2020年12月15日 星期二

Legend of the Gipper

The truth about Ronald Reagan’s economic record.
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By Paul Krugman

Opinion Columnist

Programming note: This newsletter will be off for the holidays for the next two weeks. I’ll see you in your inbox again on Jan. 5.

Today’s column was about the Republican rejection of facts, which I argued really began under President Ronald Reagan. In passing I said a bit about the legend of the Reagan economy, which plays an outsized role in conservative economic doctrine to this day. And I thought it might be interesting to talk some more both about the reality of Reaganomics and the relevance of that reality to possibilities over the next few years.

First of all, why are Republicans still talking so much about Reagan? The answer is that the core of modern conservative economic doctrine is the assertion that cutting taxes, especially on the wealthy, does wonderful things for the economy. And they hold up Reagan’s economic record as proof of that doctrine’s truth.

Why use an example that is decades in the past, rather than a more recent success story? The answer is that there aren’t any recent success stories. Since 1990 claims that tax cuts will generate huge booms — and that tax hikes will lead to disaster — have belly-flopped again and again. President Bill Clinton’s tax increases in 1993 didn’t cause the recession just about everyone on the right predicted; President George W. Bush’s tax cuts didn’t produce a “Bush boom.” The Trump tax cut didn’t deliver anything like the promised results.

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In 2011 Gov. Sam Brownback of Kansas cut taxes sharply, promising that this would lead to a surge in growth. It didn’t. At the same time, California raised taxes; conservatives declared that this would be “economic suicide.” It wasn’t.

So it’s back to Reagan. But was the Reagan story really all that great?

Right-wing politicians think so — but this is based on what they’ve heard from people in their intellectual bubble. A few years back, for example, Sen. Rand Paul made what he thought was a telling point: “When was the last time in our country we created millions of jobs? It was under Ronald Reagan …” Actually, more jobs were created under Clinton.

So where does the legend of Reagan come from? Partly, of course, from pretending that the Clinton-era boom never happened — which is easier because of the “hack gap”: Conservatives and their media outlets constantly harp on their preferred story lines, in a way liberals don’t. But it also involves a bait-and-switch on timing, essentially pretending that Reagan’s presidency didn’t start until the end of the severe recession that occupied most of his first two years in office.

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How much difference does this make? If you look at G.D.P. over the whole of Reagan’s time in office, it grew at an annual rate of 3.38 percent — compared with 3.33 percent under President Jimmy Carter and 3.68 percent under Clinton. Given the limitations of economic statistics, which I like to describe as a peculiarly boring form of science fiction, this basically amounts to no difference.

But if you start at the bottom of the 1981-2 recession, the rate of growth in the rest of the Reagan years was 4.7 percent. Morning in America!

The truth is that Reagan doesn’t deserve blame for the 1981-2 recession — but he doesn’t deserve credit for the subsequent recovery, either. Instead, it was all about the Federal Reserve. The Fed sharply raised interest rates in 1980 in an attempt to bring inflation down, causing a severe recession; then it relented in the summer of 1982 and the economy snapped back. That snapback led to two years of rapid growth, as unused capacity was brought back online — and tax-cutting conservatives have been falsely claiming credit for that growth ever since.

So what’s the relevance of all this to where we are now? I’ve been arguing for a while that the pandemic is playing an economic role that, in a peculiar way, is similar to that of the high interest rates of the early 1980s, and that there will be a period of very fast growth once the vaccine lets us go back to more or less normal life. So, do you think conservatives will give President-elect Joe Biden credit for a new Morning in America?

That was a rhetorical question.

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Quick Hits

But Dean Baker, who I respect, has doubts.

The real Morning in America, such as it was, was the productivity surge in the late 1990s and early 2000s.

Reagan didn’t jump-start growth, but he helped break labor unions, which was an important cause of rising inequality.

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