The Big Reagan Recovery Was Government Spending And Hiring

Dave Johnson

Conservatives like to talk about how well the economy did under Reagan, and how poorly it is doing now. Then they say that government “takes money out of the economy.” But the difference in economic growth was that under Reagan the government was spending and hiring, and now it isn’t.

Paul Krugman lays it out, in States of Depression,

… compare government employment and spending during the Obama-era economic expansion, which began in June 2009, with their tracks during the Reagan-era expansion, which began in November 1982.

Start with government employment (which is mainly at the state and local level, with about half the jobs in education). By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it’s down by 2.7 percent.

Next, look at government purchases of goods and services (as distinct from transfers to individuals, like unemployment benefits). Adjusted for inflation, by this stage of the Reagan recovery, such purchases had risen by 11.6 percent; this time, they’re down by 2.6 percent.

And the gap persists even when you do include transfers, some of which have stayed high precisely because unemployment is still so high. Adjusted for inflation, Reagan-era spending rose 10.2 percent in the first 10 quarters of recovery, Obama-era spending only 2.6 percent.

Austerity Killing Growth

Meanwhile conservative demands for government spending cuts – “austerity” – are causing exactly the opposite of what they claim. They claim that spending cuts will cause economies to grow, while all the economies that are cutting spending are shrinking faster and faster. NY Times: Spain Adjusts Deficit-Reduction Target at European Summit,

Spain announced Friday that a deepening recession meant it would have to abandon its deficit-reduction targets for this year…

Spain’s predicament is a reminder of how, in several countries, the austerity measures that evolved from the debt crisis have eroded confidence and reduced growth, making it harder to escape a downward spiral.

Same in Greece, and elsewhere. Cuts = downward spiral.

Government Of By and For Plutocrats

Here is what is going on: Politicians dance with the ones that brung ‘em. A government that is of, by and for We, the People will do things that benefit We, the People. A big part of that equation is investing in the future: good schools, infrastructure, even parks. From Free Trade Or Democracy, Can’t Have Both,

When people have a say we insist on good wages, benefits, safe working conditions, and a clean environment. We even go so far as to say we want good public schools, parks and opportunities for our smaller businesses. When We, the People have a say we get so uppity and ask for the most outrageous things!

A government that is run only for 1%er plutocrats will only do things that benefit plutocrats. As the governments of the world are increasingly “captured” by the plutocrats they will increasingly cut back on doing things for regular people. It doesn’t matter if this hurts or even kills their economies in the future, 1%ers don’t care. Plutocrats want it now, for themselves, and take it now, for themselves, the rest be damned.

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