It's the Reagan Economy, Stupid
by Lawrence Kudlow and Stephen Moore
Lawrence Kudlow is chief economist at Schroder & Co., Inc. and CNBC.com. Stephen Moore is an economist at the Cato Institute.
This essay first appeared in the February 1, 2000 Washington Times.

It was Reagan's supply side economic ideas -- the policy of marginal rate tax cuts, a strong dollar, trade globalization (the Gipper started NAFTA with a U.S.-Canadian free trade agreement), deregulation of key industries like energy, financial services and transportation, and a re-armed military -- all of which unleashed a great wave of entrepreneurial-technological innovation that transformed and restructured the economy, resulting in a long boom prosperity that continues to throw off economic benefits to this day.
The trend of the stock market, shown in the accompanying chart, provides compelling evidence that the real turning point of the U.S. economy was the early 1980s, not the early 1990s.

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Blame Reagan for the financial mess
The change in America's financial rules was Ronald Reagan's biggest legacy, writes columnist Paul Krugman. And it's the gift that keeps on taking.
By Paul Krugman
Syndicated columnist

"This bill is the most important legislation for financial institutions in the last 50 years. It provides a long-term solution for troubled thrift institutions. ... All in all, I think we hit the jackpot."

So declared Ronald Reagan in 1982, as he signed the Garn-St. Germain Depository Institutions Act.

He was, as it happened, wrong about solving the problems of the thrifts. On the contrary, the bill turned the modest-sized troubles of savings-and-loan institutions into an utter catastrophe. But he was right about the legislation's significance. And as for that jackpot — well, it finally came more than 25 years later, in the form of the worst economic crisis since the Great Depression.

For the more one looks into the origins of the current disaster, the clearer it becomes that the key wrong turn — the turn that made crisis inevitable — took place in the early 1980s, during the Reagan years.

Attacks on Reaganomics usually focus on rising inequality and fiscal irresponsibility. Indeed, Reagan ushered in an era in which a small minority grew vastly rich, while working families saw only meager gains. He also broke with long-standing rules of fiscal prudence.

On the latter point: Traditionally, the U.S. government ran significant budget deficits only in times of war or economic emergency. Federal debt as a percentage of GDP fell steadily from the end of World War II until 1980. But indebtedness began rising under Reagan; it fell again in the Clinton years, but resumed its rise under the Bush administration, leaving us ill prepared for the emergency now upon us.

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WASHINGTON -- This time, Ronald Reagan really was larger than life.

Seven feet tall, in fact, cast in bronze and unveiled Wednesday in the Capitol Rotunda next to another popular Republican president, Dwight D. Eisenhower.

Former first lady Nancy Reagan shed a tear when a blue curtain fell away and revealed the visage of her beloved "Ronnie," standing tall as a head of state and bearing the trademark twinkle of a movie star who understood the power of humor in politics.

She reached out and touched the statue's knee.

"The last time that I was in this room was for Ronnie's service," Mrs. Reagan, 87, told the Reagan-era officials and their successors who packed the Rotunda. "It's nice to be back under happier circumstances."

Reagan, who died in 2004, was the nation's 40th president, from 1981-1989. There was bipartisan agreement that his statue belonged in the Rotunda, the symbolic core of American government. On Tuesday, President Barack Obama created the Ronald Reagan Centennial Commission to plan and carry out activities marking the 100th anniversary, in 2011, of Reagan's birth.

His legacy includes the spread of democracy...

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From Paul Krugman at the NYT

Part of the answer is that there’s a lot of money behind them. “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, I would add, his campaign contributions — “depend upon his not understanding it.” In particular, vast amounts of insurance industry money have been flowing to obstructionist Democrats like Mr. Nelson and Senator Max Baucus, whose Gang of Six negotiations have been a crucial roadblock to legislation.

But some of the blame also must rest with President Obama, who famously praised Reagan during the Democratic primary, and hasn’t used the bully pulpit to confront government-is-bad fundamentalism. That’s ironic, in a way, since a large part of what made Reagan so effective, for better or for worse, was the fact that he sought to change America’s thinking as well as its tax code.

How will this all work out? I don’t know. But it’s hard to avoid the sense that a crucial opportunity is being missed, that we’re at what should be a turning point but are failing to make the turn.

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When bankrupt banks, car manufacturers and insurance companies are "too big to fail", handouts from the government are welcome. When you're poor and helpless, you can die in the street, because you're "too small and insignificant" and, of all things, uninsured...

by Alexander Cockburn

The Reagan cult celebrates the centenary of its idol's birth this month, and the airwaves have been tumid with homage to the 38th president, who held office for two terms – 1981-1988 – and who died in 2004. The script of the recurring tributes is unchanging: with his straightforward, sunny disposition and aw-shucks can-do style, the manly Reagan gave America back its confidence.

In less flattering terms he and his PR crew catered expertly to the demands of the American national fantasy: that homely commonsense could return America to the vigour of its youth and the economy of the 1950s.

When the former Hollywood actor took over the Oval Office at the age of 66, whatever powers of concentration he might have once had were already failing. The joint chiefs of staff mounted their traditional show-and-tell briefings for him, replete with simple charts and a senior general explicating them in simple terms. Reagan found these briefings way too complicated and dozed off.

The joint chiefs then set up a secret unit, staffed by cartoonists. The balance of forces were set forth in easily accessible caricature, with Soviet missiles the size of upended Zeppelins, pulsing on their launchpads, while the miniscule US ICBMs shrivelled in their bunkers. Little cartoon bubbles would contain the points the joint chiefs wanted to hammer into Reagan's brain, most of them to the effect that "we need more money". The president really enjoyed the shows and sometimes even asked for repeats.

Even the Westminster City Council could not resist the legend of Ronald Reagan.

On 4 July, Independence Day, a bronze statue of the 40th President of the United States will be unveiled in Grosvenor Square – a distinction that normally must wait until the historical figure in question has been dead at least 10 years. But in Britain it seems, just as in America, that Reagan stands apart.

He died in 2004 at the age of 93 at his home in Bel Air, just west of Hollywood where he first made his name, lost in the fog of Alzheimer's disease. In spirit, however, it is as if he had never gone – as today's Republican search for a challenger to Barack Obama only underlines. The primary campaign that formally kicks off early next year is not just to produce a nominee, but to designate the true heir of Ronald Reagan.

http://www.independent.co.uk/news/world/americas/reagan-a-presidents-second-act-2303168.html

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Gus: for anyone who has not worked in the movie industry, the "brute" is the massive spotlight that lights up a giant set. Then one adds keylights and back-lights to give the illusion of 3D modelling. The brute is powerful like a wartime searchlight with more diffusion. Of course movies are made to give people escape from mundanity by twisting their understanding of pain and contentment... The brute brings the illusion close to home, though in the sixties "cinema verité" came to be. "Cinema verité" was only another trick in the cinematic expressions — all designed to butter illusions of what we do react to. Ronald was an illusion too — one that burnt the future house down. see toon at top..

But we do not live in a sane world, and the idolatry of Ronald Reagan is one of the principle reasons why. This is why it behoves us to review some of the principle lies involved with Ronald Reagan's record, focusing specifically on the economy. What follows is but a brief rundown.

The idea that Reagan produced a uniquely booming economy is false

First, Reagan's record on the economy was not just exaggerated by his boosters, it's almost exactly the opposite of what they claim. It was a fairly ordinary time by the most common measurements of economic growth, looking good only in comparison with a selective time-slice of the 1970s. But once you start looking beneath the surface even the tiniest bit, the picture turns very dark indeed.

In terms of the most basic measure of economic growth - increase in gross domestic product (GDP) - the vaunted "Reagan boom" was an unremarkable period of time. If we look at Reagan's eight years, and compare them with Clinton's and JFK/LBJ's, Reagan comes in dead last, with 31.7 per cent compared with Clinton's 33.1 per cent and JFK/LBJ's 47.1 per cent. Only Nixon/Ford's eight years make Reagan look good, with a mere 26.2 per cent growth.

The idea that Reagan brought prosperity is true only for those at the top, not for average American workers

If we examine incomes, we discover that Reagan's eight years marked a real take-off for inequality, while average incomes stagnated. The income growth of the top once per cent was ten times that of everyone else during his term: 61.5 per cent versus 6.15 per cent. Under JFK/LBJ, the bottom 99 per cent actually did better: gaining 30.9 per cent compared with 26.9 per cent for the top once per cent. And while inequality continued to rise under Clinton, the bottom 99 per cent did more than twice as well as they did under Reagan, gaining 16.7 per cent compared with 56.6 per cent for the wealthiest one per cent.

The idea that Reagan was good for the American economy in general is false

http://english.aljazeera.net/indepth/opinion/2011/07/2011771074476381.html

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Here I am thinking...

When Ronald was in power, I thought this fellow is leading the world into the ditch... He was only rescued by Gorbachev, the true hero of the later part of the 20th century. Sure there were some dark undercurrents and manipulations of running spirits to dismantle the Soviet Union while the US consolidated its position, but there was also a lot of payout and pay offs... Despite what people say of Putin, he understands his country's position like nobody else. He understood how the west could rape Russia out of its underground richness while ruining it. Nothing is ever simple though. Deals have to be made. People have to be put in prison or exiled for profiteering at the expense of the nation. Russia is a net exporter of energy while the US is still thirsty. The emergence of China has compounded the American problems to which they've added a few little silly wars, including having financed the Taliban against the Russians and now fighting the Taliban themselves, on borrowed money. All in all, the American dream is still alive BECAUSE IT SUITS the Chinese to let it run.

So about 2 years I did the cartoon at top...

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Joseph S Nye (Joseph S Nye Jr, Assistant Secretary of Defense in the Clinton Administration, and currently a professor at Harvard University, is the author of The Future of Power.)

This month marks the 40th anniversary of Henry Kissinger's secret trip to Beijing, which launched the process of mending a 20-year breach in diplomatic relations between the United States and China. That trip, and President Richard Nixon's subsequent visit, [Whitlam visited in 1971, Nixon in 1972] represented a major Cold War realignment. The US and China put aside their intense hostility in a joint and successful effort to contain an expansionist Soviet Union.

Today, the Soviet Union has vanished, and Chinese power is growing. Some in the US argue that China's rise cannot be peaceful, and that the US, therefore, should now adopt a policy of containing the People's Republic. Indeed, many Chinese officials perceive that to be the current American strategy. They are wrong.

After all, Cold War containment of the USSR meant virtually no trade and little social contact. Today, by contrast, the US not only has massive trade with China, but also extensive social contact, including 125,000 Chinese students attending universities in the US.

With the end of the Cold War, the containment of the Soviet Union ushered in by Kissinger's visit could no longer serve as the basis for US-China relations. Moreover, relations with China cooled after the Tiananmen Square shootings in 1989, and the Clinton administration had to devise a new approach.

When I was supervising the Pentagon's East Asia Strategy Review in 1994, we rejected the idea of containment of China for two reasons. If we treated China as an enemy, we were guaranteeing an enemy in the future. If we treated China as a friend, we could not guarantee friendship, but we could at least keep open the possibility of more benign outcomes.

In addition, it would have been difficult to persuade other countries to join a coalition to contain China unless China resorted to bullying tactics, as the Soviets did after World War II. Only China, by its behaviour, could organise the containment of China by others.

Instead of containment, the strategy that the Clinton administration devised could be termed "integrate but hedge" - something like Ronald Reagan's "trust but verify" approach to strategic agreements with the Soviets. On one hand, the US supported China's membership in the World Trade Organisation and accepted Chinese goods and visitors. On the other hand, the Clinton-Hashimoto Declaration of April 1996 affirmed that the US-Japan security treaty, rather than being a Cold War relic, would provide the basis for a stable and prosperous East Asia.

http://english.aljazeera.net/indepth/opinion/2011/07/20117591135770761.html

BY Claire Bond Potter

With Build Back Better, President Biden has attempted to revive a New Deal ethic that entwines human and physical infrastructure. No one likes taxes, but building a nation where Americans know that their families are safe and cared for is popular across party lines. It shouldn’t have been a hard sell.

But here we are. The reconciliation package has shrunk to about $2 trillion. And something else is gone: a chance to change the American narrative of what good government does. The legislation was once billed as a plan for sweeping once-in-a-generation social change, but aspects of it that warranted that hyperbole, like dental and vision coverage for Medicare recipients and free community college, have disappeared. Paid family and medical leave have been sharply reduced.

Other industrialized nations provide a far more robust safety net than the one we have and even the one Mr. Biden proposed. Yet Republicans and at least one Democrat insist that such social welfare spending endangers the nation’s fiscal and moral health.

How did we get to a point that doing less for Americans is a virtue, and comprehensive social welfare a privilege?

It goes back to Jan. 20, 1981. On that cold, windy day, Ronald Reagan, who had scoffed at mythical female welfare cheats on the campaign trail, a trope he had revisited since his 1966 campaign for governor of California, took the oath of office. The defeated Democratic President Jimmy Carter, also on the dais, shared some of Mr. Reagan’s distaste for social spending. During his presidency, Mr. Carter charged Secretary of Health, Education and Welfare Joseph Califano Jr. with creating “pro-work and pro-family” rules for recipients (though they never went through).

Mr. Reagan went further. In his inaugural speech, he linked government itself to national decline. The economic crisis of the 1970s, he declared, was “proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.” Social programs were wasteful. Worse, they lured families into dependence.

In other words: The government that helps families most helps them least. It was an idea that became an American ethic, with staying power through Republican and Democratic administrations alike. Attacks on social programs portrayed poverty as a moral failure and exploited racist stereotypes to mischaracterize social welfare as a magnet for criminal, failed and indolent Americans. The belief that successful families helped themselves remained an article of faith in both parties until the socialist Senator Bernie Sanders ran for president.

Under Mr. Reagan, conservatives were finally able to begin dismantling the New Deal state and Lyndon B. Johnson’s Great Society. In 1981 and 1982, Mr. Reagan made more than $22 billion in cuts to social welfare programs, including federal student loans and the Comprehensive Employment and Training Act, a modest program that paid businesses to train and hire economically disadvantaged people.

The federal deficit grew anyway, as Mr. Reagan cut taxes and accelerated military spending. Inheriting a national debt of about $995 billion, he nearly tripled it. But conservative activists still cheered.

In fact, Mr. Reagan’s welfare reforms just made the poor poorer. When a three-year recession hit in 1980, six million more Americans fell into poverty. By 1989, employment recovered, but a weak social safety net meant that workers were an illness or an accident away from hardship.

Democrats were complicit. In 1992, although he would try (but fail) to pass national health care, Bill Clinton promised to “end welfare as we know it.” Looking to a second term, he later blasted big government. The bipartisan Personal Responsibility and Work Opportunity Reconciliation Act of 1996 put mothers to work at low-wage jobs without health care benefits, linked food aid to work, established a five-year lifetime limit on benefits paid by federal money and funded sexual abstinence programs, not reproductive health. By 1999, single mothers on “workfare” had sunk deeper into poverty.

Progressive Democrats did only marginally better. In 2012, Republicans accused President Barack Obama of unwindingdecades of welfare-to-work provisions, with a new system of waivers, work requirements and block grants that states had to follow. And while his Affordable Care Act passed narrowly, under pressure from both parties, he abandoned universal health care.

Today the poverty rate hovers around 11 percent, about where it was in 1973, and economic insecurity now envelops the working poor and middle class. Some economists now argue that the misery caused by decades of failure to support working families paved the way for Donald Trump’s presidency.

That may be true. Left to fend for themselves in poorly regulated markets, by default, working Americans do care for themselves — often on credit. Medical debt was recently pegged at $140 billionand student loans at over $1.7 trillion. Thirteen million workershave more than one job.

Americans work hard, but in the United States it costs money even to go to work. Child care, if parents can find it, can cost more than a mortgage payment. Elder care? Even more. Despite the Affordable Care Act, 28 million Americans are left uninsured.

Cutting social programs failed, yet this ethic dogs us to this day. Why? First, since the New Deal, conservatives have promoted the falsehood that universal welfare programs reward Americans for not working. Second, when Great Society programs failed to eliminate poverty, rather than make federal aid more accessible and inclusive, some liberals implicitly tied welfare to work and implied that the inability to make ends meet was a moral problem.

Thus Reagan-era bromides are alive and well, even in the Democratic Party, and they are undermining good-faith efforts to help a besieged middle class, too. While Senator Joe Manchin has said that he is not against paid leave, some of his comments continue to perpetuate the myth that comprehensive social welfare programs are a national moral hazard. “I cannot accept our economy or basically our society,” Senator Manchin declared as he demanded more cuts in human infrastructure, “moving towards an entitlement mentality.”

And, while the conservative U.S. Chamber of Commerce, a campaign donor to Manchin and Sen. Kyrsten Sinema, supported the hard infrastructure bill, it blasted the earlier $3.5 trillion human infrastructure proposal as “an existential threat to America’s fragile economic recovery and future prosperity.” So it’s no accident that what remains in the reconciliation bill mostly pumps new funds into existing programs: a child tax credit, universal pre-K, climate spending, the Affordable Care Act and affordable housing.

These things are not insignificant. But what Mr. Biden wanted, and America required, won’t happen: a universal safety net that covers the needs of Americans as a right, not a privilege, and a revised tax structure that asks the wealthiest Americans to support the work force that made them rich.

Ten years ago, Americans were already sicker, less educated and poorer than the citizens of most other industrialized countries. This year an estimated 18 million Americans said that they still could not afford a drug prescribed by their physician. Health care providers and patients juggle catastrophic expenses from Covid-19. Of the more than four million women who dropped out of the work force to care for family members during the pandemic, nearly 2 million are still missing in action.

The myths of American individualism planted and nurtured under Mr. Reagan continue to cost us dearly as a nation. “In this present crisis, government is not the solution to our problem; government is the problem,” he insisted in that first inaugural.

The time is long overdue to reverse that equation.

Claire Bond Potter is a professor of history at the New School for Social Research.

Read more: https://www.nytimes.com/2021/11/11/opinion/reagan-social-welfare.html

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