Ezra Klein points out that government spending under Barack Obama detracted from official GDP estimates of economic growth in 2011 and 2012 — after adding to it in 2009 — while government spending added to GDP growth under Ronald Reagan. He then runs a little counterfactual:
Just for fun, I took Obama’s GDP growth, netted out the effect of government spending and investment, and then added the total government spending and investment numbers — which include state and local government — from Reagan’s first term. The result is a significantly better economy, with growth since 2010 averaging 3.2 percent rather than 2.4 percent.
Just for fun, I did the opposite. What if government subtracted from GDP growth under Reagan the way it has during the Obama recovery, about a third of a percentage point. During Reagan’s first full three years of recovery, GDP growth averaged 5.3%. So replacing Reagan-government spending with Obama government-spending gives you average GDP growth of around 4%.
So even with all that back-of-the-envelope rejiggering and recalculating and counterfactualizing, the Reagan recovery as measured by GDP growth was considerably stronger. Let me also add that these spending numbers include state and local spending, which have detracted more from GDP growth than federal spending since 2009. Also, most of the government spending adding to GDP under Reagan was defense spending.
And don’t even get me started on the difference in job growth. Well, maybe just one thing: During the Reagan recovery, the US labor market regained ALL the jobs lost during the 1981-82 recession in just 12 months. So far during the 3 1/2 year Obama recovery, we’ve regained about 60% of the jobs lost during the Great Recession.