan much chance of re-election at the 1982 mark. Few people are counting out Obama at this point.

        • Rupert in Springfield

          >Sorry, but that’s the way it was.

          I know, like I said, you guys were using this chestnut at least as far back as last summer, and like Obama said, you guys took a shellacking.

          >Few people are counting out Obama at this point.

          Congratulations, you have just lurched into the obvious.

          • Founding Fathers

            Rupert,

            You’re entitled to your own opinion. You’re not entitled to your own facts.

            When Ronald Reagan took office, the unemployment rate was 7.5%. It had stayed about the same since the previous May. In November, 1982, it was 10.8%. This was a year and 3 months after signing a significant tax cut for the wealthy.

            When Barack Obama took office, the unemployment rate was 7.7% and had increased from just 5.0% the previous May. In November, 2010, the unemployment rate was 9.8%, a full percentage point lower than at the same point in Reagan’s Presidency.

            At no point during Obama’s Presidency so far has the unemployment rate exceeded what it was from October 1982 through April 1983, and there have been only 3 months where the unemployment rate was at or over 10.0%, compared to the 10 months where it exceeded 10.0% in Reagan’s first term, and it topped out at 10.8%, compared to only 10.1% for Obama.

  • Steve Plunk

    The obvious difference between the two recoveries is the different attitudes Reagan had and Obama has concerning business and government. We all know Reagan believed in the private sector while Obama believes in the public sector. Business is still worried about Obama’s policy agenda and remains hunkered down while under Reagan business saw opportunity and growth ahead. Until that changes recovery will be slow.

    In Oregon it is doubly bad since we have a repeat performance coming with the new governor. I expect Oregon and the entire West coast to languish under misguided policies and heavy regulations for years to come.

  • Bob Clark

    A lot of economics is animal spirits, or namely confidence. Obama has been anything but a confidence builder for businesses and even individual investors. Reagan instilled a lot of confidence through deregulation of the energy industries, and softening union powers. Reagan also had different demographics favoring economic growth than Obama. So, this makes the need to deregulate, streamline government, and boost U.S competitiveness even more essential if America is to grow in propserity. A prosperous fully engaged free economy is achieveable but not if Obama and the Democrats persist in shutting down conventional energy supplies, regulating the internet, etc. These backwards moves will only speed the next recession.

    Look at oil prices. They are now $90 per barrel and only six months ago were in the low $70 range. You can play around with renewables til the cows come home, but only conventional energy delivers in mass quantities enough to fuel a prosperous rate of growth. If the Dems wouldn’t have filibustered against ANWR’s development in the early 00s we’d have perhaps as much as 20% more domestic oil supply by now, cutting imports and helping slow the decline of the U.S dollar (the latter being partly the cause of surging oil prices).

    The new GOP house must take the administration to task, threatening defunding of EPA and FCC so as to rein in these loose anti economic rogue agencies. The public demands this after electing the GOP to House majority.

    • Carl

      You are correct, sir!

    • a retired professor

      “A lot of economics is animal spirits”

      I see you have been reading your Keynes!

    • Stockman is right!

      Yes! If we would only let corporations dump hexavalent chromium into city water supplies, pump carcinogens into our air, allowed more rat droppings in our food supply, and got rid of liberal policies like child labor laws, and the minimum wage, we would be on the road to recovery.

      Brilliant! And of course, those evil regulators should never consider ensuring that monopolies that control the bandwidth can shut down competitors by shutting down access.

      One thing that we cannot do under any circumstances is respond to the realities of the new economy. God forbid that we should invest money into research that would help make us more energy independent from dictators in the middle east and latin America. Government investment in research has never done a damn thing for this country. Just look at what a failure the DARPA and ARPA investments in the internet have been!

      And, of course, the other thing we should never ever consider doing is consider taxing the people who have benefited the most from America. Corporations should be totally unfettered from all external costs such as roads and infrastructure that they rely on.

      Above all else, we should never worry about the relationship between military spending and government debt. Who cares if we account for 50 percent of global military spending and our closest allies combine for another 25 percent of military spending.

      Thanks for that, Bob. Your approach is really going to solve our problems.

      • Steve Plunk

        Reductio ad absurdum. No one is suggesting we do away with health and safety regulations and to say such a thing exposes the weakness in arguing against a more fair regulatory environment. There’s balance to be struck and many of us see government going well beyond that reasonable balance.

        Investment should be based upon economic realities not unicorn dreams and rainbow ideas. Taxes should be based upon what is absolutely necessary rather than what can betaken without doing too much harm to the economy. The envious idea that we should take more form those that have more is morally unsound.

        Energy independence is likely to never happen but energy security is possible. Yet with all the rhetoric we have a president who says he will put the coal industry out of business, declared a scientifically unsound moratorium on offshore drilling, and fails to promote clean, plentiful natural gas. Ethanol? An example of a rent seeking industry and a clueless government.

        The progressive approach has been tried and proved lacking. It’s time for grown ups to start making decisions instead of old radicals and communist sympathizers.

        • Anonymous

          Steve – The comment I responded to did not call for reasonable regulatory reform. It called for eliminating the EPA, FCC and other regulatory agencies. As for your “Reductio Ad Absurdiam” comment… look in the mirror, bub. There is nothing radical, socialist, communist, or Marxist about pointing out that we need to deal with externalities associated with manufacturing; that government investment has spurred capitalist economic growth; that labor laws are not necessarily a bad thing.

          However, there may be something decidedly Fascist abour denouncing everyone who disagrees with you as a socialist or a communist sympathizer. Certainly there is nothing reasonable or balanced about such an approach.

          If it walks like a Brown Shirt…

          • Anonymous

            In his world, everyone who agrees with him is a grownup, and reasonable, a good citizen, and everyone else is a commie. You think that sounds a bit like Weimar Germany?

            While the EPA has gotten out of hand, the solution is not to abolish it, but to pass laws limiting its powers. And if someone says that nobody is proposing to eliminate the EPA, that is simply not true — the Republican candidate for Congress in my district (Oregon 5th), Art Robinson, proposed exactly that. He’s also on record at various times calling for abolition of public schools, abolishing the Federal Reserve Bank, and other equally radical proposals.

          • Anonymous

            Agreed. Robinson is a total nutcase. The most disturbing thing about his candidacy was the fervor with which people gravitated to him.

          • Anonymous

            Yes, the rural areas in his district voted overwhelmingly for him; DeFazio won because of the urban areas, especially the Eugene area. The rural areas were thick with Robinson signs with very few DeFazio. Obviously some very intense polarization. Both candidates actually pretty far out, but Robinson has to take the cake, as far as I know, he was the most far-out Republican Congressional candidate in the entire country! Oregon 5th is sure a strange district. I doubt that many of the people who voted for Robinson actually wanted to eliminate their public schools. Hard to know just what to make of all this.

          • Steve Plunk

            Whoa there. I merely pointed out that many of the administration advisers are old radicals and communist sympathizers. Bill Ayers? Van Jones? That is a correct observation. I never called you one since I have no idea who you are. I have looked in the mirror and found I do not not use rhetorical tricks when making a point. Facts have a way of being both reasonable and balanced.

            So back it down and read more carefully the next time. I am neither a brown shirt nor a Nazi as the poster below suggests. It’s a sign of weakness to resort to such terms. If you would like to refute Bill Ayers as an old radical and Van Jones as a communist sympathizer get back to me.

            I never say someone should not have the right to speak but I also point out theie errors when they do.

          • Founding Fathers

            You do realize that Bill Ayers is in no way “an administration adviser.”

            You’re entitled to your own opinion. You’re not entitled to your own facts.

  • a retired professor

    Check out Charles Krauthammer — I guess he must be one of “us guys” in Rupert’s world — on Obama’s astonishing comeback:

    http://www.washingtonpost.com/wp-dyn/content/article/2010/12/23/AR2010122303877.html?hpid=opinionsbox1

  • JSSmith210

    If you ever wanted a clear example of why “supply side” or “trickle down” economics work while the Keynesian approach doesn’t, this is it. Remember the economy as Reagan inherited; double-digit inflation PLUS double-digit unemployment, it was a much worse economy than what Obama had to work with. Rather than blaming Carter, however, Reagan turned things around while all Obama and his ilk provide are excuses, finger-pointing and no growth.

    • valley person

      Reagan spent a lot of time blaming Carter. And trickle down worked? Interesting. The middle class has been stuck in place or declining ever since Reagan, while the rich have simply gotten richer. Not much has trickled down. And when Bush 2 repeated Reagan’s approach by cutting taxes mostly for the wealthy, we got 7 years of a crappy economy followed by a disaster. So if supply side works, why didn’t it work for Bush?

      • Thebigdog327

         There was 50 consecutive months of growth under Bush. The housing market collapsed due to democrats and republicans allowing ridiculous lending practices, and that was the downfall of the economy.

  • http://twitter.com/BillBateman1 Bill Bateman

    History shows what administration propaganda will try to obfuscate. This administration inherited a better economy than Ronald Reagan and made it worse while supply side free enterprise friendly policies under Reagan had decades lasting prosperity affects. 

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