To Create Jobs Obama Can Pivot to Reaganomics

Another disappointing Jobs report was released by the Department of Labor on Friday.  America lost 131,000 jobs in July, the second month in a row of declining employment.   President Obama reacted during a speech at a sign factory in Washington:

We know from studying the lessons of past recessions that climbing out of any recession, especially one as deep as this one takes some time. the road to recovery doesn’t follow a straight line

But the President and the Democratic Congress have implemented a series of measures that defy  the lessons of past recessions, especially 1981 that was, by some measures, worse than this one.

Ninteen months ago President Obama inherited a deep recession.  The center-piece of his response was the so-called Stimulus, $887 Billion in extra borrowing and spending, over and above the government’s already bloated budget.  Obama promoted the stimulus aggressively, promising that it would, in his words “immediately jumpstart job creation.”  Additional responses to the recession were to

  • Expand the bailout program begun under the Bush administration;
  • Enshrine as explicit government policy the theory that some companies, such as GM and Chrysler are deemed too-big-to-fail and will always be rescued from the consequences of their own mistakes, especially if their workforce is unionized;
  • Offer The “cash for clunkers” subsidy to new car purchasers
  • Subsidize blue-sky energy schemes that are too expensive and unreliable to survive in the competitive marketplace;
  • Schedule tax increases on small businesses and investors to begin in 2011;
  • Continuously threaten employers with hyper-regulation, new health care mandates, and an artificial energy shortage imposed by government.

Like President Obama, President Reagan inherited a deep recession as he took office in 1981. By some measures it was worse than the current downturn.  Reagan’s economic program, based on his commitment to liberty, was the opposite of Obama’s:

  • Reduce regulation and government intervention in the economy;
  • Enact sweeping tax cuts that were phased in over three years.  Each of the 16 income tax bracket rates were reduced by at least 25%.  The top bracket rate was cut from 70% to 50%.  Tax cuts left capital in the hands of those who had earned it and were best equipped to invest in job creating enterprises;
  • Release the creative and productive energies of The People from the yoke of imperial government.

The upper chart shows the job market recovery is faltering at best, after 31 months of Bush/Obama policies.  There are 8 million fewer Americans now employed than in December, 2007.

The results, in the lower chart, speak for themselves.  Reagan’s policies turned the job market around after 16 months of losses. The Reagan economy grew continuously for 90 months, creating a total of 21 million new jobs, or a 24% increase in the number of Americans who were employed.

1 Comment so far

  1. Anon on August 7th, 2010

    At what point is it appropriate to raise taxes?

    This is an honest question. The standard conservative line is that taxes should always be cut.

    I understand the rationale that we are in too vulnerable an economy to raise taxes right now, but if we weren’t, would it ever be appropriate to raise taxes?

    What level of tax rates do you view as ideal? Reagan 2nd term? Reagan’s deficits did force Bush Sr.’s tax hikes. At what level are budget deficits too dangerous to ignore?