One of President Barack Obama‚??s favorite rhetorical ploys is to accuse presumptive Republican presidential nominee Mitt Romney of favoring ‚??trickle-down‚?Ě economics. President Obama likes this line so much, he has taken it from his campaign speeches to use in presidential addresses.
Obama borrowed the term ‚??trickle down‚?Ě from 1984 Democratic presidential nominee Walter Mondale, who found the phrase so effective that he lost to President Ronald Reagan in a landslide, losing 49 out of 50 states.
Obama uses the phrase ‚??trickle-down,‚?Ě as Mondale did, to belittle the idea President Reagan expressed in announcing his ‚??across-the-board, top-to-bottom cut in personal and corporate income taxes.‚?Ě Reagan argued that tax reform must cut rates not only for those in the lower and middle brackets, but also for those in the ‚??upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital.‚?Ě
Oops, that wasn‚??t Reagan; it was Democratic President John F. Kennedy! Nevertheless, Kennedy‚??s argument is precisely what Obama now ridicules as ‚??trickle down.‚?Ě There‚??s no longer room for men like Kennedy in Obama‚??s radicalized Democratic Party.
It‚??s true, as Obama says, that the United States has tried such tax reform in the past, most notably under Mondale‚??s b√™te noire, Reagan. According to Obama, ‚??That doesn‚??t work. It‚??s never worked.‚?Ě
It‚??s now been three years since the recession ended in June 2009. That gives us three years of data on the results of Obama‚??s recovery policies. Let‚??s compare these results with those produced in the first three years of the Reagan recovery that started in November 1982.
At the end of his recession, Reagan‚??s situation was in some ways even worse than Obama‚??s: The unemployment rate was higher (10.8 vs. 9.5 percent), the employment-population ratio was lower (57.3 vs. 59.4), and the labor force participation rate was lower (64.2 vs. 65.7). And, unlike Obama, Reagan inherited out-of-control inflation and interest rates, both in double digits.
Nevertheless, in its first three years, the Reagan recovery produced more than three times as many net new jobs as the Obama recovery. (See Figure 1)
Although the Reagan recovery started with higher unemployment than the Obama recovery, after three years, Reagan‚??s unemployment rate was lower than Obama‚??s. In fact, during this time Reagan brought unemployment down about three times as much as Obama. (See Figure 2)
Likewise, when the Reagan recovery started, the share of the population that was employed was lower than it was when the Obama recovery started. Yet after three years of recovery, Reagan‚??s employment-population ratio had surpassed Obama‚??s starting level, while Obama‚??s ratio had actually fallen. Incredibly, this ratio is actually lower now, during the Obama ‚??recovery‚?Ě than it was during the preceding recession. (See Figure 3)
Similarly, at the outset of the Reagan recovery, the Labor Force Participation Rate was lower than it was at the start of the Obama recovery. Nevertheless, after three years, Reagan‚??s LFPR was higher than Obama‚??s. As job-seekers become discouraged and drop out of the labor force, this rate, too, has declined during the Obama recovery to a level lower than during the recession. (See Figure 4)
In short, the Kennedy-Reagan policy of tax cuts, including for those who pay the highest marginal tax rates produced results far superior to Obama‚??s class-warfare tactics. By suppressing investment and growth, Obama is depriving the unemployed of jobs. Whatever is left after various bloated government bureaucracies get through with it, he proposes to redistribute among those he has thus forced into dependence‚??the ultimate in ‚??trickle-down‚?Ě tyranny.
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