WHY THE REAGAN REMARKS MATTER

As the Dems head to the polls in South Carolina and the Repubs in Florida squabble over immigration, the country is slipping into a recession. That recession, not immigration, Iraq, or which candidate you’d prefer to share a beer with, is likely to dominate the election cycle of 08. That is the storyline we need to be watching.

The President’s response has been predictable. Tax cuts. Paul Krugman’s analysis shows why it will be largely a wasted effort. 2/3 of the money will go not to the people who need it most and would spend it quickest, but directly into the bank accounts of the well off where it will stimulate nothing but knowing smiles.

The idea that broad consumer tax cuts (the crack cocaine of economic stimulus packages) is the correct response to a recession is one of the legacies of the “Reagan Revolution.” The Repub storyline – largely echoed by the media – is that tax cuts by Reagan stopped the recession of 1980 in its tracks, leading to an unparalleled period of economic growth. And you can definitely shade the statistic to show that. But you can also make the case that real economic growth came 12 years later, in 1993, when Bill Clinton raised taxes on the rich (without the help of even one Repub vote) which led to 8 years of solid increases in employment, productivity, real income growth, and equality of wealth distribution.

The storyline Dems need come September is one Ronald Reagon successfully used, “Are you better off now than you were eight years ago?” What they don’t want to do is bring up images of “Morning in America.” That is why the squabble over Obama’s remarks seeming to give the Repubs the title “Party of Ideas” actually matters. You don’t cede the high ground to your enemy before the first shot is even fired.

Comments

[Cam Beck]

Be careful here... Obama is making himself more appealing to the "enemy," which gives him crossover appeal.

This speaks directly to his "electability" in the general election, in minds of primary voters. Since "electability" is often a primary criteria in candidate selection during the primaries, this may play into Obama's favor.

Also, I must point out one flaw in your logic without discussing the political implications.

You said, "In 1993, when Bill Clinton raised taxes on the rich (without the help of even one Repub vote) which led to 8 years of solid increases in employment, productivity, real income growth, and equality of wealth distribution."

It would be more correct to say that the tax increase preceded the solid increases in employment...etc., not that it led to (i.e. caused) those things.

Just because one thing preceded another does not mean that the first thing caused the second. Otherwise, you might say the same thing about the Republican takeover of Congress in 1994.

Or, for that matter, the fall of Rome.

Here's an interesting article from an economist about the "stimulus" package being offered by both parties: http://www.wnd.com/news/article.asp?ARTICLE_ID=59942

[Max]

Hi Cam -

Cause and effect is always tricky. In this case I believe you can make the case that by showing action towards balancing the budget the US was able to reduce interest rates long term as a stimulus to growth which was more powerful than the short term stimulus of "bribing the voters" by a down and dirty tax cut, but your point is well taken.

As for crossing over - there is no doubt that Obama is a very appealing candidate. But is he really ready for the job? I suspect that is what is going to be on the minds of many voters when they go into the polls. He isn't JFK (a certified war hero). He is most like Jimmy Carter - a good hearted man hoping to bring the country together by force of personal charisma. In both McCain and Romney Obama faces opponents with solid governoring experience (legislative for McCain, executive for Romney) and proven track records of reform - experience and records Obama notably lacks.

And the MSM has been handling him with kid gloves. Every candidate gets hit with at least a few weeks of really bad news. Some recover, some don't. That this hasn't happened for Obama yet makes me very nervous. Like the moment in a western where the you suddenly notice it is just too damned quiet. We will have to see.

BTW: What is your take on the Repub race right now? Any chance I could get you to post here about it? (other than a comment?)

[Cam Beck]

Sure. You should have my email address through this form, if not, just visit my blog and leave a comment on one of the posts so I will have yours.

P.S. It may be "bribing the voters," but the wicked genius of it is that the politicians are able to do it with the voters' own money, and the voters eat it right up. Scary. :)