Is Obamanomics a better strategy than Reaganomics?

By Tom Quiner

The economy was in shambles when Ronald Reagan took office, much worse off even than when Barack Obama took office.

The misery index, which adds the inflation rate to the unemployment rate, stood at one of its all time highs at 19.33 when Mr. Reagan took office. By contrast, it stood  at 7.73 when Mr. Obama took office.

The poverty rate was in the midst of an explosive increase, increasing by a third from 1978 thru the recession he inherited.

Real median family incomes decreased by ten percent from 1978 to 1982.

The stock market was in a state of collapse, losing 70% of its real value from 1968 to 1982.

America’s economy was a mess, even worse than that which Mr. Obama faced upon taking office. By no means do I diminish the severity of the economic situation brought on by the subprime mortgage crisis. Things were bad in 2008. Things still are bad. But they were worse in the early 80s by most economic yardsticks.

What is interesting is the different paths these two presidents took to fix the economy’s structural flaws.

Mr. Obama has pursued a course pretty much the exact opposite of that taken by Mr. Reagan.

Mr. Reagan cut taxes. He reduced the top marginal income rate from 70% to 50%, in other words, a big tax cut “for the rich.” He went further and cut taxes across the board by 25% for everyone else. And he got Congress to lower them even more a few years later.

Mr. Obama is agitating to increase taxes on the most productive Americans, aka “the rich.” Rates will increase in 2013 for top earners by 20%, and the capital gains tax rate will increase by 60%.

When it came to government spending, Mr. Reagan cut spending. In all, government spending shrunk from 23.5% of GDP in 1983 to 22.3% of GDP by 1988.

On the other hand, Mr. Obama increased government spending by 23% his first two years. His 2012 budget plans on increasing spending another 57% by 2021.

The Reagan approach was accompanied by a tight money policy from the Federal Reserve.

The Obama approach is accompanied by a loose money policy from the Federal Reserve.

Mr. Reagan cut government regulation beginning with an end to price controls on oil and natural gas.

Mr. Obama has signed massive new legislation into law which will increase government regulation of health care, finance, and energy.

Where Mr. Reagan unleashed the market place, Mr. Obama has embraced central planning as the cornerstone of Obamanomics.

In summary, Reagan cut taxes, Obama is increasing them.

Reagan cut spending, Obama increased it.

Reagan used a tight money policy, Obama, loose money.

Reagan cut regulations, Obama increased them.

So which approach worked best? Quiner’s Diner will look at the results tomorrow. Please check back.