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TMFHousel (92.13)

Reagan Vs. Obama

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June 15, 2011 – Comments (10)

The theme has been blaring for years, but nowhere was it louder than last night's Republican presidential debate: If only Obama would mimic the economic policies of Ronald Reagan, the economy would be booming -- just like it was under Reagan.

I decided to pull up some numbers to put this topic into context. Obama is 2.5 years into office. Compare that to a few economic numbers 2.5 years after Reagan entered office.

Real GDP Growth:

Jan. 1981-June 1983: 1.1%

Jan. 2009-June 2011: 4.7%

Unemployment Rate:

June 1983: 10.1%

June 2011: 9.1%

Jobs created (lost)

Jan. 1981-June 1983: (1.86 million)

Jan. 2009-June 2011: (3.3 million)

Stock market:

Jan. 1981-June 1983: +24%

Jan. 2009-June 2011: +50% 

Corporate profit margins

1981: 6%

2011: 13.3% 

Federal taxes as a percentage of GDP

1983: 17.5%

2011: 14.4%

Federal spending as a percentage of GDP

1983: 23.5%

2011: 25.3% (23.8% in 2010) 

Top marginal tax rate (personal income)

1983: 50%

2011: 35%

Top marginal tax rate (corporate income)

1983: 46%

2011: 35%

Discuss. 

10 Comments – Post Your Own

#1) On June 15, 2011 at 12:42 AM, TMFHousel (92.13) wrote:

Sorry, the year under corporate profit margins should read 1983, not 1981. 

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#2) On June 15, 2011 at 1:09 AM, awallejr (79.68) wrote:

Not much to discuss since it would be apples to oranges.  Reagan came in after replacing Carter's failed Presidency.  You had serious stagflation with double digit inflation and double digit interest rates, thanks to Volcker trying to break the back of the same.  Obama came in after one of the greatest financial collapses in history.

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#3) On June 15, 2011 at 1:16 AM, TMFHousel (92.13) wrote:

Both inherited gigantic messes, in other words. While the mechanics of each mess was different, I think the two periods are probably the most apt comparisons of any 2.5 periods of the past half century -- extreme econoimc upheaval and massive uncertainty. 

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#4) On June 15, 2011 at 1:18 AM, TMFHousel (92.13) wrote:

^ 2.5-year periods, that is. 

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#5) On June 15, 2011 at 7:00 AM, dbjella (< 20) wrote:

During Reagan's day (BTW, I don't really credit Presidents for economies as Congress plays a role as well) were we not at the beginning of the "information" age?  I mean MSFT, INTC, ORCL.... and others were just making strides.  Productivity was really starting to improve.  People wanted and needed things.

Today, not to go all Altsty on you, we are pretty well built up and I see the following problems with very few solutions:

1)  IMHO, we won't really see much in the way of productivity gains as we have become pretty efficient...there will always be ways to be more productive, but using technology really soared and hit its mark in the 80's & 90's.  With all these productivity gains we have people with nothing to do (see the relation to #3).

2) We are getting older.  We will use more of our resources to keep people from dying.

3) My father and mother (in the age group with the most people) have everything they need or want.  They don't want another car, boat, computer, furniture......  I suppose they will have to replace the cell phone :)

4) The world is flooded in IOU's.  Debt. DEBT. DEBT. Some of that may traced to the 80's and Reagan.   Country after country spends more than they take in.  Consumers did the same.  I know quite a few people who mortgaged themselves to the hilt with 2nds and are underwater today.

5) The world is much smarter than it was in the 80's.  I don't think people were on daily calls to India or China back then.  People complain that manufacturing has moved overseas and blame politicians, but in global competitive world if someone makes toys for example much cheaper at the same quality desired by consumers they are going to get the business.

6) Inflation is going up not down as it was in the 80's.  I know the CPI numbers reported, but from my own experience the things I buy have gone up while my wage is stagnant.  I would have expected prices for things to plummet and they did briefly at the start of 09.  Now, they are much higher.  Bacon was $2.89 in March of '09 (I can't tell you why I know this) and today it is $4.25.  Maybe that could be Swine flu related, but eggs are higher and gas.....  My mom bought the kids a bag of "fun" size snickers.  I have no idea how much she paid, but have you seen how small a "fun" size is now?  

These are just a few, but enough for me to explain that this time is different.  The one piece that scares me is debt.  Logically, I don't see how more debt helps this situation, but there are people far smarter than me at higher pay grades that will say otherwise :) 

 

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#6) On June 15, 2011 at 7:36 AM, alstry (36.08) wrote:

Obama borowed more money in two years of his presidency than America borrowed in its FIRST 200 YEARS.

What is your point?

Borrowing trillions allows you to spend a lot?

Now we are draining pension plans to keep the country running...next it will be 401Ks/IRAs/and investment accounts.

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#7) On June 15, 2011 at 7:54 AM, dbtheonly (< 20) wrote:

Two big differences.

Reagan was able to rasie taxes several times.

And, oh yes, Reagan was white so no questions about him being a Muslim/Kenyan/terrorist infiltrator.

 

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#8) On June 15, 2011 at 6:00 PM, TMFTypeoh (80.59) wrote:

Morgan,

Interesting comparison.  I had a similar thought today, about the two being compared, and I wondered if Obama would talk about what he inherrited, and where we are today.

 I'm glad you are looking at this with fresh eyes, just giving us the facts. I've got a feeling the Fox news junkies will still attack (see above), but I'm glad you posted this.

 Under that "jobs created/lost" stat, any idea what it would be if adjusted for population growth?  I've got a feeling that 30 years ago the population of the US was mayb 200 MM or so, which would mean the 3.3 MM job lost for Obama would be about the same in terms of percentage as the Reagan error.

 Also, can you give us an idea what debt/GDP was?  Obviously, its WAYYYYY higher in nominal terms.

 

Nice post.

Brian 

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#9) On June 16, 2011 at 3:26 PM, Melaschasm (57.74) wrote:

There are a few major differences.

1.  Reagan was elected after years of stagflation, Obama was elected during a short sharpe recession.

2.  Reagan's tax cut policies were not implimented during his first year because he had to work with an opposition controlled congress.  Obama's big spending agenda began before the election, and Obama's party controlled congress during his first two years in office.

#7)  When Reagan was elected the tax rate was 70%+.  When Reagan left office the tax rate was 28%.  Under what possible definition can that be considered a tax increase?

 

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#10) On June 20, 2011 at 5:51 PM, miteycasey (30.18) wrote:

Watch the Documentry 'I want your money'.

It breaks down over 1.5 hours. 

Kinda interesting.

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