The Modern Myth of Reaganomics

“It is time to check and reverse the growth of government.” – Ronald Reagan

There is no doubt about it, Ronald Reagan was a fucking statesman through and through and a great leader who helped conquer communism abroad and who helped unite a nation after it was torn apart for two decades by multiple assassinations, war in Vietnam, the Nixon-Watergate scandal and the ultralame shitty bullshit politics of James Earl “Jimmy” Carter. Reagan, the first president I really got to know as a child, as I was born in ’78, seems to be a hot topic for conservatives today.

Fox News light-heavyweight champion, Sean Hannity continually boasts that he is a Reagan conservative and that all conservatives should be as fiscally responsible as Reagan was in the 1980′s. Hannity is right about the fiscal responsibility thing but his view of Reagan is slightly skewed. I am not picking on Hannity, I actually watch his show almost daily and have met the guy, albeit briefly, however his stance and interpretation of Ronald Reagan seems to be the popular and accepted version of the “truth” by conservatives and Republicans abroad. Unfortunately, Reagan was not as fiscally responsible as many would like to believe. In fact, in some ways, he was worse than Barack Obama. Sacrilege, I know, but let’s look at the how’s and why’s and the factual evidence that supports it.

We have just passed the 18 month mark of Barack Obama’s presidency, and unemployment is worse now than what it was when he was sworn into office. Because of the Obama Administration’s fiscal carelessness, our current president is often times compared to the “fiscally responsible” Ronald Reagan. Well, looking at the unemployment statistics is kind of eye-opening and will most likely be shocking to Reaganites. During Obama’s first 18 months, unemployment rose from 7.7 percent to 9.5 percent; that’s pretty horrible. However, over the course of Reagan’s first 18 months, unemployment rose from 7.5 to 9.8 percent; that’s half a percent higher! In retrospect, as far as unemployment goes, Obama is doing a better job than Reagan at the start of his presidency. That’s a hard pill for me to swallow and I’m sure it’s much harder to swallow for a lot of you. Obama is a fiscal monster but facts are facts and there is that old adage that numbers never lie. After three years, unemployment was at 11% under Reagan. In another 18 months, we can compare Obama’s numbers to that figure.

Ronald Reagan also holds a record, that record is being the president with the highest average spending as a percentage of the GDP. Inflation has warped the numbers since the 1980′s but when looking at a total percent of our nation’s GDP, Reagan takes the cake. Granted, Obama is on his way to shattering that record but the fiscal responsibility of former-President Reagan must come into question and raise some eyebrows. During Reagan’s last year in office the percentage of GDP being spent was at 21.3%, giving us a deficit of 3.1%. At one point in 1983, the budget deficit was at 6%! In fact, federal spending under Reagan grew from $678 billion to $1.14 trillion. Even amongst a plethora of raised taxes, Reagan could not bring the GDP deficit down to a real manageable level.

Speaking of raised taxes, Reagan increased taxes twice in 1982 and then raised them again in 1983, 1984, 1985, 1986 and 1987: nearly every year that he was in office. With all of these new tax dollars coming in, the Reagan Administration was still underwater. Keep in mind that this was after the tax cuts of 1981 that many conservative commentators like to use in their “talking points”.

On a side note: as governor of California, Ronald Reagan instituted the highest tax increase in state history.

The Mises Institute analyzed and commented on Reaganomics at the end of his presidency in 1988. Here are a few quotes from that article (found here):

“So how did the Reagan administration do? At the end of the first quarter of 1988, federal spending accounted for 28.7% of “national income.”"

They also added:

“Reagan came into office proposing to cut personal income and business taxes. The Economic Recovery Act was supposed to reduce revenues by $749 billion over five years. But this was quickly reversed with the Tax Equity and Fiscal Responsibility Act of 1982. TEFRA—the largest tax increase in American history—was designed to raise $214.1 billion over five years, and took back many of the business tax savings enacted the year before. It also imposed withholding on interest and dividends, a provision later repealed over the president’s objection.”

As well as:

“Even the heralded Tax Reform Act of 1986 is more deception than substance. It shifted $120 billion over five years from visible personal income taxes to hidden business taxes. It lowered the rates, but it also repealed or reduced many deductions.”

And:

“The Reagan administration has been the most protectionist since Herbert Hoover’s. The portion of imports under restriction has doubled since 1980. Quotas and so-called voluntary restraints have been imposed on a host of products, from computer chips to automobiles. Ominously, Reagan has adopted the bogus fair-trade/free-trade dichotomy, and he was eager to sign the big trade bill, which tilts the trade laws even further toward protectionism.”

And finally:

“Reagan’s fans argue that he has changed the terms of public-policy debate, that no one today dares propose big spending programs. I contend that the alleged spending-shyness of politicians is not the result of an ideological sea-change, but rather of their constituents’ fiscal fright brought about by $250 billion Reagan budget deficits. If the deficit ever shrinks, the demand for spending will resume.”

Now keep in mind that that article was written in 1988, when all the information was still fresh in people’s minds and not twisted and contorted by time and agenda-driven quasi-historical misinformation.

Taking from that article as well as other sources, there are more numbers and facts to look at when dissecting what has become the myth of Reaganomics. For instance, Reagan boosted import tariffs and trade restrictions.  One example is when Reagan imposed punitive tariffs on Brazil to punish them for curbs on American computers and software. Sir Ronald also set a 100 percent tariff on selected electronic goods coming in from Japan. So much for free trade and free markets, eh?

The following quote is from an article that appeared in the Wall Street Journal in 1982:

“In recent months the administration has accelerated its provocation of trade warfare with the European Economic Community over steel; with Japan over autos, airline service and high-technology products; and with the Third World over sugar and textiles. Mr. Reagan has even extended quotas on imported clothespins, citing the national interest. This is the consequence of the administration’s sensitivity to privileged business and union interests and its lack of appreciation of the people’s freedom to choose.”

Is it beginning to sink in yet? If not, there is more.

• Presidents Ford and Carter combined increased government spending by 1.4 percent. Reagan alone increased it an additional 3 percent.
• Reagan created a 60 percent increase in total government spending.
• The Department of Education’s budget was promised to be cut but was instead increased by $22.7 billion.
• Social Security rose from $179 billion in 1981 to $269 billion in 1986.
• Farm subsidies increased from $21.4 billion in 1981 to $51.4 billion in 1987.
• Medicare swelled from $43.5 billion in 1981 all the way up to $80 billion in 1987.
• Federal entitlements were $197.1 billion in 1981 and exploded to $477 billion in 1987.
• Foreign aid rose from $10 billion to $22 billion.
• Etcetera, etcetera, et-fucking-cetera.

The illusion that Ronald Reagan was for smaller government can be easily shattered by the fact that he increased the size of the Federal Government exponentially during his eight years in office. Between the tax increases, the budget being out of control and several other variables it is really hard to hear the bullshit that is being presented by many political commentators and conservatives who either don’t understand economics, don’t know how to look at facts or just bury their heads in the sand.

The grim reality is that Reagan wasn’t much better than what we have today. He talked a big game and his often-quoted speeches are great sources of inspiration in fighting against big government but when it really came down to it, Sir Ronald’s policies were far from Sir Ronald’s words. It is funny how history rewrites itself and how people’s interpretations and memories are very selective.

I guess the lesson to be learned is that we all know what needs to be done, at least most of us do, so let’s just do it. Find the inspiration in yourselves and stop turning to leaders with a botched legacy. Deifying any human being will bite you in the ass, not to mention the fact that a whole movement based off of bullshit will eventually crumble under its own fallacies and misinformation. I like Reagan, he was generally a good president and he did do a lot of good but as far as using Reaganomics as an example against Obamanomics, one must really reconsider and reanalyze the reality of those claims.

“How can a president not be an actor?” – Ronald Reagan