Buddy, can you spare a credit default option?
Class, come to order. Yesterday, we discussed the dismal unemployment numbers, and what those numbers translated into when put in terms of real human lives. For politicians to wish these figures to get worse so as to bring down the party in power--well, that is not serving the people is it?
But, there is another part to this story, and that is whether, if we had followed a radically different prescription, everything would be so much better.
OK, class, to get at this, we are going to have a pop quiz today, but this should be an easy one, so stop that whining or Phil Gramm will teach this course, you should all get 100%. Why? Because every week or so, the peculiarly tanned John Boehner--loved by his colleagues for providing them Tobacco Industry lobbying checks on the House Floor, so you know, if you like lung cancer, you can love him too, besides he looks so totally hip with that, that, whatever that tan is--pronounces the Obama stimulus plan a failure, pointing to the unemployment numbers. He usually proceeds to contrast this dismal picture with the nirvana brought about by the Reagan tax cuts.
Certainly, as good students of history, you recognize that Reagan did not inherit the worst financial crisis since the Great Depression. Nor did he inherit two wars, nor the collapse of the automobile industry, nor 8 years of budget profligacy, nor the radical right wing championing (and avoiding service in) another war or two or three. The retirement of the baby-boomers was 25 years in the future, not already ongoing and accelerating.
And, of course, you don't need little Johnny Boehner to tell you that tax rates, even for the wealthiest Americans, are now already 14% lower than Reagan's 1981 tax cut, nor that 95% of Americans received a tax cut in the Obama stimulus, nor that tax rates will still be 10.5% lower for the wealthiest when Obama allows the George W tax cuts to expire, nor that those cuts were intended to expire for the simple reason that they were projected then to cause to big a hole in the deficit.
But this, of course, begs the question as to what the Reagan tax cuts, such as they were, actually did achieve. At the same point in Reagan's Presidency as we are now at in Obama's, what was unemployment, and how long before it began to decline?
Class, I am shocked, shocked, that no one is raising his right hand. So, I'll tell you. Reagan inherited an unemployment rate of 7.6%, no wars, no major financial crisis, a still robust auto industry, a right wing clamoring for increased defense spending (that helps domestic employment), no retiring baby boomers actually taking down social security funds.
To answer the pop quiz: the unemployment rate under Reagan went from 7.6% to 9.7-9.8% in the summer after his inaugural, and remained at that level for two years, before it began to decline in the summer of 1983. In "Obama-time", that would be the equivalent of the summer of 2011. Moreover, the economy did not begin improving until the Spring, 1983, in "Obama-time" that is Spring, 2011.
There are those (your teacher included) who have difficulty separating the effects of the Reagan tax cuts from pure old Keynesian pump-priming deficit spending that accompanied these Reagan tax cuts. And, lest Republicans whine that Reagan had a Democratic Congress, remind them that Reagan himself never even submitted a balanced budget!
Surprise question for extra credit: what was Reagan's approval rating in January, 1983, two years into his Presidency? Again, no one raising their right hand except Dickie Cheney and OJ? OK, the correct answer: 35%--an approval rating only Dick Cheney and OJ Simpson would cheer.
Last question for extra credit: what was the unemployment rate when Reagan left office? C'mon boys and girls, you can get this one. Ah, now the right hands go up, but wait, wait, keep them up, it's not SO bad... Here's a hint: the "Reagan revolution" dropped unemployment by 2.1% from start to finish--that's right, you've got it, it was 5.5% when Reagan left office. (Ok, Ok, I know, the first George Bush reversed that too, but, hey, he was only Reagan's heir at the time, we did not yet have the pleasure of knowing him as George W's father, and George W showed us what a real Reagan revolution could mean).
The human brain has a wonderful (and necessary) ability to compress the past. Today, we are suffering daily the nearly 1-in-10 people unemployed (and, yes, these are comparable numbers, and the real numbers (perhaps 1-in-7 unemployed) were also elevated in Reagan's day. That period, nearly 30 years ago, is ancient history.
So, as a public service, so we can understand better what it was like then, your assignment, class, is to spell out the months of rising and non-declining unemployment under the Reagan nirvana the Republicans want us all to remember and revere:
1981: February-March-April-May-June-July-August-September-October-November*-December (yep, Xmas itself)-1982: January-February-March-April-May-June-July-August-September-October-November (Congressional elections!)-December-1983: January-February-March-April-May-June-July.
(*The equivalent to where we are in the Obama Presidency).
That's it. Class dismissed. You may now go to your homes, communities, campuses, radio stations, TV-strategists, and then next time someone critiques the Obama stimulus plan by contrasting it to Reagan's--tell them you ain't buyin' their nonsense, you just aced a pop quiz on the subject.
[Oh, one more thing as you are leaving. The banks under Reagan were still governed by Glass-Steagall that prevented overly risky activities that could bring down the entire economy. Today, there is no Glass-Steagall, and the banks have too much economic and political power. So, go to www.breakupthebigbanks.com, and sign the petition if you really want to regain your economic security..and you can tell Mommy and Daddy that teacher suggested you do it, and they do it too!].