Ronald Reagan: Fiscal Disaster

There's been a great deal of back of forth about Clinton and Obama and what they have said about Reagan. Personally, I've missed most of it. Being a stock market person I've been a little preoccupied over the last few weeks. But, I think it's time to chime in on the debate because the underlying facts -- those pesky things -- aren't very flattering to Reagan. In fact, the facts -- again, those pesky annoying things -- indicate that Reagan was a complete and total fiscal disaster.

First, let's go to the charts, shall we? It wouldn't be a Bonddad diary without charts and graphs. Let's start with Reagan's buying the "tax cuts pay for themselves" line of reasoning. Here is a graph from the St. Louis Federal Reserve of the year-over-year percentage change in tax receipts.

If you look closely at the tax receipts under Reagan and compare them to other periods you will notice a clear pattern: there is no meaningful difference between the yearly change in tax receipts under Reagan and any period before or after. This tells us a very important fact: tax receipts -- and the growth thereof -- is as much a function of overall economy growth as the actual tax rate.

OK -- let's see how much of a fiscal conservative Reagan was. Here is a graph of federal expenditures in red and federal receipts in blue.

Does anyone notice a pattern? In case you have a hard time figuring it out, let me provide some clarity.

-- Reagan -- the fiscal conservative -- never balanced a budget.

-- Reagan -- the fiscal conservative -- never came close to balancing a budget.

-- Reagan -- the fiscal conservative -- never even came remotely close to even thinking about balancing a budget.

So, how did Reagan pay for this? He mired the country is a mammoth explosion of Federal debt. Let's place this in historical context. Here is a graph of total federal debt going back to 1940, again from the St. Louis Federal Reserve.

Does anybody notice a pattern? The fiscally conservative party -- at least in theory -- have indebted this country since 1980 with a mammoth amount of debt.

Now -- let's look a little closer at the 1980s.

Saint Ronnie -- the great Saint who many are praising in one form or another -- nearly tripled the national debt. St. Ronnie -- the fiscal conservative who we all should bow down and worship -- paid for his massive expanse of the federal government (because he never balanced a budget) by pawning off the expense on the next generation. St. Ronnie used his great communication skills to tell us this was all somehow OK.

St. Ronnie was an asshole.

Comments

[mrcontinental]

Excellent Bonddad! You are without a doubt the because economical poster here. And the charts are always educational.

Thanks for telling it like it is about Uncle Ronnie the wackjob who they want to put up on Mount Rushmore. He was the worst thing to happen to this country; until Dubya of course.

[kassandranobody]

And what about all the de-regulation Reagan did? And getting rid of the fairness doctrine? And busting Unions? The reason Reagan looks so good is because the powers that be now(Bushco), are so greedy, stupid and bullying, Reagan looks like a nice guy.
Maybe its time for leaders from the young since they have the most to lose.

[NJYankee]

Great Blog, actual facts that can be seen and interpreted. I also liked the honesty of the other stock broker NURREDIN. We need to look at honest people with common sense analysis of the issues, unfortunately everything today is a spin. And most unfortunately is that to get the truth we have to dig for it, as in this blog. History usually corrects the misconceptions of a generation, St. Ronnie he wasn't. For all those who think George W. is the best, time will tell. If current political/history pundits are correct, W. will be way down in the best of category of presidents and just wait until the bills for this Iraq war start to come due...we will be assuring the Iraqis a better quality of life than ourselves...eventually. Wasn't it W who said he didn't believe in Nation building in a debate with Kerry? Another republican postulate along with fiscal conservative that went down the drain...although now its called preemptive war.

[Tsunami]

The last line of this BLOG is perfect. RR was an A-Hole of the highest order. He's Obama's hero? President Clinton was a Savior compared to RR.

[CharlesMac]

Bonddad, you have presented these facts before, as you have always presented hard evidence to support your conclusions. Your accurate, and occasionally prophetic conclusions, have always been metered, professional, and restrained.

"St. Ronnie was an asshole."

Passion is a beautiful thing. You wear it well.

[Novista]

I am cogitating on a new hypothesis: the myth of the figurehead.

Having lived in Australia since 1974, I paid little attention to the Reagan years. But, being back in my home state of Florida in 2000, I developed an interest again in cause-and-effect.

More recently, watching the 21st century unfold, I find this anomaly:

Greenspan wrote succinctly in 1966 on the cause of the 1929 stock market crash: essentially that easy credit flowed into the stock market and led to the correction ... now, I ask myself, if he knew that then, why did he pursue the same policy? And I conclude, he was a tool, a puppet.

Similarly, I have a Chertoff reaction to the Reagan 'legacy' that leads me to the same conclusion.

Maybe that 'invisible hand of the market' exists and is invisible but it is not as amorphous as the experts reckon ... just sayin' ...

[Chris1]

Not only was Reagan anally challenged, Bonddad, he was a traitor. Gary Sick, Robert Parry and others have clearly proved that he with Bush Sr., Casey and some others made a deal in October 1980 with the leaders of the Iranian government (in Paris, Madrid and Athens) to hold the hostages till after the presidential elections, in exchange for arms. The Iranians held them till 5 minutes after Reagan's inauguration! He also more or less converted the CIA into an unaccountable domestic spying instrument, spying on non-violent Americans.

Whenever I go on the Ronald Reagan freeway out of LA I insist on calling it National Freeway. His fiscal policies notwithstanding, at least his face hasn't soiled our currency -- yet.

[thedirtman]

Why is it every time the truth comes out about Reagan the clowns that will turn America into the next Haiti start becoming all offensive? America was a great nation long before Ronnie-boy. America is still great despite his effort.

[MadAppraiser]

This abovementioned column with economic charts depicts the results of the contemporary, private American banking pyramid envisioned by a German immigrant, and supported by American banking/Wall Street Interests! These private American banking/Wall Street Interests lobbied politicians after the Great Depression, and were instrumental in the passing/implementation of enabling legislation to create national debt mechanisms.

American politicians and citizens are in the dark concerning the unimaginable heist of American taxpayer money while we are entertained by American presidential candidate"s political acumen, domestic/foreign nation building inefficiency, employment deficits, tax cutting accounting magic, educational deficits, and banking/economist theatre. American citizens will have to evaluate presidential politician"s national economic competence in terms of the presidential cabinet economist selection process to actively control measures to decrease the national debt.

[timinhi]

I liked that Ronnie Reagan guy . . . He was funny in that movie with the chimp.

[Janelynne]

Thank you. There is nothing so cogent as the truth. The GOP wants to put Reagan on Mt Rushmore. They may hide it in an earmark.

Instead, may Reagan be immortalized as creating the Reaganomics trickle down principle, that will give all the breaks to the people at the top and the overflow will trickle down to the rest of us. As we recall, it didn't trickle at Enron, is isn't tricking from the bankers who made bad loans, it never tricked down in NOLA, it isn't trickling to our schools or hospitals. Something, however, trickled down, but it wasn't the advantages, it wasn't the prosperity, and it wasn't the American Dream.

[not one of the sheep]

Don't you just wish you could time travel back to the Carter days? Hell, Mexico is probably looking for some good two dollar a week workers. Just keep crybabying and whining about living in the greatest country in the world. Feel free to move, the other countries are looking for some great minds.

[NURREDIN]

It's about time someone told the truth (I am also a stockbroker). The Reagan and Bush Presidencies (both Bushes) are why we are in the mess we find ourselves in today.While destroying the middle class and allowing American companies to ship production overseas, our infrastructure has been so damaged it will take 30 years to get us back to where we were in 1980 (if no more Republicans are elected and I am a Republican).My party hasn't made fiscal sense in almost 30 years.The American middle class income has gone to China and that money and those jobs aren't coming back.John McCain lost Michigan because he had the nerve to tell the people the truth, but just like the idiots in the "Red" states, they want to hear "pie-in-the-sky" promises from the new "Daddy Feelgood"! The red staters don't realize another big misconception about Reagan: We lost the Cold war, we didn't win it!. Who is now responsible for all those former Soviet Union sattelite countries that Russia no longer needs? Uncle Sap, the British, and the French. Who sent their soldiers to fight and die in Europe when the Russians pulled out? Not Yeltsin! The Soviet Union only existed as a buffer zone to protect Russia from a conventional attack. With the advent of nuclear weapons, the Russians didn't need the buffer and now we pay for those unproductive countries. Who buys products from Latvia or Uzbekhistan? How much of our tax revenue is going to Nato to keep these countries up now they they are in "our realm of influence" while the Russian economy continues to grow? How much did we spend to make sure their nuclear arsenals were dismantled? This is all Reagan's fault.The smart money in Russia knew he was stupid enough to take over those countries, and now we foot the bill.The "Great Communicator" was just a great Pimp, and we're the "tricks" he turned out.You better figure out a way to save every dime you need for retirement, 'cause the calvary ain't coming.

[whsmith]

and Hillary still hasn't removed this from her website:
"But no president can do it alone. She must break recent tradition, cast cronyism aside and fill her cabinet with the best people, not only the best Democrats, but the best Republicans as well.. We"re confident she will do that. Her list of favorite presidents - Washington, Adams, Jefferson, Lincoln, both Roosevelts, Truman, George H.W. Bush and REAGAN - demonstrates how she thinks. As expected, Bill Clinton was also included on the aforementioned list."

[richsmith]

Mr Stewart - Bonddad - I sent your last Huffblog around my circle of friends because of the organization of your charts and the conclusions you draw from them. Over the past 6-7 years (since the tech bubble bust) I have been telling my brother-in-law and types like him (besides the fact that the Shrub II is an idiot) that they should keep an eagle eye on the housing market for any sign of problems and sell all their security and mutual fund holdings if they see it coming. The housing bubble will be the last big one. There wont be any more. The only thing we have left to invest in here in the Ol'e USA is land, not land in the middle of the Mohavi Desert but where crops can be grown, wood can be cut, or where ore or coal can be dug. That's it.

I believe cartoons and charts work better with these folks than my rants.

Most of this blog makes sense except one detail described by your "tax receipt" chart. If you are reading these comments, notice the steep decline of tax revenue at the start of each first term of the Trixter, the Communicator, Shrub I and Shrub II. They are followed by revenue rise and the reestablishment of relative equilibrium after a year or year and a half. What happened there? I would assume a subsequent rise in taxes, and in the case of Shrub II I believe that was the case, but what happened in the other cases?