“In this present crisis, government is not the solution to our problem; government is the problem.” ~ Ronald Reagan, first inaugural address, January 20, 1981
“But at this particular moment, only government can provide the short term boost necessary to lift us from a recession this deep and severe.” ~ Barack Obama, George Mason University, January 8, 2009
On November 4 of last year, the American people embarked on a great experiment. They made a decision to embrace “change” embodied in the person of a young, charismatic, but ultimately inexperienced leader who intends to take the country down an opposite path from where Reagan took us.
Barack Obama, placing his full faith in the power of government intervention and deficit spending, is thus the anti-Reagan, casting off the policies that directly led to the economic boom of the 1990s that lasted up until the sub-prime crisis hit late last year.
Obama likes to talk about “the fierce urgency of now” — but few remember that Reagan used a similar quote: “the temporary convenience of the present.” Again, Obama and Reagan are polar opposites. Obama says “now” is what matters; Reagan says future generations matter as well.
We’re now living in one of those future generations that Reagan talked about 28 years ago. And things have rocked along pretty well — until government in its zeal to provide home ownership to those who couldn’t afford to buy houses stepped in and forced the issue. In the current crisis, there is little doubt that government is the problem.
Reagan knew that. When he took office, the American people were sick and tired of the “national malaise,” the “misery index,” and the “stagflation” of the Jimmy Carter years. The inflation rate was 11.83 percent. Unemployment was 7.5 percent. Like Obama, Reagan proposed change. His idea was to stimulate the economy with large, across-the-board tax cuts. The new president identified the problem and laid out his plans in his inaugural address:
“For decades we have piled deficit upon deficit, mortgaging our future and our children’s future for the temporary convenience of the present. To continue this long trend is to guarantee tremendous social, cultural, political, and economic upheavals.
You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that collectively, as a nation, we’re not bound by that same limitation? We must act today in order to preserve tomorrow.”
Simply put, Reagan’s solution was to spend less; Obama’s is to spend more.
Reagan cut spending on non-military programs, lowered income tax rates, and brought the country out of the Carter recession. He created 16 million jobs, brought inflation under control and fashioned a sustained period of economic prosperity.
Reaganomics has stood the test of time, with Nobel laureates like Milton Friedman and Robert A. Mundell recognizing what a boon it was to all Americans — and to the world. Obamanomics on the other hand is rooted in collectivism, which, so far in history, has never worked.
Both methods cannot be right. Either Reagan’s policies based on the theories of Arthur Laffer — or Obama’s which are based on the ideas of John Maynard Keynes — will prove to be the correct course. What has got us into the current mess is that we have spent too much — both as a nation and as individuals. Obama will now attempt to solve the problem by spending more. That’s just the opposite of what Reagan would do.