Two paths
No matter which part of the political landscape you call home, it must be agreed that Obama has approached this economic downturn the exact opposite of the way Ronald Reagan approached the downturn of the late 70's and early 80's.
Where Reagan slashed taxes and regulations, Obama has targeted increased taxes and regulations. Reagan looked at ways to scale back government, while Obama is already presiding over a massive expansion of government. Reagan set aside defense cuts while Obama has said that the defense budget will be cut.
At the end of an Obama Presidency - whether four or eight years in duration - we should have a pretty good idea which of the two approaches offered greater prosperity.
I have never hidden my concern for Obama's approach. I liken his approach to protecting against failure while Reagan, in my mind, attempted to unleash success.
Investors Business Daily revisits the Reagan experiment here:
"On the nations' campuses and even in some of its boardrooms, people were talking about capitalism as a failed system.
Some advocated a "third way" between socialism and capitalism, as in Europe, which would include heavy doses of government intervention in markets to bring them back to life. Still others took up the call in E.F. Schumacher's best-seller, "Small Is Beautiful," to downsize expectations. Live frugally, they said. Inhabit small houses. Drive small cars. Don't use oil. Rein in your ambitions.
One man didn't agree with this: President Ronald Reagan, elected in 1980 amid a wave of voter disgust at his predecessor's failures.
It was Reagan who brought America's capitalist economy roaring back to life, ending energy price controls, slashing income tax rates by 25% and dramatically reducing tax rates on capital gains."
I'm afraid you're giving Obama too much credit. Apply Ockham's Razor to the known facts: Obama's cultural-Marxist background, the proven success of the Reagan approach, the fact that there's no empirical evidence that governmental spending that exceeds 25% of GDP has ever worked, and even left-leaning Europe's undisguised shock at Obama's reckless borrowing and spending. The simplest explanation to all that is that Obama is trying to end capitalism by destroying capital. Same with the congressional leaders. The rest of the congress critters are merely stampeding -- as they always do in times of crisis.
From my soapbox.
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David - I agree with everything you said except giving Obama too much credit. I give Obama his actions - increased taxation, greater regulation, lower defense spending, etc - nothing more, nothing less.
I have a high level of certainty about where that will lead us and your arguments support that. In Obama, though, liberals will get their shot at results. We shall now see.
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Sorry. I took your "I liken his approach to protecting against failure" as suggesting that Obama himself is trying to protect against failure. I now see the difference in the distinction you drew.
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Kurt,
I'm a history major, but having graduated in 1973 I have been a tad undisciplined in my studies since then. Please forgive any errors in fact or judgement.
The problem in comparing Reagan and Obama is as such one of context as philosophy. Reagan inherited an economy featurning a top marginal tax rate of 70% on income over $215,400. Skipping forwared, in 2008 the top marginal tax rate is 35% on income in the mid $300,000s. Not sure slashing taxes is a serious option.
On the regulation front, if our friends on Wall Street had been required to have reasonable restrictions on capital requirements and leverage, and if mortgage lenders selling loans to quasi-governmental agencies had reasonable requirements on their borrowers ability to actually re-pay the borrowed money, our current mess would be much different. Not sure slashing regulations, at least in the financial markets, is much of an option either.
I do know that Reagan's 1981 re-working of the tax code on depreciation (15 year accelerated depreciation was very cool) led to some serious over-building in the commercial real estate world. The "corrections" made in the 1986 tax code changes to remove those goodies wiped out about 20% of the value of any commercial building. Thereby contributing to the S & L crisis of the late 1980's.
All in all, ours is a complex system. If history shows anything, it is that really smart people do not always do smart things and that the "law of unintended consequences" is always at work.
I have no solutions to offer other than to say that a) the government and the people were co-conspirators in causing this mess, b) the government has a role to play in stabilizing the financial system and reasonable people will disagree on what that role looks like, and finally c) the country can only succeed if individuals and communities accept the responsibility for their own lives.
By the way, I love your blog.
Steve
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Thanks for visiting Steve and glad you like the site.
Since I am a flat-tax supporter, you would have a tough time convincing me that cutting taxes is not a serious option. The biggest concern I have with Obama's approach is interest in increasing taxes. Why increase the economic barriers to success at a time when need more risk-takers.
I agree with your co-conspirators assessment which is precisely why I like the government to stay out of it. We need a lot more of your final recommendation - just because some mortgage broker says you can afford an $800,000 house doesn't mean you have to buy it.
See you Monday.
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