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Thursday, February 9, 2012

Reagan and Obama: No, Things Were Not the Same!

"Reagan inherited an economy with similar problems to that inherited by Obama.  But by the third year, things were really simmering along and the GDP was growing at a very quick pace!  

Reagan's economic policies and tax cuts were therefore better than those of Obama." 

I've heard and read this in many places this winter.

Well...not so fast....

The Truth About Reagan and Carter and the 1981 recession

I read the following yesterday posted as a comment at the Huffington Post.  Let's debunk this fact by fact:

1.  "Ronald Reagan "inherited­" a very similar (to the current) economic downturn from Jimmy Carter in 1981."

2.  "Three years into Reagan's presidency his economic policies created over 6.3 MILLION jobs, reduced unemployment from double digits to 7%....Reagan created over 6 million jobs at the same point in his presidency as Obama is now."

3.  GDP growth was booming near 6% ...

4.  (Reagan did this)  WITHOUT spending TRILLIONS in taxpayer money.

5.  Reagan CUT taxes and the booming economy and the millions more people in the workforce with jobs actually INCREASED federal income tax revenue!!"

I think we need a few facts here:   
  • The recession in 1981 was a Reagan recession. He inherited a DECLINING unemployme­nt rate from Carter, a DECLINING inflation rate, and an INCREASING number of jobs.  Carter's one term was the TOP one term for any modern Prez in % of job growth. 
  • Unemployme­nt was NOT double digits when Reagan took office. In January 1981, unemployme­nt was 7.5%. The highest unemployment rate under Carter was 7.8% in the summer of 1980. Reagan's policies (those severe tax CUTS) got the unemployme­nt rate climbing, and it went up to 10.8% in Fall 1982. When Reagan's budget director realized that the economy was in trouble (Hmm- maybe those tax CUTS were extreme?), Reagan was willing, with the help of a CO-OPERATI­VE DEMOCRATIC House of Representatives, to roll back some tax cuts--- and within half a year, the unemployment rate started dropping and the economy was rolling again.
  • Reagan had NOT created over 6 million jobs by the same point in his presidency as Obama's current point (January 2012 vs. January 1984).    There were 91,030,000 jobs when Reagan took office from Carter in January 1981. (This was a new high in the United States.)  Jobs increased for five months after Reagan was elected and then started to decline. Jobs were down to 88,770,000 in late 1982. When taxes were increased in late 1982, jobs started to come back. In January 1984, (same time frame as now), there were 92,657,000 jobs, an increase of 1,627,000 from the time Reagan took office.  From the "trough" of the 1981-2 recession, the increase was 3,887,000. Remember Reagan inherited a declining unemployme­nt rate and an increasing number of jobs.

Remember: Reagan was working with a DEMOCRATIC House in Congress. They could have played obstructio­nist games as the Reagan administration was on the ropes in late 1982, but it appears that they cared more about the American people than about getting the Republican out of the White House.  However, the current obstructio­nist Republican Congress will do anything, including prolonging the misery of the American people, to get Obama out of office.    (Click on that link if you haven't heard about the Inauguration 2008 night meeting of Republicans who were busy plotting to keep you in misery.. just to recapture the White House.)

I will repeat one thing: It was Reagan's tax CUTS in 1981 that plunged the country into that deep Reagan recession. It was the tax INCREASES in late 1982 that got the economy moving again.

Now let's look at those GDP (Gross Domestic Product) growth rates:  

The GDP did take a nasty dip during the spring of 1980.  It popped back up pretty quickly, and the GDP was chugging along at an increase of 7+% when Carter was elected.  It hummed along at an increase of 8+% in early 1981 during and after Reagan's inauguration.  Most of the problems in the economy could be related to the 1979 oil crisis, resulting from both the Iranian revolution and the start of the Iran/Iraq war.  

Reagan inherited an economy that had a quick brief downturn, turned around, and was starting to cook.   Period. 

Then in Spring 1981, the GDP again went negative, with a small recovery in the summer.  Reagan's major tax cut, the Economic Recovery Tax Act of 1981, was signed in mid August 1981.  Starting in the 4th quarter, October 1981, things really fell apart, with a 5% decline in GDP in that quarter and a decline of over 6% in the GDP in the first quarter of 1982.  Things were very dicey throughout 1982 and the unemployment rate kept climbing from 7.5% when Reagan was inaugurated up to 10.8% in late 1982.  

Congress apparently worked on a tax INCREASE all year, and finally a tax increase package, the Tax Equity and Fiscal Responsibility Act, was signed into law in November 1982.  And a couple of months later, the 10.8% unemployment rate started to decline and the GDP started to grow again..vehemently.  By the end of Reagan's third year in office, in late 1983, the unemployment rate was 8.3% and the GDP started growing again.. with a vengeance.    

Some charts and information for comparison:  

GDP growth by quarter from :

 1980 01  1.2909
 1980 02  -7·9500
 1980 03  -0·7381
 1980 04 37.6023
 1981 01  8.5781
 1981 02  -3.1550
 1981 03  4.9475
 1981 04  -4.8870
 1982 01 8-6.4081
 1982 02 12.1843
 1982 03 1-1·5275
 1982 04 30.3143
Here's what was happening at the time Obama was elected:

 2008 01 95-1·7652
 2008 02 121.3241
 2008 03 73-3·6629
 2008 04 72-8.8903
 2009 01  4-6.6663
 2009 02  2-0.6900
 2009 03  11·6940
 2009 04  93·8027
 2010 01 483.9339
 2010 02 623·7875
 2010 03 212.5074
 2010 04 942.3493
Notice in particular the three quarters of significant downturn that started before Obama took office and during his earliest months in office.  Compare 2008 Q3 & Q4 and 2009 Q1 with 1980 Q3 & Q4 and 1981 Q1: 

2008 Q3       -3.7                   1980 Q3      -0.7
2008 Q4       -8.9                   1980 Q4      +7.6
2009 Q1       -6.7                   1981 Q1      +8.6

No, Reagan and Obama did NOT inherit similar economies.

Let's compare the unemployment rate situation around the time the two men took office:  
                                       2008-9                     1980-1
July                                  5.8                              7.8
August                             6.1                              7.7
September                        6.1                              7.5
October                            6.5                              7.5 
November                         6.8                              7.5 
December                         7.3                              7.2
January                            7.8                              7.5
February                           8.3                              7.4
March                               8.7                              7.4
April                                 8.9                              7.2

Which column is increasing.. rapidly.. and which column is decreasing, though slowly?

HERE is a list of Reagan tax measures, both increases and decreases.
From ThinkProgress:  Ten Things Conservatives Don't Want You To Know About Reagan  
Another good link comparing the two Presidents and the situations they "inherited":  Why the Obama Recovery is Much More Impressive Then the Reagan Recovery
(Obama/Reagan "Photo/illustration" from a Time magazine cover HERE! )


  1. There you go again with those pesky things that many on the right are allergic to... facts! I look forward to see what new info you add to this post.

    By the way, I added you to my blog roll... keep up the great work!

  2. Hi Malcolm! You are right... There I go again! With facts! Thanks for the add, Malcolm. I will be adding a few facts about jobs numbers and a couple of links.


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