There’s no reason to compare his situation to Reagan’s c. 1982.
It’s a good bet right now that Barack Obama will be a one-term president. The enthusiasm that once shielded this hyphenated American has dissipated. His supporters, although still numerous, have discovered that he lacks Bill Clinton’s centrist instincts, and even his charm. The anti-Bush mania that swept the country from 2006-09 finally burned itself out.
It’s always possible that the Republicans will nominate a dud. That has happened so often that it should even be considered likely. Not since 1980 has there been an outstanding GOP candidate. But at this stage it’s too difficult to predict the 2012 nominee, so I’ll drop that subject.
Most important from Obama’s point of view is the economy. It is still in poor shape and is likely to stay that way. The unemployment picture has not brightened. In California it is 12.6 percent, while in Michigan it is 14.9 percent. In Europe, meanwhile, the economic picture ranges from uncertain to grave and I’ll have more to say on that.
I was glad to hear the news media’s unofficial position on Obama’s prospects the other day when I bumped into an old friend, Jim Barnes, the political correspondent for National Journal. He was at a cocktail party that our esteemed publisher gave for Bob Tyrrell’s excellent new book, After the Hangover: The Conservatives’ Road to Recovery. I last saw Barnes when he was a researcher at the American Enterprise Institute in the early 1980s. He was nonpartisan then and so he remains today — as befits the creator of National Journal’s Insiders Poll. Sometimes he appears on Gwen Ifill’s PBS program Washington Week, which features three or four Washington journalists who help Ms. Ifill frame the conventional wisdom of the week.
When I asked Jim Barnes about Obama’s political chances he said he had heard talk of the parallel between the president’s position now and that of Ronald Reagan in 1982. Reagan had been in office for a little more than a year and the economy wasn’t doing so well then, either. But it recovered strongly in 1983, and of course Reagan easily won reelection. So this was a reason for Obama’s supporters to look on the bright side.
A week later I heard the same analysis on Meet the Press from Robert Shrum, a longtime Democratic insider. He worked for Sens. Kennedy, Gore, Kerry, and Kerrey, and for other liberals too numerous to list, but not for Clinton or Obama. (Eventually he was considered jinxed, all eight of his candidates having failed to win the presidency.)
Anyway, Bob Shrum too compared Obama’s situation to Reagan’s in 1982.
Here’s why I think that analogy is wrong. It could even be that our situation is the opposite of what it was in 1982. The economic recession that year was to some extent the inadvertent by-product of the big Reagan tax cut of 1981. That very desirable legislation reduced the top income tax rate to 40 percent, from 70 percent, which is where it had been since the mid-1960s. The 1981 law also allowed tax brackets to be adjusted for inflation, then much higher than it is now. Nominally higher wages were moving taxpayers into higher tax brackets, producing a contraction throughout the economy.
The liberals as usual understood nothing. Ronald Reagan did understand what was going on, however, which is why he became a hero to the “Reagan Democrats.” The Reagan tax cut, enacted within months of his becoming president, was one of the most important changes in tax law in the postwar era; it also inspired Margaret Thatcher to enact comparable tax reductions in Britain.
But the new U.S. law had this problem. It didn’t take effect until 1983. The delay encouraged the postponement of earnings and economic decision-making until 1983, when the much more friendly tax rates took effect. Thus the slump of 1982.
Today we may well be in the opposite position. The new tax laws for 2011 are still unclear. “Tax extender” legislation is making its way on Capitol Hill even as I write, and its final shape is uncertain. That is an important reason why capitalists are sitting on a lot of capital right now and hiring is sluggish.
But it is clear that tax rates on upper incomes and on capital gains will increase, perhaps sharply. We know what Obama thinks about the rich, even if he is one of them. He thinks they should be punished. He wants tax law to reassert its punitive role. He is actually the opposite of Reagan in this as in many other respects.
With tax rates on capital and upper incomes set to increase next year, 2010 may well turn out to be a good year in which to complete pending or moveable financial transactions. So tax prospects may even be stimulating the economy right now, in contrast to slowing it in 1982.
The argument for introducing much lower tax rates in the 1980s was known as supply-side economics, and two things should be immediately said: it was very successful economically and very unpopular with the intelligentsia. They never stopped complaining about it and now, a generation later, they have regained the upper hand. Supply-side ideas are so unfashionable that no one even wants to talk about them.
Supply-siders — prominent among them Robert Bartley and Jude Wanniski of the Wall Street Journal, and the late congressman Jack Kemp (none of them economists) — introduced incentives into fiscal policy. As economics is all about incentives, this was an important if belated innovation.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?