This is the follow-up to the previous article on Reaganomics. I wrote that two years ago, when there was very little data on Bush's economy. During the election period this year, I wrote this follow-up since Bush's policies are similar to those of Reagan. It is interesting to see if they produce the same results.
In the first installment, I traced the history of our economy from Carter to Bush II. I pointed out that to be fair, we must take a critical look at economic statistics from two years into a President’s administration in order for there to be any relevance to that President’s policies. At the time I wrote that piece, W hadn’t been in office long enough to apply the two-year rule. As we approach a new election, I think it’s time to see how W stacks up to his predecessors.
In January of 2001, when George W. Bush took the oath of office, the prime lending rate was standing at 9%; not all that bad. But as I documented in the other piece, we were already in the throes of a recession. The Fed started reducing the prime rate on a regular basis, trying desparately to help stimulate a recessing economy. And then 9/11 hit. This further debilitated the already lagging economy. The Fed continued to lower the prime lending rate until it reached it’s lowest rate since 1958 – 4%! That was in June of 2003, just over two years (sound familiar?) since George Bush took office. As of this writing, the prime rate stands at 4.75%.
So does that mean the economy is on the rebound? Let’s take a look at the change in GDP. When W took office in January of 2001, the economic growth number was at -1.4%. The most recent data has it at 3.3%. It certainly seems that W has had some impact on the economy. That’s a pretty dramatic turnaround in such a short time, especially when you consider that it includes the period after 9/11. Unemployment during this period has gone from 4.2% when he took office to 5.4% currently.
Bear in mind here that George Bush was elected with a promise to cut taxes. He started by giving us a rebate in the summer of 2001. Every American who paid taxes received a check from the government. Shortly after, 9/11 hit. In 2002, another tax cut. Despite the devastating effect of 9/11 on our economy, the third quarter of 2001 was the last quarter of negative growth in George Bush’s presidency – the beginning of a recovery that is still growing.
But this doesn’t include the two-year rule. Let’s apply that and see where we are. Ok, so here we go. In January of 2003, unemployment was at 5.8%. Now it stands at 5.4%. Not much of a change, but the significance here is that it is going DOWN not up! Brace yourself, we’re going to check economic growth next. Are you sitting down? In the six quarters we actually have stats for, economic growth is up 4.23%! That beats Reagan and smashes Clinton. Now I realize this is just six quarters, a snapshot really. But it is all we have to go on and probably not a fair assessment to compare to our last two-term Presidents. And yet, it is absolutely a fair assessment of how he is doing right now! Having inherited a receding economy, unemployment (although low) on the rise, and the worst terror attack on our nation’s soil, It seems that he’s done pretty well.
Recently, Edward Prescott, a professor at Arizona State University and a researcher at the Federal Reserve in Minneapolis, was co-awarded the Nobel Prize for Economics. He believes that George Bush’s tax cuts were too small. According to the Washington Times, Prescott says that adding tax cuts usually provides an incentive to work. Hopefully, President Bush will take his advice when he begins his second term!
http://www.washtimes.com/upi-breaking/20041012-111648-5503r.htm
Saturday, November 27, 2004
Reaganomics Didn't Work?
The following is a study I did a few years ago to see if we could detect a trend in economic prosperity based on the criteria: unemployment rate, prime lending rate, and economic growth (percent change in GDP). I wanted to track a change in numbers based on economic policy. I would like to go through a much more in-depth study that looks at the specific policies and their overall effect. I think that this does a good job of showing the impact of Reagan's policies on the economy and how the Democrats before and after him had their own kind of impact.
In 1976, Jimmy Carter was elected with unemployment at 7.5%, economic growth at 5.6%, and the prime lending rate at 6.25%. When he left office in 1981, unemployment was at 7.5%, economic growth was at -.2%, and the prime lending rate was at 20% (This was down from a high of 21.5% just one month earlier.).
In 1981, Ronald Reagan took office with a promise to install what the press called Reaganomics. His vice-president, George Bush, called it voodoo economics. Whatever you call it, when he left office in 1989, unemployment was at 5.4%, economic growth was at 4.2%, and the prime lending rate was at 10.5%. Unemployment spiked in 1982 at 10.8%, the worst ever since they started keeping track in 1948. Whatever George Bush may have thought about Reaganomics during the 1980 campaign, he changed very little of the plan and by the time he left office in 1993, unemployment was at 7.3%, economic growth was at 3%, and the prime lending rate was at 6%. It was at this point that Bill Clinton was telling anyone who would listen that we were suffering through the worst economy in 50 years.
And what of the Clinton years? We’ve heard so much about the Clinton boom of the 90’s. What are the real numbers? We already know what they were when he took office. How did they pan out in the end? First, economic growth: Over the eight year period, he had a very healthy average of 3.7% with a high of 4.4%, a low of 2.7% (twice) and ending at 3.8%. Compared to Reagan’s average of 3.4% with a high of 7.3% and a low of –2% (in 1982), George Bush’s average of 1.95% with a high of 3.5% and a low of
-.5%. Clearly the Reagan years kept pace with the Clinton years and may have been better. I’ll get to that later. Let’s look at unemployment: 4.1% when Clinton left office in 2001. Very healthy. Virtually everyone who could work was working. In fact, after the high of 7.8% in the middle of 1998, the unemployment rate continued to fall and from the middle of 1997 until the end of his term, it never went above 5% including a low of 3.8% in 2000. Astounding! At that point, literally every American who could work was working. This is tantamount to 0% unemployment, which is unachievable. There will always be a certain percentage of the population that cannot work. This is stellar news. The prime lending rate, however, was at 9%. This is a 50% increase from where it was when Clinton took office. Could this be an indicator of things to come? Certainly, by any standard the Clinton years were economically very good.
But economic policies are not like flipping a light switch. You don’t simply wave a magic wand and change the way business is done in this country. It takes time for policies to be devised and implemented. That’s why I have devised the two-year rule. There is always a bit of lag time between the time a policy is dreamed up, put before congress, voted on, implemented and some results start to take shape. Let’s look at the Carter years for starters. The average economic growth for his term from 1977-1980 is 3.3%, not that bad. But do you really think that his economic policies were in play in Jan. of 1977? How about Feb? In fact, do you think you can say he had anything to do with the success or failure of economic growth in all of 1977? In fact, during this year, unemployment was going down as well. Things were going along very nicely. But what if we offset these numbers by two years. Not an arbitrary number but a reasonable amount of time for someone’s economic policies to take effect. From 1979-1982, economic growth is an abysmal .9%! That is absolutely stagnant. Although unemployment had been reduced to 5.9% in 1979, it grew to an uncontrollable amount of 10.8% in 1982!! Almost double! The worst in the history of the statistic. Clearly, the Carter years were a complete economic failure. Certainly a much more likely candidate (if not, in fact, the only candidate) for the worst economy since WWII.
Ronald Reagan took office in Jan. of 1981. His tax cuts weren’t approved by congress until Aug. of 1981. Would you say that the economic progress (or regress) during this period is Reagan’s or Carter’s? Do you think that there was significant change in the economy in September of 1981? October? Certainly, the two-year rule is a good one. Implementing that for Reagan, we get a revised number of 4%! That’s better than his previous and better than the Clinton boom of the 90’s! Does the two-year rule affect Bush? His new number is 2.3%. Substantially better than before.
But what of the Clinton boom? How does the two-year rule affect him? Clinton’s new number is 3.2%. Not bad, but not close to Reagan. And remember, Clinton followed an economy with a 2.3% economic growth rate while Reagan had a truly abysmal economy to dig us out of. In fact, after 8 years of Clintonomics, he was only able to increase the economy by the same pathetic amount that Carter left for Reagan: .9%. And this at a time when the entire country was working their collective butts off!
Perhaps I’m being a little unfair to poor Bill. After all, he wasn’t responsible for 9/11, which by the two-year rule would fall to him. It clearly had a devastating effect on the economy. But if you look a little closer at the numbers, you’ll see that Bill’s economy was tanking long before 9/11. In the last half of 2000 (before G.W. Bush, before 9/11), the economic growth rate was .25%! Worse than even Carter. In fact, for the 4 quarters before 9/11, Clinton’s number is -.4%!! That includes three quarters of NEGATIVE growth! Obviously, I’m not being unfair at all and he should be grateful these numbers aren’t being published on a daily basis.
George W. hasn’t been in office long enough for the two-year rule to take effect. I can only say this: there hasn’t been a negative quarter of growth since 9/11. Let’s revisit this when the tax cuts kick in!!
Prime rate data: http://research.stlouisfed.org/fred/data/irates/prime
Unemployment data: www.bls.gov Click “Get Detailed Statistics” then choose “Unemployment Rate.” Select years.
Economic Growth data: http://www.bea.gov/bea/dn/gdpchg.xls
In 1976, Jimmy Carter was elected with unemployment at 7.5%, economic growth at 5.6%, and the prime lending rate at 6.25%. When he left office in 1981, unemployment was at 7.5%, economic growth was at -.2%, and the prime lending rate was at 20% (This was down from a high of 21.5% just one month earlier.).
In 1981, Ronald Reagan took office with a promise to install what the press called Reaganomics. His vice-president, George Bush, called it voodoo economics. Whatever you call it, when he left office in 1989, unemployment was at 5.4%, economic growth was at 4.2%, and the prime lending rate was at 10.5%. Unemployment spiked in 1982 at 10.8%, the worst ever since they started keeping track in 1948. Whatever George Bush may have thought about Reaganomics during the 1980 campaign, he changed very little of the plan and by the time he left office in 1993, unemployment was at 7.3%, economic growth was at 3%, and the prime lending rate was at 6%. It was at this point that Bill Clinton was telling anyone who would listen that we were suffering through the worst economy in 50 years.
And what of the Clinton years? We’ve heard so much about the Clinton boom of the 90’s. What are the real numbers? We already know what they were when he took office. How did they pan out in the end? First, economic growth: Over the eight year period, he had a very healthy average of 3.7% with a high of 4.4%, a low of 2.7% (twice) and ending at 3.8%. Compared to Reagan’s average of 3.4% with a high of 7.3% and a low of –2% (in 1982), George Bush’s average of 1.95% with a high of 3.5% and a low of
-.5%. Clearly the Reagan years kept pace with the Clinton years and may have been better. I’ll get to that later. Let’s look at unemployment: 4.1% when Clinton left office in 2001. Very healthy. Virtually everyone who could work was working. In fact, after the high of 7.8% in the middle of 1998, the unemployment rate continued to fall and from the middle of 1997 until the end of his term, it never went above 5% including a low of 3.8% in 2000. Astounding! At that point, literally every American who could work was working. This is tantamount to 0% unemployment, which is unachievable. There will always be a certain percentage of the population that cannot work. This is stellar news. The prime lending rate, however, was at 9%. This is a 50% increase from where it was when Clinton took office. Could this be an indicator of things to come? Certainly, by any standard the Clinton years were economically very good.
But economic policies are not like flipping a light switch. You don’t simply wave a magic wand and change the way business is done in this country. It takes time for policies to be devised and implemented. That’s why I have devised the two-year rule. There is always a bit of lag time between the time a policy is dreamed up, put before congress, voted on, implemented and some results start to take shape. Let’s look at the Carter years for starters. The average economic growth for his term from 1977-1980 is 3.3%, not that bad. But do you really think that his economic policies were in play in Jan. of 1977? How about Feb? In fact, do you think you can say he had anything to do with the success or failure of economic growth in all of 1977? In fact, during this year, unemployment was going down as well. Things were going along very nicely. But what if we offset these numbers by two years. Not an arbitrary number but a reasonable amount of time for someone’s economic policies to take effect. From 1979-1982, economic growth is an abysmal .9%! That is absolutely stagnant. Although unemployment had been reduced to 5.9% in 1979, it grew to an uncontrollable amount of 10.8% in 1982!! Almost double! The worst in the history of the statistic. Clearly, the Carter years were a complete economic failure. Certainly a much more likely candidate (if not, in fact, the only candidate) for the worst economy since WWII.
Ronald Reagan took office in Jan. of 1981. His tax cuts weren’t approved by congress until Aug. of 1981. Would you say that the economic progress (or regress) during this period is Reagan’s or Carter’s? Do you think that there was significant change in the economy in September of 1981? October? Certainly, the two-year rule is a good one. Implementing that for Reagan, we get a revised number of 4%! That’s better than his previous and better than the Clinton boom of the 90’s! Does the two-year rule affect Bush? His new number is 2.3%. Substantially better than before.
But what of the Clinton boom? How does the two-year rule affect him? Clinton’s new number is 3.2%. Not bad, but not close to Reagan. And remember, Clinton followed an economy with a 2.3% economic growth rate while Reagan had a truly abysmal economy to dig us out of. In fact, after 8 years of Clintonomics, he was only able to increase the economy by the same pathetic amount that Carter left for Reagan: .9%. And this at a time when the entire country was working their collective butts off!
Perhaps I’m being a little unfair to poor Bill. After all, he wasn’t responsible for 9/11, which by the two-year rule would fall to him. It clearly had a devastating effect on the economy. But if you look a little closer at the numbers, you’ll see that Bill’s economy was tanking long before 9/11. In the last half of 2000 (before G.W. Bush, before 9/11), the economic growth rate was .25%! Worse than even Carter. In fact, for the 4 quarters before 9/11, Clinton’s number is -.4%!! That includes three quarters of NEGATIVE growth! Obviously, I’m not being unfair at all and he should be grateful these numbers aren’t being published on a daily basis.
George W. hasn’t been in office long enough for the two-year rule to take effect. I can only say this: there hasn’t been a negative quarter of growth since 9/11. Let’s revisit this when the tax cuts kick in!!
Prime rate data: http://research.stlouisfed.org/fred/data/irates/prime
Unemployment data: www.bls.gov Click “Get Detailed Statistics” then choose “Unemployment Rate.” Select years.
Economic Growth data: http://www.bea.gov/bea/dn/gdpchg.xls
Friday, November 26, 2004
Welcome to my thoughts!
Well, for months I've been looking for a place to place my thoughts. I've looked at groups and websites but this seems like it might be the place to vent. I will be addressing the things that are most important to all of us: politics, sports, and movies! Sure, I may diverge from these topics, but since this is most of what I think about, I'm sure it will be most of what shows up here on the blog.
I'm new to blogging and don't know how often I'll be able to update, but I'll try to get here a few times a week. Feel free to respond. I won't take things personally if you choose to disagree with me. All I ask is that you do the same for me. Of course, the fact that we are sharing very personal thoughts in a very public way and that someone has chosen to criticize you for that can't possibly be taken as anything other than personal, but I digress!
I am currently working in television as a free-lance replay specialist. My primary duties are to do slow-motion replay for televised sporting events. Various production companies will call me and book me for certain upcoming games. I do a lot of travelling and see a lot of games. It mixes my love of sports with the pressure of live television. I love it.
I'm sure I'll have a topic to address very soon, so stay tuned.
I'm new to blogging and don't know how often I'll be able to update, but I'll try to get here a few times a week. Feel free to respond. I won't take things personally if you choose to disagree with me. All I ask is that you do the same for me. Of course, the fact that we are sharing very personal thoughts in a very public way and that someone has chosen to criticize you for that can't possibly be taken as anything other than personal, but I digress!
I am currently working in television as a free-lance replay specialist. My primary duties are to do slow-motion replay for televised sporting events. Various production companies will call me and book me for certain upcoming games. I do a lot of travelling and see a lot of games. It mixes my love of sports with the pressure of live television. I love it.
I'm sure I'll have a topic to address very soon, so stay tuned.
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