Tag: Reagan

A Remembrance of William Niskanen

I first met Bill when I went to the Council of Economic Advisers in mid-1982. Bill had come to the CEA in the spring of 1981 as one of the early appointees of the incoming Reagan administration. He had known the president and worked with him when he was governor of California.

Bill and I quickly became good friends. Whenever we were both in Washington, we would usually start the day with 20 minutes of chewing over what was going on in the economy and in public policy. Part of the bond that developed between us was a consequence of the unrelenting infighting within the administration. The infighting sometimes involved the CEA but Bill and I, most of the time, were able to stand clear and remain in neutral territory.

Of course, Bill understood how bureaucracies work, or failed to work, from both his research and his experience at Rand, Ford, OMB and, yes, at UCLA and Berkeley. His insights were a staple of our conversations both at the CEA and later. Very few scholars have such first-hand experience in these various sectors of the economy. That fact often shows in the work of academics who have policy ideas that are simply untenable in the context of how organizations and the political system actually work.

A wonderful sense of humor lubricated Bill’s interactions with others. Well, most of the time anyway. During the administration’s work that culminated in the Tax Reform Act of 1986, Bill cracked along the way that the Treasury proposal was one that Walter Mondale would be proud of. I had left the CEA and returned to Brown University by that time, but Bill’s crack so angered Treasury Secretary Don Regan (who was not renowned for a sense of humor) that Regan vetoed Bill’s path to become chairman of the CEA. He served as acting chairman for a short time and then joined Cato.

Bill was the most widely read person I have known. That, plus the breadth of his personal experience, made him a delightful conversationalist on almost any topic in almost any group.

Although it was a big loss to the Reagan administration for Bill to depart, it was a huge gain for Cato and for the nation for him to join Cato. His leadership there, working closely with Ed Crane, built Cato to what it is today—the premier libertarian think tank in the world. Bill’s scholarly work will influence future generations; so also, in equal or greater measure, will the Cato Institute that he helped to build.

Bush Was Not a Conservative

There’s an interesting debate in the blogosphere about whether President George W. Bush was a conservative. Here’s a good summary of the discussion, along with lots of links. (I especially like this analysis since it cites my work.)

I’ve already explained that Bush was a statist rather than a conservative, and you can find additional commentary from me here, here, here, and here.

Simply stated, any president who doubles the burden of federal spending in just eight years is disqualified from being a conservative — unless the term is stripped of any meaning and conservatives no longer care about limited government and constitutional constraints on Washington.

But if you don’t want to read the blog posts I linked above, this chart should make clear that Bush was a big spender, not only when compared to Reagan, but also compared to Clinton. Moreover, we’re only looking at overall domestic spending, so this doesn’t include Iraq, Afghanistan, and other defense expenditures. And these are inflation-adjusted dollars, so we’re comparing apples to apples.

Let’s also examine the burden of domestic spending as a share of GDP. As you can see, there actually was progress during the Clinton years, and significant progress during the Reagan years. But all that was completely wiped out during the Bush presidency.

These numbers should not be a surprise. During Bush’s tenure, we got the no-bureaucrat-left-behind education bill, two corrupt farm bills, a new prescription drug entitlement, two pork-filled transportation bills, an auto company bailout, and a TARP bailout for banks.

This was a time of feasting for special interest groups and lobbyists, to put it mildly.

If that’s conservative, then Ronald Reagan was a liberal.

Spending Restraint Works: Examples from Around the World

America faces a fiscal crisis. The burden of federal spending has doubled during the Bush-Obama years, a $2 trillion increase in just 10 years. But that’s just the tip of the proverbial iceberg. Because of demographic changes and poorly designed entitlement programs, the federal budget is going to consume larger and larger shares of America’s economic output in coming decades.

For all intents and purposes, the United States appears doomed to become a bankrupt welfare state like Greece.

But we can save ourselves. A previous video showed how both Ronald Reagan and Bill Clinton achieved positive fiscal changes by limiting the growth of federal spending, with particular emphasis on reductions in the burden of domestic spending. This new video from the Center for Freedom and Prosperity provides examples from other nations to show that good fiscal policy is possible if politicians simply limit the growth of government.

 

These success stories from Canada, Ireland, Slovakia, and New Zealand share one common characteristic. By freezing or sharply constraining the growth of government outlays, nations were able to rapidly shrinking the economic burden of government, as measured by comparing the size of the budget to overall economic output.

Ireland and New Zealand actually froze spending for multi-year periods, while Canada and Slovakia limited annual spending increases to about 1 percent. By comparison, government spending during the Bush-Obama years has increased by an average of more than 7-1/2 percent. And the burden of domestic spending has exploded during the Bush-Obama years, especially compared to the fiscal discipline of the Reagan years. No wonder the United States is in fiscal trouble.

Heck, even Bill Clinton looks pretty good compared to the miserable fiscal policy of the past 10 years.

The moral of the story is that limiting the growth of spending works. There’s no need for miracles. If politicians act responsibly and restrain spending, that allows the private sector to grow faster than the burden of government. That’s the definition of good fiscal policy. The new video above shows that other nations have been very successful with that approach. And here’s the video showing how Reagan and Clinton limited spending in America.

To Fix the Budget, Bring Back Reagan…or Even Clinton

President Obama unveiled his fiscal year 2012 budget today, and there’s good news and bad news. The good news is that there’s no major initiative such as the so-called stimulus scheme or the government-run healthcare proposal. The bad news, though, is that government is far too big and Obama’s budget does nothing to address this problem.

But perhaps the folks on Capitol Hill will be more responsible and actually try to save America from becoming a big-government, European-style welfare state. The solution may not be easy, but it is simple. Lawmakers merely need to restrain the growth of government spending so that it grows slower than the private economy.

Actual spending cuts would be the best option, of course, but limiting the growth of spending is all that’s needed to slowly shrink the burden of government spending relative to gross domestic product.

Fortunately, we have two role models from recent history that show it is possible to control the federal budget. This video from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to demonstrate the fiscal policy achievements of both Ronald Reagan and Bill Clinton.

Some people will want to argue about who gets credit for the good fiscal policy of the 1980s and 1990s.

Bill Clinton’s performance, for instance, may not have been so impressive if he had succeeded in pushing through his version of government-run healthcare or if he didn’t have to deal with a Republican Congress after the 1994 elections. But that’s a debate for partisans. All that matters is that the burden of government spending fell during Bill Clinton’s reign, and that was good for the budget and good for the economy. And there’s no question he did a much better job than George W. Bush.

Indeed, a major theme in this new video is that the past 10 years have been a fiscal disaster. Both Bush and Obama have dramatically boosted the burden of government spending – largely because of rapid increases in domestic spending.

This is one of the reasons why the economy is weak. For further information, this video looks at the theoretical case for small government and this video examines the empirical evidence against big government.

Another problem is that many people in Washington are fixated on deficits and debt, but that’s akin to focusing on symptoms and ignoring the underlying disease. To elaborate, this video explains that America’s fiscal problem is too much spending rather than too much debt.

Last but not least, this video reviews the theory and evidence for the “Rahn Curve,” which is the notion that there is a growth-maximizing level of government outlays. The bad news is that government already is far too big in the United States. This is undermining prosperity and reducing competitiveness.

Comparing Reaganomics and Obamanomics

Ronald Reagan would have been 100 years old on February 6, so let’s celebrate his life by comparing the success of his pro-market policies with the failure of Barack Obama’s policies (which are basically a continuation of George W. Bush’s policies, so this is not a partisan jab).

The Federal Reserve Bank of Minneapolis has a fascinating (at least for economic geeks) interactive webpage that allows readers to compare economic downturns and recoveries, both on the basis of output and employment.

The results are remarkable. Reagan focused on reducing the burden of government and the economy responded. Obama (and Bush) tried the opposite approach, but spending, bailouts, and intervention have not worked. This first chart shows economic output.

The employment chart below provides an equally stark comparison. If anything, this second chart is even more damning since employment has not bounced back from the trough. But that shouldn’t be too surprising. Why create jobs when government is subsidizing unemployment and penalizing production? And we already know the so-called stimulus has been a flop.

None of this should be interpreted to mean Reagan is ready for sainthood. He made plenty of compromises during his eight years in office, and some of them were detours in the wrong direction. But the general direction was positive, which is why he’s the best President of my lifetime.*

*Though he may not be the best President of the 20th Century.

The Tea Party and Foreign Policy

There has been an on-going discussion recently about the Tea Party’s foreign policy views and how this might influence the upcoming election and new members of Congress.  In an essay at the Daily Caller last week, the Heritage Foundation’s Jim Carafano addressed this question and the claim that the new “Defending Defense” initiative— led by Heritiage, AEI, and the Foreign Policy Initiative—is aimed at co-opting the Tea Party movement (for more on the substance, or lack thereof, of “Defending Defense,” see Justin Logan’s response here).

Over at The Skeptics blog, I take issue with Carafano’s assessment of the Tea Party’s foreign policy views:

With respect to Carafano’s assessment of the Tea Partiers’s views on foreign policy and military spending, most of what he puts forward is pure speculation. Little is actually known about the foreign policy views of a movement that is organized primarily around the idea of getting the government off the people’s backs. It seems unlikely, however, that a majority within the movement like the idea of our government building other people’s countries, and our troops fighting other people’s wars.

Equally dubious is Carafano’s claim that the Tea Party ranks include “many libertarians who don’t think much of the Reagan mantra ‘peace through strength’ ” but an equal or larger number who are enamored of the idea that the military should get as much money as it wants, and then some. Carafano avoids a discussion of what this military has actually been asked to do, much less what it should do. By default, he endorses the tired status quo, which holds that the purpose of the U.S. military is to defend other countries so that their governments can spend money on social welfare programs and six-week vacations.

Tea Partiers are many things, but defenders of the status quo isn’t one of them. This movement is populated by individuals who are incensed by politicians reaching into their pockets and funneling money for goo-goo projects to Washington. It beggars the imagination that they’d be anxious to send money for similar schemes to Brussels, Paris, Berlin and Tokyo, and yet that is precisely what our foreign policies have done – and will do – so long as the United States maintains a military geared more for defending others than for defending us.

Click here to read the entire post.

Or a Program That Was Actually Going to Work

John Judis writes in the New Republic that Obama hasn’t been as successful at selling his economic program as Reagan was:

On the eve of the [1982] election, with the unemployment rate at a postwar high, a New York Times/CBS News poll found that 60 percent of likely voters thought Reagan’s economic program would eventually help the country. That’s a sign of a successful political operation.