Friday, April 22, 2016

We Need More Reagan, Not Less

Had A "Reaganite" Plan

Executed the Plan

In a recent op-ed, David Brooks claims that what he calls the "post-Trump" Republican party will have to reject Reaganism in favor of a new organizing philosophy. While Brooks admits that the "Reagan orthodoxy" was "right for the 1980s," he also claims that this template is "increasingly obsolete."  In particular, Brooks claims that: "[t]he Reagan worldview was based on the idea that a rising economic tide would lift all boats.  But that's clearly no longer true." Analogizing to Thomas Kuhn's work on scientific revolutions, Brooks observes that today's Republicans "are still imprisoned in the Reaganite model . . . ask Reaganite questions [and] propose Reaganite policies." Because the Reaganite model no longer works, Brooks says, conservatism is in a crisis state and must develop a new model.   Among other things he suggests that conservatives turn away from economic theory and embrace Sociology because, in his words: "Homo economicus is a myth and conservatism needs a worldview that is accurate about human nature."

Brooks' assessment of modern Republican ideology rests upon a crucial assumption, namely, that a robustly rising economic tide does not lift all boats.  However, he offers no evidence to support this assumption.  To be sure, the current economic recovery has left out millions of Americans.  Some cannot find jobs and others must work two or more part-time jobs to make ends meet.  Total employment rose a mere 10 percent from 2009 through 2014. Median household income, is still below what it was in 2008, and poverty rates are still higher. In 2015, the United States experienced its 10th straight year of economic growth below 3 percent, apparently a record, though not the sort of record that any country brags about.  (GDP growth in 2015 was 2.4 percent.)

Still, these data shed no light whatsoever on the "Reagan worldview," or the usefulness of "Reaganite policies" derived from economic theories assuming that human beings are rational actors that respond to incentives.  In March, 1983 President Reagan, who had majored in Economics, predicted that his policies across-the-board tax cuts (inspired by John F. Kennedy), reduced regulation and free trade would produce an economic recovery that would be "powerful and sustained."  (The second photo above depicts President Reagan signing the Economic Recovery Tax Act of 1981.)  He was correct. Between 1983 and 1988 (inclusive), the economy grew at an annual average rate of 4.6 percent, more than twice the rate of growth during this most recent recovery. During the same period median real household income rose 10.9 percent and rose another 1.8 percent in 1989. The economy added 17,913,000 jobs, increasing total employment by 20.1 percent, twice the rate of the current recovery.  Exports skyrocketed as more productive U.S. industries won new markets abroad.  Tax relief allowed Americans in all economic classes to keep more of their income. Rules indexing the standard deduction and tax brackets for inflation preserved the value of the deduction and protected low and middle income taxpayers from the sort of "bracket creep" that had pushed Americans of modest means into higher tax brackets in the late 1970s.  A significant portion of the tax burden shifted from the middle class to those in the "top one percent" of the income distribution.

None of this is to say that the Reagan recovery improved the lives of each and every American.  Still, the difference between that recovery and the most recent one is stark indeed. It is little wonder that, less than two years into the Reagan recovery, the American people resoundingly reelected President Reagan in a landslide, i.e., 49 of 50 states and nearly 59 percent of the popular vote.  In so doing the voters rejected former Vice President Mondale's platform of higher taxes, Trump-like economic protectionism and more intrusive federal regulation.  The economy continued to grow into 1990, thus constituting the longest peacetime expansion in U.S. History.

This blogger believes that most Americans would be thrilled by an economic recovery similar to that which occurred between 1983-1990.  Any decision to reject the "worldview" that helped produce that recovery should be based on sound argument and hard evidence, not cavalier speculation.  We need more Reagan.  Not less.