Rule Five Friday

2015_05_01_Rule Five Friday (1)Not like this should be a surprise to anyone who has followed economic policy for the last 35 years, but here it is anyway:  Obama vs. Reagan on GDP Growth – Not Even Close.  Excerpt:

Ronald Reagan’s economic plan saw GDP surge at a 3.5% clip – 4.9% after the recession. That’s a 32% bump.

During the Obama years, thanks to his big government policies, the US economy has stalled. Today the quarterly GDP was announced. The GDP for the first quarter of 2015 braked more sharply than expected at only a .2% pace. The US economy has grown an anemic 9.6% during the Obama years (excluding today’s dismal number).

Of course, Obama’s record on job growth is also much worse than President Reagan’s record.

2015_05_01_Rule Five Friday (2)Net job growth has declined under Obama. By the end of the second year of their terms as president, economic growth under Reagan averaged 7.1% , under Obama an anemic 2.8%. (IJ Review)

And today, more than five years into the tepid recovery, labor-force participation remains at its lowest level since 1978 during the Carter years.

More from Forbes:

Let’s look at some numbers. President Reagan entered office in a period of high inflation which was stamped out by high interest rates that in turn led to the 1982 recession. His job-creation record after that may fairly be termed outstanding: nearly 20 million more Americans were employed when he left office than when the recession ended. Overall, including the recession on his watch, Reagan’s net job growth over eight years was 16.1 million.

2015_05_01_Rule Five Friday (3)Barack Obama entered office in different circumstances: He inherited a recession that was already well underway, which ended much earlier in his presidency than did the Reagan recession. If you think of the economic cycle like a bouncing ball, Obama entered office just as the ball was about to strike the pavement. The bounce, though, has proceeded in agonizingly slow motion. Some eight million jobs have been created under Obama since the mid-2009 end of the recession, with a net gain of about five million. Charting Obama and Reagan’s job-creation against overall U.S. population increases makes the picture look even worse for Obama, and the Reagan-era U.S. had a much smaller population. At any rate, more people have been added to the food-stamp rolls than the job rolls under Obama.

It’s misleading to compare employment rates during the two presidencies. 2015_05_01_Rule Five Friday (4)Imagine 90 out of 100 people are employed, and because the economy looks like it’s picking up more steam 10 more people enter the workforce. If nine out of ten of them find jobs, the unemployment rate doesn’t go down at all, yet ten percent more people are employed.

So what’s the chief difference between these two completely different takes on economic policy?

There’s one key difference:  Incentives.  President Reagan pushed policies that encouraged growth; they encouraged investment, small business, they rewarded success – at least to the extent that the Democratic Congress of those years (and mind you, the Democrat party has moved a ways to the left since the 1980s) allowed.

President Obama’s policies – at least to the extent that the rather squishy GOP Congress is allowing – punish success and reward failure.

2015_05_01_Rule Five Friday (5)It’s a truism in economics that you get more of what you reward, and less of what you punish.    Barack Obama’s economic policy can be boiled down to “you can’t make it without the Imperial Federal government.  We’ll give you handouts.  We’ll give you preferences.  We’ll give, give, give, and someone else will pay.”

Economic policy should be:  “You can do this yourself.  We’ll show you how.”

At present nobody much in the Imperial City is talking like this.  Why not?

2015_05_01_Rule Five Friday (6)