Thursday, August 5, 2010

Did President Reagan Increase Government Spending or Reduce It?

Daniel Mitchell who only pretends to be an economist writes more spin on the wonders of Reaganomics:

Both Ronald Reagan and Barack Obama entered office during periods of economic misery. But they adopted dramatically different solutions. Reagan reduced the burden of government and Obama increased the burden of government. So which approach worked best? In his Washington Times column, Richard Rahn compares the economy’s “recovery” performance under both Presidents. As you can see, Reaganomics is much better than Obamanomics.

I’m scratching my head here as I thought the standard pseudo-supply-side line was that the deficit exploded in the 1980’s because government spending exploded. OK, the truth is that the ratio of Federal spending to GDP neither increased nor decreased during this period. Real tax revenues per capita fell which is why the deficit rose but this notion that the burden of government fell is not factually based.

As far as the business cycle, Ezra Klein and Paul Krugman have already debunked Mitchell’s spin.


Neil Cameron (One Salient Oversight) said...

From a short look at my own data, Federal government spending during the Reagan era was between 22-24% of GDP. Under Carter and before it was around 20-21% of GDP.

TheTrucker said...

Here's the actual numbers and graph.

Bruce Webb said...

In the conservative world view spending on defense can never be a 'burden on government'. When Stockman then or Norquist now talked about 'starve the beast' or 'drown in a bathtub' they were not including Reagan's goal for a 600 ship Navy or Star Wars in the calculation.

Purely from recollection I don't think Reagan was able to seriously lower the nominal dollar number of non-defense discretionary spending but I would think he clearly shifted the defense/non defense ratio which for conservative might have been a good approximation of 'lower the burden'. If all of that extra 2-3% of GDP spent under Reagan was completely on the defense side then I can see people not really connected to the reality based continuum nor committed to numeracy to begin with might still make the claim.