Carter, Reagan and the Poor

My colleague Tom Firey is right on the mark with his nearby blog post dissecting a recent Paul Krugman column on the supposed myths of the Reagan economic record. Allow me to pile on.

Krugman wrote in a January 21 column for the New York Times that the economic record of President Reagan was one of failure. The Reagan years did encompass a recovery from a steep recession, he acknowledges, but then, “By the late 1980s, middle-class incomes were barely higher than they had been a decade before — and the poverty rate had actually risen.”

Let’s bore in on the poverty numbers and the operative phrase “a decade before.”

As everyone knows, Reagan was in office for exactly eight years, from January 1981 to January 1989. To compare his last full year in office (1988) to “a decade before” would take us back to 1978, a period that would include the last two years of Jimmy Carter’s single term. Those two years, it turns out, were absolutely brutal for America’s poor.

The last half of Carter’s tenure was marked by double digit inflation, record high interest rates, and a sputtering economy that fell into recession in the first half of 1980. That stagflationary mix caused the poverty numbers to soar. From 1978 to 1980, according to the Census Bureau, the number of Americans living below the poverty line rose by 4.8 million and the poverty rate jumped from 11.4 to 13.0 percent.

The poverty rate continued to climb under Reagan as the nation labored through a steep recession in 1981-82, a recession largely caused by the Federal Reserve Board’s efforts to slay the Carter-era inflation. After peaking at 15.2 percent in 1983, the rate declined steadily through the rest of Reagan’s time in office. By his last year in office, the poverty rate was exactly the same—13 percent—as it was in Carter’s last year in office. That’s nothing to crow about, but neither is it an increase or an obvious sign of failure.

To compare the last year of Reagan’s presidency to 1978 has the effect of saddling the Reagan record with the last half of the Carter presidency—a neat statistical trick worthy of the current presidential campaign season.