Money & The Economy

What We Need From Our Next President

President Ronald ReaganAs the pool of aspiring presidential candidates grows by the day, one can’t help but hope that the electorate’s appetite for economic improvement under a term or two of a new president will likewise increase. After eight years of burgeoning government hegemony, diminution of personal liberty, assault on the free enterprise system and middle class family incomes, the last thing we need is perpetuation of the stagnant and fiscally stifling policies of the Obama administration. Perhaps we should look back, as we look forward, determining the nation’s course under a new president.

The last time the U.S. floundered with such a moribund economy was when the misery index (inflation plus unemployment) spiked over 20 at the end of the Carter administration. With rather constrained inflation, and government underreporting of real unemployment (Department of Labor U6 is still over 10%) our misery index is nowhere near Carter’s abysmal economic mishandling. But the sluggish economy, declining median income, and negligible economic expansion are taking their toll not just on the middle class, but the whole country.

Reagan-Obama-November-11But looking back to 1980 and how a new president, with congressional help, was able to reverse the negative trends, as well as instill hope for the future, is an example that begs repeating. If we’re to have any hope for our children and grandchildren’s future, it’s an example that must be repeated!

Carter’s economic policies had perpetuated the inordinately high tax rates of the previous decade, limiting job growth and capital investment, while generating less tax revenue due to the stagnant economy. Yet following the passage and implementation of the Economic Recovery Tax Act of 1982, unemployment dropped 45%; private domestic investment grew 77%, and economic growth averaged over 4.5% annually. The consumer price index, a measure of inflation, rose only 17% over the next ten years, far below the one-year peak of 13.5% the last year of the Carter term. Real income of every income bracket increased while tax receipts doubled from 1980 to 1990, from $500 billion to over $1 trillion.

Real GDP Growth (Recovery)The Reagan administration deregulated many industries, reducing the cost of doing business significantly, including oil, making energy cheaper. A new U.S.-Canadian free trade agreement was inked, and savings and investment encouraged by the creation of IRAs and 401(k) plans. A whole new investor class was created, as most Americans now had “skin in the game” of economic expansion. And they were richly rewarded, as the GDP increased by 77%, and the Dow Jones Industrial Average more than doubled.

National debt continued to grow under Reagan, but that was more the culpability of a spendthrift congress headed by Speaker Tip O’Neil. Twice Reagan sent balanced budget recommendations to Congress, both of which were carried to the capitol in an ambulance so Speaker O’Neil could declare them DOA (dead on arrival).

Cumulative Job Growth ComparisonSpending on education, social services, and healthcare nearly doubled over eight years, while federal outlays on commerce, housing credits, and regional development were decreased by nearly 22%. The federal civilian workforce was reduced by 5% as well. The deficit, as a share of GDP, was cut more than in half, from 6.3% to 2.9% by the time Reagan left office. A vibrant, growing, and healthy economy made that possible, even with the spending increases.

National defense was a priority in the Reagan years, as exemplified by a near doubling of the annual military budget over his two terms. When told in a cabinet meeting that he couldn’t spend that much on the military, the president responded, “Look, I am the president of the United States, the commander-in-chief. My primary responsibility is the security of the United States. … If we don’t have security, we’ll have no need for social programs.”

GrowthInPerCapitaGDP80sVsCurrentThe strengthened and expanded military validated Reagan’s defense mantra: peace through strength. Due to our significant military investment, the cold war never evolved to a hot one, and the Soviet state collapsed in part due to their inability to match our burgeoning military capabilities.

Researching the economic “report cards” of postwar presidents, Harvard economist Robert Barro claims, based on the raw data alone, Reagan easily has the top scores. “Using the change each year in inflation, unemployment, interest rates, and growth in gross national product, Reagan ranks first. He engineered the largest reduction in the misery index in history—50 percent.”

This is not intended to heap adulation on a former president, but to illustrate what can happen nationally when tried and true principles are applied in governance. Rather than perpetuating the failed Obama doctrines intended to fundamentally transform America, a return to the economic principles that made the nation great will resurrect the indomitable free enterprise engine of America, unleashing our ability to work, produce, and compete, and hopefully get a handle on our out-of-control spending.

Associated Press award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, Idaho and is a graduate of Idaho State University with degrees in Political Science and History and coursework completed toward a Master’s in Public Administration. He can be reached at rlarsenen@cableone.net.

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Richard Larsen

AP award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, Idaho, and is a graduate of Idaho State University with a BA in Political Science and History and former member of the Idaho State Journal Editorial Board. He can be reached at rlarsenen@cableone.net.

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One Comment

  1. This page keeps ‘bleeping’ me off…..so short and sweet. Give me a president that loves this Country and has leadership supported by a backbone

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