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Ronald Reagan’s Birthday

Well, it’s Ronald Reagan’s 100th birthday, and all the garden-variety conservatives are busy touting that. It seems, therefore, appropriate to republish some of the actual facts about Ronald Reagan, who, like virtually all politicians, talked a good game but didn’t deliver. The following is from a post I did December 16th, 2009:

It’s high time we dispel once and for all the absurd myth that Ronald Reagan was somehow for deregulation.

Statistically speaking, the size of bureaucracy, in terms of sheer civilian manpower, increased dramatically under Reagan, so that by the time he was finished, there were well over 200,000 more government workers than in 1980, when he took office.

In fact, the size of government under Ronald Reagan grew astronomically in virtually every way. To wit:

At the end of the first quarter of 1988, government spending had increased to 28.7 percent of the national income (“national income” refers to the private money generated by the hard-working citizens of this country). To put that into better perspective, this figure is even higher than Jimmy Carter’s outrageous numbers: in his final year as president, Carter maxed out at staggering 27.9 percent. Indeed, both Gerald Ford and Jimmy Carter cut government spending far more efficiently than Ronald Reagan. Here are some of those numbers, which don’t lie:

Under Reagan, Social Security spending went from 179 billion in 1981 to 269 billion.

Farm programs skyrocketed: 21 billion to 51 billion.

Medicare jumped from 43 billion in 1981 to 80 billion in 1987.

During the Reagan era, federal entitlements alone rose from 197 billion to 477 billion.

Reagan promised the people that he would “abolish” the Department of Energy and the Department of Education. He did no such thing. On the contrary, these budgets more than doubled under Reagan. In his own words: “We’re not attempting to cut either spending or taxing levels below that which we presently have.”

In addition to not cutting, however, Reagan also upped the spending a few notches, thus: the Gross Federal Debt went from 900 billion to 2.7 trillion. Ford and Carter simply doubled it; Reagan tripled it.

Spending habits (which are a better gauge of government size than are taxes) increased under Reagan’s leadership in almost every way. But in any case, Reagan hardly cut taxes: by the end of 1987, government revenues, a good indicator of taxes and tax cuts, were nearly identical to those of Carter.

Reagan’s Economic Recovery Act, so-called, was negated a year or two later by his Tax Equity and Fiscal Responsibility Act (TEFRA).

He furthermore placed a five-cent-per-gallon tax on gas.

He hiked up taxes on the trucking industry.

He succeeded in increasing the Social Security tax – to the tune of 165 billion. In terms of foreign trade, Reagan was the most mercantilistic since Herbert Hoover: import restriction doubled under Reagan, and quotas were placed on countless products.

Foreign aid went from 10 billion to 22 billion.

Reagan also supported seatbelt laws and federal airbag laws.

Reagan increased regulation of the auto industry by not opposing that monstrous thing known as Corporate Average Fuel Economy (CAFÉ).

In the final analysis, Reagan, like all the other bureaucrats, was just another interventionist. So please don’t be fooled.

If the mark of a minimal government is a government which, in Thomas Jefferson’s words, “extends only to such acts as are injurious to others” (i.e. which limits itself to protection against the initiation of force), then Reagan was about as far from that as any President ever, right or left.

That is, until now.


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The Multiplier Theory


In the Concise Guide To Economics, author and economist Jim Cox correctly explains that the Multiplier is one of the major components of Keynesian policy.

For those who still don’t know it, Keynesian economics — named after John Maynard Keynes — are the economics that Barack Obama, as well as George W. Bush (et al), espouse in full.

The following explanation of the Multiplier Theory, though exceptionally clear and cogent, gets a bit technical, but please read through it. It is short, and it is also crucial that everyone understands the degree to which economic illiteracy grips the political leaders who have power over us.

The multiplier effect can be defined as the greater resulting income generated from an initial increase in spending. (For example, an increase in spending of $100 will generate a total increase in income received of $500 as the initial income is respent by each succeeding recipient–these figures are based on an assumption that each income receiver spends 80% of his additional income and saves 20%, the formula being Multiplier = 1 / % Change in Saving.)

Fundamentally, the multiplier is theory run amok, as Henry Hazlitt has explained in The Failure of the New Economics:

If a community’s income, by definition, is equal to what it consumes plus what it invests, and if that community spends nine-tenths of its income on consumption and invests one-tenth, then its income must be ten times as great as its investment. If it spends nineteen-twentieths on consumption and invests one-twentieth, then its income must be twenty times as great as its investment….And so ad infinitum. These things are true simply because they are different ways of saying the same thing. The ordinary man in the street would understand this. But suppose you have a subtle man, trained in mathematics. He will then see that, given the fraction of the community’s income that goes into investment, the income itself can mathematically be called a “function” of that fraction. If investment is one-tenth of income, income will be ten times investment, etc. Then, by some wild leap, this “functional” and purely formal or terminological relationship is confused with a causal relationship. Next the causal relationship is stood on its head and the amazing conclusion emerges that the greater the proportion of income spent, and the smaller the fraction that represents investment, the more this investment must “multiply” itself to create the total income! p. 139

A bizarre but necessary implication of this theory is that a community which spends 100% of its income (and thus saves 0%) will have an infinite increase in its income–sure beats working!

A further reductio ad absurdum is provided by Hazlitt:

Let Y equal the income of the whole community. Let R equal your (the reader’s) income. Let V equal the income of everybody else. Then we find that V is a completely stable function of Y; whereas your income is the active, volatile, uncertain element in social income. Let us say the income arrived at is:

V = .99999 Y

Then, Y = .99999 Y + R

.00001 Y = R

Y = 100,000 R

Thus we see that your own personal multiplier is far more powerful than the investment multiplier, it is only necessary for the government to print a certain number of dollars and give them to you. Your spending will prime the pump for an increase in the national income 100,000 times as great as the amount of your spending itself. pp. 150 -151

The multiplier is based on a faulty theory of causation and is therefore in actuality nonexistent. Keynesians today will often admit to this but cling to their multiplier by citing the fact that it has a regional effect. Without them saying so explicitly, what this means is that if income is taken from citizens of Georgia and spent in Massachusetts it will benefit the Massachusetts economy(!).

The multiplier is an elaborate attempt to obfuscate the issues to excuse government spending. It and Keynesian theory are nothing more than an elaborate version of any monetary crank’s call for inflation; Keynes managed to dredge up the fallacies of the 17th century’s mercantilist views only to relabel them as the “new economics”!

(Link)

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George W. Bush


Under President George W. Bush, who was the Herbert Hoover of his day, appropriated government programs grew from $298 billion to $613 billion.

Under President George W. Bush, Social Security spending went from $406 billion to $662 billion.

Under President George W. Bush, Medicare spending went from $216 billion to $425 billion.

Under under President George W. Bush, Medicaid spending went from $117.9 billion to $259 billion.

Under President George W. Bush, “miscellaneous spending” went from $290 billion to $673 billion.

Under President George W. Bush, net interest dropped from $222.9 billion to $139 billion.

Under President George W. Bush, disaster cost went from $0 billion to $4 billion.

In George W. Bush’s eight years, government spending increased more than 55 percent, largely due to woefully misbegotten wars.

Even when adjusted for inflation in constant dollars, federal expenditures under Bush soared by 29 percent.

During his Presidency, real Gross Domestic Product (GDP) only increased by 17.3 percent, and over the Bush years, real government spending went up nearly twice as fast as the actual U.S. economy.

The left should therefore be in love with George W. Bush. He, like his father and like Ronald Reagan, was a complete statist.

There’s more:

Under George W. Bush, Washington ran deficits almost every year. Total federal debt doubled and rose from 58 percent to 66 percent of GDP, for a 14 percent increase in taxpayer debt burden (in terms of the Gross Domestic Product).

Here’s a quick rundown:

• Payment for Individuals: $1054.6 billion in the year 2000 to $1397.1 billion in the year 2007.

• Social Security and Railroad Retirement: $410.5 billion in the year 2000 to $487.7 billion in the year 2007.

• Federal Employees Retirement and Insurance: $100.3 billion in the year 2000 to $116.0 billion in the year 2007.

• Unemployment Insurance: 21.1 billion in the year 2000 to 27.1 billion in the year 2007.

• Medical Care: $362.7 billion in the year 2000 to $559.9 billion in the year 2007.

• Student Assistance: $10.9 billion in the year 2000 to $24.9 billion in the year 2007.

• Housing Assistance: $24.1 billion in the year 2000 to $27.0 billion in the year 2007.

• Food and Nutrition Assistance: $32.4 billion in the year 2000 to $46.3 billion in the year 2007.

• Public Assistance and Related Programs: $88.3 billion in 2000 to $103.4 billion in 2007.

• Other Transfers to Individuals: $4.3 billion in 2000 to $4.7 billion in 2007.

Of course, there was also the $700 billion Troubled Relief Assets Program (also known as the TARP bailout), and yet if you think these figures are difficult to fathom and the expenditures over-the-top, I assure you they do not even begin to compare to the massive spending apparatus that Barack Obama has unleashed.

Indeed, next to Barack Obama, George W. Bush’s reckless spending is downright frugal.

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Ronald Reagan And The Myth Of Deregulation

reagan22newIt’s high time we dispel once and for all the absurd myth that Ronald Reagan was somehow for deregulation.

Statistically speaking, the size of bureaucracy, in terms of sheer civilian manpower, increased dramatically under Reagan, so that by the time he was finished, there were well over 200,000 more government workers than in 1980, when he took office.

In fact, the size of government under Ronald Reagan grew astronomically in virtually every way. To wit:

At the end of the first quarter of 1988, government spending had increased to 28.7 percent of the national income (“national income” refers to the private money generated by the hard-working citizens of this country). To put that into better perspective, this figure is even higher than Jimmy Carter’s outrageous numbers: in his final year as president, Carter maxed out at staggering 27.9 percent. Indeed, both Gerald Ford and Jimmy Carter cut government spending far more efficiently than Ronald Reagan. Here are some of those numbers, which don’t lie:

Under Reagan, Social Security spending went from 179 billion in 1981 to 269 billion.

Farm programs skyrocketed: 21 billion to 51 billion.

Medicare jumped from 43 billion in 1981 to 80 billion in 1987.

During the Reagan era, federal entitlements alone rose from 197 billion to 477 billion.

Reagan promised the people that he would “abolish” the Department of Energy and the Department of Education. He did no such thing. On the contrary, these budgets more than doubled under Reagan. In his own words: “We’re not attempting to cut either spending or taxing levels below that which we presently have.”

In addition to not cutting, however, Reagan also upped the spending a few notches, thus: the Gross Federal Debt went from 900 billion to 2.7 trillion. Ford and Carter simply doubled it; Reagan tripled it.

Spending habits (which are a better gauge of government size than are taxes) increased under Reagan’s leadership in almost every way. But in any case, Reagan hardly cut taxes: by the end of 1987, government revenues, a good indicator of taxes and tax cuts, were nearly identical to those of Carter.

Reagan’s Economic Recovery Act, so-called, was negated a year or two later by his Tax Equity and Fiscal Responsibility Act (TEFRA).

He furthermore placed a five-cent-per-gallon tax on gas.

He hiked up taxes on the trucking industry.

He succeeded in increasing the Social Security tax – to the tune of 165 billion. In terms of foreign trade, Reagan was the most mercantilistic since Herbert Hoover: import restriction doubled under Reagan, and quotas were placed on countless products.

Foreign aid went from 10 billion to 22 billion.

Reagan also supported seatbelt laws and federal airbag laws.

Reagan increased regulation of the auto industry by not opposing that monstrous thing known as Corporate Average Fuel Economy (CAFÉ).

In the final analysis, Reagan, like all the other bureaucrats, was just another interventionist. So please don’t be fooled.

If the mark of a minimal government is a government which, in Thomas Jefferson’s words, “extends only to such acts as are injurious to others” (i.e. which limits itself to protection against the initiation of force), then Reagan was about as far from that as any President ever, right or left.

That is, until now.