Reagan In the News

If Obama inherited a bad economy, so too did Reagan when he took over from Carter. Inflation hovered around 13% and unemployment flirting with 10%. By the time he was done, it was down to 5.5% and 4.5% respectively. Though such stats can mean anything. For example, what was its impact on poverty?

Reagan's term, as is usually the case, is filled with contradictions. As a Republican conservative, spending exploded under Reagan (blamed on tax cuts) but offset by an expanding GDP. By his second term, spending was drastically scaled back while GDP increased further. Yet, despite this, the wealth didn't seem to spread.

And so the debate about this rages.

Now, of course, his policies have left a legacy filled with debate. On one side, he laid - so conservatives argue - the foundations to American econmic expansion of the 1990s, and on the other, he was the perpetuator of "trickle-down" economics that allegedly increased the income inequality gap - likely attributed to a process beginnin in the 1970s.

There's still much to consider as this study attempts to show.

"What is surprising is the apparent lack of progress against poverty throughout the 1980s. In a decade that featured one of the longest peacetime economic expansions in U.S. history, the share of all persons in poverty actually rose moderately. It appears that the benefits of robust economic growth "trickled down" to the poor in declining measure."

Thus, the question becomes - and it ties to the opening of this post - why then did poverty rise with unemployment decreasing and GDP expanding? One way is to not measure poverty against only income but to consumptions instead.

Other explanations in the link provided include demographics:

"A significant demographic shift that might have affected income povertyrates in the 1970s and 1980s was the surge in divorce and out-of-wedlock births. Because female-headed households typically have the highest poverty rates of all family types, growth in this population translates strongly into poverty growth."

And changes in welfare arrangements:

"Changes in government transfer policies(such as Aid to Families with Dependent Children) appear to be a more promising explanation. Reforms initiated by the Reagan administration in 1981 made welfare participation less attractive, which may have resulted in lower incomes for some of the poor and near-poor."

It concludes:

"A first look at the consumption poverty data suggests at the very least that the picture of increasing inequality and the failure of the 1980s' "rising tide" to lift all boats may be exaggerated. The poor appear to benefit from a vigorously expanding economy now as much as before. After considering this new evidence, it is not at all clear that a policy to promote overall growth (and hence to expand aggregate consumption opportunities) is of declining interest to Americans below the poverty line."

Of course, none of this will probably satiasfy those who simply believe it was an economy made and provided for by the rich.

***

30 years on and it seems like America is right back in the same mood it found itself under Carter. Then along came President Obama who was and is seen as a "transformative" figure. As such, he had and still possesses a powerful asset in his favor.

So why has his message seemingly stalled so far?

I suppose one can look at JFK and Reagan to see what differentiated him from them. One gets the sense JFK and Reagan spoke to the people. It was all about what you can do and not what the state can do as Obama espouses.