Reagan’s Recovery vs Obama’s Recovery (UPDATE)

Here’s an interesting comparison by Michael at EconoPolitics.com from April of this year. In sum, Michael shows, “Had total government spending and employment followed the same trend in this recovery as the 80s recovery, spending would be $895B higher and there would be 1,250,000 more government employees.”

EconoPolitics

Last June, I compared the early 80s recovery under Ronald Reagan to the current recovery. I presented two graphs which compared total government spending and total government employment during the two recoveries. It turned out that government spending and employment both grew more during the Reagan recovery.

It’s been nine months since then. How have things changed?

The current recession began 62 months ago. Reagan’s recession officially began in July 1981 – so 62 months later would be September 1986.

At this point in Reagan’s Recovery (compared to start of recession):

  • Total government spending was up 51%.
  • Government employment was up 750,000.

Today (compared to start of recession):

  • Total government spending is up 22%.
  • Government employment is down 500,000.

Had total government spending and employment followed the same trend in this recovery as the 80s recovery, spending would be $895B higher and there would be 1,250,000 more government employees. Also…

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Krugman Trashes Austerity’s Phony Morality Economics

DAVOS/SWITZERLAND, 24JAN08 - Jean-Claude Trich...

DAVOS/SWITZERLAND, 24JAN08 – Jean-Claude Trichet, President, European Central Bank, Frankfurt, captured during the session ‘Systemic Financial Risk’ at the Annual Meeting 2008 of the World Economic Forum in Davos, Switzerland, January 24, 2008. (Photo credit: Wikipedia)

Apropos of a current theme of this blog, that the powerful Austrian school of economics that has supplanted Keynesianism as the go-to ideology of our government and, more and more, both political parties, is rooted in the same Nietzschean stew of pro-winner, anti-loser sentiment that appealed to the Nazis, Paul Krugman has a piece in the current New York Review of Books that devastates the “austerian” contention that Keynesianism feeds the Beast, while austerity corrects naughty economic behavior. His main support for his argument is the recent discovery of severe flaws in the methodology of two studies most often cited by austerians, one by Harvard profs Carmen Reinhart and Kenneth Rogoff and the other by Italy’s Alberto Alesina and Silvia Ardagna, purporting to show that government spending that exceeds 90% of GDP in the wake of a depression or financial meltdown is catastrophic for the economy in question.

David Stockman’s The Great Deformation … [is] an immensely long rant against excesses of various kinds, all of which, in Stockman’s vision, have culminated in our present crisis. History, to Stockman’s eyes, is a series of “sprees”: a “spree of unsustainable borrowing,” a “spree of interest rate repression,” a “spree of destructive financial engineering,” and, again and again, a “money-printing spree.” For in Stockman’s world, all economic evil stems from the original sin of leaving the gold standard. Any prosperity we may have thought we had since 1971, when Nixon abandoned the last link to gold, or maybe even since 1933, when FDR took us off gold for the first time, was an illusion doomed to end in tears. And of course, any policies aimed at alleviating the current slump will just make things worse.

In itself, Stockman’s book isn’t important. Aside from a few swipes at Republicans, it consists basically of standard goldbug bombast. But the attention the book has garnered, the ways it has struck a chord with many people, including even some liberals, suggest just how strong remains the urge to see economics as a morality play, three generations after Keynes tried to show us that it is nothing of the kind. Continue reading