While Americans across the country are holding celebrations to mark the 100th anniversary of the birth of President Reagan, President Obama and his media allies are peddling the line that he is just like Reagan. So let’s try this thought experiment. Suppose Obama did follow in the tradition of Reagan, Thatcher, and what could have been his ideal mentor, Jack Kemp.
Suppose as a result that President Obama embraced reducing tax rates, cutting spending, slashing unnecessary regulatory burdens and restrictions, and maintaining a strong dollar, anti-inflation monetary policy. And suppose as the inevitable result of those policies, the economy took off in a generation long boom, just like it did under Reagan.
How would conservatives, the Tea Party, and America have responded? We would have loved Obama like no other political leader, even Reagan. That is because his reach would have been even broader than Reagan.
Instead of the Tea Party forming in opposition to Obama’s policies, Obama would be leading the Tea Party in opposition to the Republicans, discredited because they fumbled away Reaganomics. The Democrats would consequently rout the Republicans for a generation, like they did under Roosevelt.
In the process, Obama would have accomplished what no other political leader could have possibly accomplished. He would have led African Americans, Hispanics, and the poor firmly into the Reagan Coalition, creating a new consensus encompassing the vast majority of Americans.
That would have been the foundation for a new explosion of prosperity, vaulting a newly unified America another generation ahead of the rest of the world. But the unique contribution of President Obama to that could have been the extension of Reaganomics into the empowerment agenda that would ensure that his base of African Americans, Hispanics, and the poor would ride that wave to their own breakthrough of personal prosperity and full participation at last in the American Dream. (Exactly how that could have worked is explained in full detail in my new book forthcoming from Harper Collins in the spring, America’s Ticking Bankruptcy Bomb.)
If Obama had followed this course, I myself would be joining Obama’s campaign for what would be an inevitable re-election à la Roosevelt 1936, and there would be talk of Mt. Rushmore.
But it was not to be. For President Obama chose, indeed his whole life represents, just the opposite course. Instead of throwing open the doors to the American Dream to African Americans, Hispanics, and the poor, President Obama’s retro New Left vision arising out of the 1960s is on a course to abolish the American Dream, for all.
Exactly contrary to the party line peddled in the Democrat party–controlled press, President Obama, his philosophy, and his policies are doggedly, thoroughly, and comprehensively the polar opposite of everything Reagan stood for, fought for, and accomplished during his life and as President. If President Reagan was alive today, he would be leading the Tea Party on his way to a historic victory in 2012 perfectly analogous to the victory of Roosevelt and the Democrats in 1932.
Contrast Obama as president with Reagan. Reagan came into office riding the wave of his campaign pledge to reduce income tax rates across the board by 30%. That means for everybody. In 1986, he led Congress to adopt a historic tax reform. As a result, the top income tax rate of 70% when he came into office was reduced all the way to 28%. The tax rate for the middle class was reduced to 15%. The working poor were removed from the income tax rolls altogether.
President Obama came into office promising to increase the tax rates for virtually every major federal tax on the nation’s employers and investors — income taxes, capital gains taxes, taxes on corporate dividends, death taxes. While he has deigned to delay that tax piracy for two years, allowing some semblance of an economic recovery to flower now, he is vowing to go ahead with it as scheduled under current law in 2013. And while President Obama got away with telling Bill O’Reilly and the nation in his pre-Super Bowl interview that he didn’t raise taxes once in his first two years, his Obamacare legislation did manage to raise payroll tax rates, capital gains tax rates, and dividend tax rates, on the nation’s employers and investors, now scheduled for 2013, in addition to all the tax rate increases above.
While America suffers from the highest corporate tax rate in the industrialized world, President Obama has also already raised taxes on business in the Obamacare bill and other legislation. Obama further pledges to double tax the foreign earnings of American companies, which will only ensure that American business will be uncompetitive in today’s globalized economy. (This is all discussed in further detail in my book published last year by Encounter, President Obama’s Tax Piracy.)
In President Reagan’s first year in office, he led enactment of the then much vilified Reagan budget cuts. Since spending cuts are popular today, the Democrat party–controlled press has pushed that history down the memory hole, but those Reagan budget cuts slashed federal spending by close to 5% in the first year. In constant dollars, non-defense discretionary spending declined by 14.4% from 1981 to 1982, and by 16.8% from 1981 to 1983. Moreover, in constant dollars, this non-defense discretionary spending never returned to its 1981 level for the rest of Reagan’s two terms! By 1988, this spending was still down 14.4% from its 1981 level in constant dollars. Even with the Reagan defense buildup, which won the Cold War without firing a shot, total Federal spending declined from a high of 23.5% of GDP in 1983 to 21.3% in 1988 and 21.2% in 1989. That’s a real reduction in the size of government relative to the economy of 10%.
In sharp contrast, in President Obama’s first year in office, he led enactment of nearly $1 trillion in increased spending in the so-called stimulus bill, which didn’t stimulate anything except increased government spending. He followed that a month later with an omnibus spending bill providing for an additional $410 billion in federal spending in his first year. That included an 8.3% increase in discretionary spending in a year with no inflation. In his first two years alone, he increased federal spending by 25%, to its highest levels in history as a percent of GDP, except for World War II.
President Obama tries to tell us today that all this increased government spending was necessary to revive the economy. But that just reflects his fundamental Keynesian fallacy that economy growth is powered by increased government spending, which has been proven wrong over and over throughout history. It has been proven wrong once again by the incredibly weak recovery America has suffered over the Obama years. But what we have learned from experience with President Obama is that he doesn’t learn from experience.
$100 A Barrel Oil
President Reagan came into office leading a wave of deregulation that saved consumers hundreds of billions. On energy in particular, Reagan’s policy was to “unleash the private sector” to provide increased American energy production. Reagan’s first executive order, in fact, eliminated price controls on oil and natural gas. Production soared, and the price of oil declined by over 50%.
President Obama, by sharp contrast, came into office leading a wave of reregulation that has crushed job growth. Obamacare’s employer mandate in particular imposes a costly new burden on jobs that has scared off new hiring. On energy, the Obama Administration is shutting down domestic energy production across America, with the price of oil soon to soar over $100 a barrel, portending ominous consequences for the economy if history is any guide. Obama pushed cap and trade, which would have added trillions in energy costs for the U.S. economy, and which even the most liberal/left Congress in American history would not pass. So now Obama is pursuing the same thing through EPA regulation.
President Reagan promoted a strong dollar monetary policy to counter the roaring inflation of the time, which the establishment elite was assuring America could not be stopped, at least not without unacceptable costs. But under Reagan’s policies, the roaring inflation that had increased prices by 25% in the two years before Reagan entered office was cut in half by 1982, and in half again by 1983, never to be heard from again, at least until this year.
Under President Obama, by sharp contrast, the Fed has returned to the discretionary monetary policies of the 1970s, under which the Fed tries to guide the real economy with the futile tool of printing money. Milton Friedman proved long ago that cannot work, but all of his learning has also been thrown down the memory hole. If the Fed foolishly revives inflation this year, as the commodity markets have been flashing, another recession to stop it will be inevitable. With a deficit already at $1.5 trillion, a renewed recession will leave America where Greece was, but with nobody who could even conceivably bail it out.
President Reagan’s national defense policies were Peace through Strength. Even while reducing total federal spending by one tenth relative to GDP, Reagan pursued a defense buildup that forced the Soviet Union into dissolution, winning the Cold War without firing a shot. Central to that was Reagan’s much vilified Strategic Defense Initiative missile defense program.
President Obama by contrast is cutting back on defense, and missile defense in particular. His foreign policy is speak to apologize for America and carry no stick. Under President Reagan, authoritarian rulers of three American allies, the Philippines, South Korea and Chile, were guided into retirement, and replaced with robust democracies that remain allied with America to this day. At least one of those, Chile, has been better governed recently than America. Let’s see if President Obama’s policies on Egypt are remotely as successful.
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