Quote:

---

Let’s be perfectly clear, the Reagan Recovery (RR) has been far stronger than the Obama Recovery (OR). I think that is beyond dispute, really. – In the first ten quarters of the OR, GDP is up a total of 6 percent. During the first ten quarters of the RR, GDP rose 15 percent. Point for Reagan.
– In the first ten quarters of the OR, the economy created 790,00 jobs. During the first ten quarters of the RR, the economy created 7.5 million jobs Point for Reagan, especially given the U.S. workforce is a third bigger today than it was in the early 1980s.
– In the first ten quarters of the OR, real disposable personal income rose at an annual average pace of 0.8 percent. During the first ten quarters of the RR, real disposable personal income rose at annual average pace of 5.4 percent. Point for Reagan. Game. Set. Match.

---

Quote:

---

The problem is that Pethokoukis is knocking over a straw man here. He's defining housing bust purely in terms of housing construction, while ignoring the real elephant in the room: The collapse in home prices, and the knock-on effects it has had on the economy. Almost nobody, when they're talking about the housing crisis, is talking about it purely in terms of residential investment (though that is one sub-area). Lest anyone be confused about what happened, here's a look at the national House Price Index going back to 1975. As you can see, home prices didn't even notice the two early '80s recessions. They collapsed massively, however, starting late in the Bush administration.

---

Quote:

---

To put it bluntly, this is A Big Deal, and a dynamic not captured at all merely looking at the residential construction's share of GDP.
The unprecedented (in post-War America) housing bust also corresponds with another thing that made this recession unique: the credit bust.

---

Quote:

---

So at least right off the bat, we can easily identify some huge differences between the conditions that Obama inherited and what Reagan inherited.
But we're just getting started ...
The first, obvious, point is that soon after Reagan entered office THE U.S. WENT INTO A RECESSION!

---

Quote:

---

Another thing about Reagan was that he was a deficit-lover.
Reagan presided over the largest (still) one-year annual jump in the size of the national debt. (And PS: that just happened to be right after the recession, when the economy started growing like crazy as Pethokoukis notes)

---

Quote:

---

If you want to look just at annual growth of government spending, Reagan clearly had more sustained growth than Obama has had. Note that Reagan never once had a period of shrinking government spending.

---

Quote:

---

The 1982 recession and the 2008 financial crisis were not the same. In the early-1980s, the country was fighting a decade of stagflation. Paul Volcker, the chairman of the Federal Reserve, decided to wring inflation out of the economy by sharply raising interest rates. The medicine worked to cure inflation, but it threw the economy into a deep recession. Recovery came when the Federal Reserve lowered interest rates again and sparked an investment boom. In contrast, the 2008 financial crisis was the result of a credit bubble. It came when the Federal Reserve was already trying to stimulate the economy with low interest rates. It was — and is — global in nature, and for the economy to recover, households need to dig themselves out of debt such that they can begin spending again. Unlike the Federal Reserve lowering interest rates, that takes time. A long time. To attach some numbers to this story, in 1982, household debt amounted to about 45 percent of GDP. In 2009, it was 100 percent. Those numbers imply very different recoveries.

---

Quote:

---

The 1980s were not all about Reagan. The effect Volcker’s policies were having on the economy was well understood. Here’s the New York Times, in 1983: “As the recession deepened in 1982, the United States and the rest of the industrialized world focused on high interest rates as the cause - and on Paul A. Volcker as the culprit.” The House majority leader, Democrat Jim Wright, called for Volcker to resign. Reagan officials were unhappy, too. “A question that seems to be in the minds of many people in the Reagan Administration and the business community is whether the Federal Reserve should pull back a bit from its restrictive monetary policy and let the President’s economic recovery package have its intended stimulative effect on the economy.”
Be very skeptical of any discussion of the recession or recovery of the early-1980s in which Volcker — or at least the Federal Reserve -- is not a primary actor. You’re likely reading a piece that deifies Reagan rather than a piece of actual economic analysis.

---

Quote:

---

The 2000s are not all about Obama. Key decisions about regulating financial derivatives were made under Clinton. The credit bubble built under Bush. The initial response to the financial crisis — which set us on a path that was hard to reverse after-the-fact — was made by Bush’s Treasury Secretary, Hank Paulson, and Federal Reserve Chairman Ben Bernanke. The pace of recovery has been substantially slowed by the European debt crisis and the rise in oil prices that resulted from the Arab Spring.

---

Quote:

---

Obama’s recovery isn’t done. For reasons laid out above, I don’t think you can make an apples-to-apples comparison between Obama and Reagan. But it’s certainly worth keeping the obvious in mind: Obama’s recovery isn’t done. At this point in Reagan’s presidency, unemployment was eight percent — though it was falling quickly. There’s nothing in the economic data right now suggesting that unemployment will fall very quickly over the next year, but a world in which the unemployment rate is 7.5 percent in November will look better for Obama than a world in which unemployment is 8.2 percent — even if the difference was made by policymakers in Brussels.

---

Quote:

---

Which isn’t to say that there aren’t useful comparisons to be made between the policies pursued by Obama and previous presidents. But the comparisons need to focus more tightly on the policies they pursued then the circumstances they faced. For instance:
Obama’s policies have temporarily increased deficits. Reagan’s policies permanently increased them. Reagan’s policies were notable for increasing structural deficits. That is to say, he passed permanent, deficit-financed tax cuts. Long after the recession was over, his tax cuts remained, necessitating the deficit-reduction bills passed by George H.W. Bush and Bill Clinton. Obama’s major deficit-financed policies -- the stimulus and the 2010 tax deal -- have both been temporary. Obama has, in other words, been much more concerned with out-year deficits than Reagan ever was.

---

Quote:

---

When Reagan entered office, taxes were unusually high. When Obama entered office, taxes were unusually low. In 1980, taxes were 19.6 percent of GDP. That was higher than they had ever been outside of wartime. When Obama entered office, taxes were below 15 percent of GDP -- lower than they had been since before the creation of Medicare and Medicaid. This helps explain why Reagan sought a long-term tax cut, while Obama is seeking a long-term tax increase.

---

Quote:

---

That said, Obama wants lower taxes than Clinton. If Obama has his way, the majority of Bush’s tax cuts will be made permanent. That is to say, the long-term tax burden under Obama will be lower than it would have been if Clinton’s policies had been continued. I consider this as basically irresponsible: The coming retirement of the baby boomers requires a revenue base at least as large as Clinton envisioned. Nevertheless, the conservative nostalgia for Clinton and Clinton-era economic policies is, at least in terms of taxes, misplaced.

---

Quote:

---

The political system is vastly more polarized today than it was in the 1980s. This rarely gets much attention, but it matters. Reagan negotiated his policies with the Democratic Speaker of the House, Tip O’Neill. Many Democrats voted with Reagan to cut taxes, and Reagan subsequently signed multiple pieces of legislation raising taxes to cut down on deficits. If the political system today was more similar to the political system of the 80s, it’s likely that we would have seen both more short-term stimulus and more long-term deficit reduction. Under both Keynesian and non-Keynesian models, that would have helped the recovery. It is hard to say what Reagan’s record would look like if he had faced a divided Congress in our more polarized moment.

---

Rosaria posted:

---

Do you believe this is Obama's recovery/economy, and if so, will you continue to believe that during the next two quarters?

---

Ashmaele posted:

---

I do. I think this blurb by Klein sums up my feeling about it more fully, though:


The political system is vastly more polarized today than it was in the 1980s. This rarely gets much attention, but it matters. Reagan negotiated his policies with the Democratic Speaker of the House, Tip O’Neill. Many Democrats voted with Reagan to cut taxes, and Reagan subsequently signed multiple pieces of legislation raising taxes to cut down on deficits. If the political system today was more similar to the political system of the 80s, it’s likely that we would have seen both more short-term stimulus and more long-term deficit reduction. Under both Keynesian and non-Keynesian models, that would have helped the recovery. It is hard to say what Reagan’s record would look like if he had faced a divided Congress in our more polarized moment.

---