Wintery Knight

…integrating Christian faith and knowledge in the public square

Comparison of budget deficit and GDP under Reagan and Obama

Here’s a nice article from the Wall Street Journal.

Excerpt:

Democrats have been running Congress for nearly four years, and President Obama has been at the White House for 18 months, so it’s not too soon to ask: How’s that working out? One devastating scorecard came out Friday from the White House, in the form of its own semi-annual budget review.

The message: Tax revenues are smaller, spending is greater, and the deficits are thus larger than the White House has been saying. No wonder it dumped the news on the eve of a sweltering mid-July weekend.

[...]As a share of the economy, the White House now says the deficit in fiscal 2010, which ends on September 30, will be even larger than in 2009: 10%. That’s after a full year of economic growth, given that the recovery began last summer. More remarkable still, the deficit will barely fall in fiscal 2011, declining only to 9.2% of GDP in the second year of a recovery that ought to be gaining steam.

Let’s compare Obama and Reagan.

To put this in historical context, consider the nearby table that compares deficits as a share of GDP under Presidents Reagan and Obama. The 1981-82 recession was comparable in severity to the one Mr. Obama inherited and reached similar heights of unemployment. The deficits that resulted from that recession were the source of huge political consternation, with Democrats, the press corps and even some senior Reagan aides insisting that only a huge tax increase could save the country from ruin.

Yet as the table shows, the Reagan deficits never reached more than 6% of GDP, and that happened only in 1983, the first year of economic recovery. As the 1980s expansion continued, the deficits fell, especially as the pace of spending slowed in the latter part of Reagan’s second term.

[...]The Obama deficits are double that, and more than one-third higher than even the Gipper’s worst year. What explains this? Part of it is that Democrats are simply spending much more, sending outlays as a share of GDP above 25% for the first time since World War II. The White House now says outlays will be higher in 2011, at 25.1% of GDP, than at the height of the stimulus in 2009 and 2010.

[...]The other explanation for the record Obama deficits is that revenues have been so anemic, thanks to the lackluster economic recovery. In the Reagan years, revenues as a share of GDP never fell lower than 17.3%, despite (or we would say because of) his pro-growth tax cuts. In 2010, by contrast, the White House now says tax revenues will hit an astonishing low of 14.5% of GDP, rising only to 15.8% in 2011, even with the huge tax increase that hits on January 1, 2011.

Tax cuts worked, and government spending failed. Next time, let’s do what works – not what feels good.

Filed under: Commentary, , , , , , , , , , ,

4 Responses

  1. Jerry says:

    I think you’re talking about a different reagan than I know about, but the one I know about cut taxes and greatly increased government spending. under reagan deficits and federal debt skyrocketed. When he left office, he transformed a national debt that was in the billions to one in the trillions. If you look back through the 20th century, you see a very similar pattern, the democratic presidents left the country with less debt than the republican ones with the notable exception of Eisonhower (one of my favorite presidents). Source: http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

    So if you think about it, Obama is doing just what Reagan did – he’s continuing the recent presidential legacy of sending this country irreversibly towards bankrupcy (Clinton is the only exception to this rule in the last 20+ years) with reckless spending.

  2. Todd Blair says:

    Apparently you do not understand “Federal Budget Deficit as a Percentage of GDP.”

    Maybe you’ll understand this: The largest budget deficit under President Reagan was $221 billion during the year of 1986.

    LAST MONTH’S (2/2011) budget deficit under President Obama was $223 billion.

    You read that correctly: Under Obama last month, our deficit was higher than under the highest entire year under Reagan.

    And this: Reagan’s ENTIRE PRESIDENCY saw a cumulative deficit of $1.447 billion. Obama has already far exceeded that.

    • Rob says:

      Comparing the cumulative deficit in today’s dollars from 30 years is completely misleading. That would be like comparing Reagan’s deficits to Eisenhower or Kennedy when deficits rose by like 200-300 billion. Of course Reagan’s 1.447 trillion looks ridiculous compared to that. A more accurate portrayal would be to use percentages. So if Obama were to follow Reagan, our deficits would be closer to 30trillion at the end of a second term.

  3. Todd Blair says:

    Rob,

    The most accurate way to compare is to look at the deficit as a percentage of GDP, which the original post does. It clearly shows that Obama’s deficits far outstrip those of Reagan.

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