Economics

Can Obama pull a Reagan?

Jon Terbush at Business Insider has an interesting post here with the provocative headline “Here’s The One Unemployment Chart Obama Will Use To Win Reelection.” He writes:

What the following chart shows is that Obama inherited a bum economy but that, under his watch, things have begun to turn around. In the past year, the unemployment rate has dropped a full percentage point amid improving job growth. Assuming those trends continue, Obama will be able to say that, yes, the economy needs to be much stronger, but that it’s currently heading in the right direction.

That exact pitch helped Reagan win his 1984 reelection bid when he destroyed Walter Mondale—Mondale carried only his home state of Minnesota and Washington D.C.—despite an unemployment rate of 7.4 percent on election day. One year earlier, unemployment stood at 8.8 percent, higher than it is today, but it then steadily ticked down over the following months.

It’s a fair point. But here are a few things to keep in mind.

Reagan had several beasts to slay when he took office. He inherited an obscene inflation rate—12.6 percent on Election Day 1980. When he was re-elected in 1984, inflation was down to 4.1 percent. Reagan was rightly given credit for this taming of inflation. Inflation has never broken 4 percent during Obama’s tenure. No beast to slay, no credit to take.

The prime rate when Reagan was inaugurated was over 20 percent. When he was re-elected it was down to 11.77 percent. The prime rate when Obama was elected was 4 percent and it has been 3.25 percent in every month of his presidency but two. Again, no beast, no credit.

How about jobs? Unemployment in November of next year would need to be 6.8 percent for the drop in the rate from its peak during Obama’s tenure to be as steep as it was under Reagan. That’s not impossible, and it’s something everyone wants, but with sluggish growth it’s highly unlikely.

And this is the key difference between the two. Reagan’s policies—tax cuts, bold regulatory reform, and so on—were explicitly growth oriented. Obama’s? Not so much.

Lastly, it’s worthwhile to contrast Obama’s speech in Kansas one year before his re-election with this Reagan speech one year before his re-election bid, in which Reagan said:

When this administration took office, we declined to go with patchwork solutions and quick fixes. We delivered, instead, on the promises we’d made to the American people, promises that were part of a consistent and coherent view of this nation’s needs and problems. We had a policy; we put it into effect. We made our promises, and we kept them. … For the first time since 1964 all personal income tax rates have been cut—and cut by a hefty 25 percent across the board. And we made the most important reform of them all; in 1985, your income taxes will be indexed, so never again will you be pushed into higher tax brackets by inflation.

The story is the same for our efforts to deregulate the American economy. It was only a few years ago that every time you turned around, some government bureau had slapped on more restrictions on our commerce, our trade, and our lives. We were at the point where we could hardly adjust our thermostats or use our credit cards without checking first with Washington. Our regulatory task force has already cut the number of final regulations issued by almost 25 percent and saved American industry some 300 million hours of filling out forms.

And now that inflation has been reduced to 2.6 percent and the economy is on the move again, I’m just wondering where are all those folks who kept insisting that Reaganomics would lead to crippling recession or runaway inflation. In fact, how come no one calls it Reaganomics anymore? I never did call it that. That was their name when they thought it wouldn’t work. I just called it common sense. But is it because our program is doing what we said it would, making America prosperous and strong again?

If Obama had been able to deliver a speech like this in Osawatomie, he’d be a shoo-in for re-election.

2 thoughts on “Can Obama pull a Reagan?

  1. You answered your own question, didn’t you–Obama will NOT be able to “pull a Reagan”; in fact, he’ll pull a “reverse” Reagan. He’d going to lose by the biggest landslide in U. S. history. If you don’t think so, just cool your heels for a few months . . .

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