Here's a great in-depth analysis of supply-side economics (aka
Reaganomics or Trickle-down-economoics):
http://www.cato.org/pubs/pas/pa-261.html
This was written during the 1996 campaign when Democrats and liberals
were bashing Dole for supporting Reaganomics and Reagan
economic-style theories.
Though this article only compares the US economy up until 1995
(Clinton's first term), the results of Reagan's economic policy are
staggering:
# Economic Growth. The average annual growth rate of real gross
domestic product (GDP) from 1981 to 1989 was 3.2 percent per year,
compared with 2.8 percent from 1974 to 1981 and 2.1 percent from 1989
to 1995. The 3.2 percent growth rate for the Reagan years includes the
recession of the early 1980s, which was a side effect of reversing
Carter's high-inflation policies, and the seven expansion years,
1983-89. During the economic expansion alone, the economy grew by a
robust annual rate of 3.8 percent. By the end of the Reagan years, the
American economy was almost one-third larger than it was when they
began. [13] Figure 1 shows the economic growth rate by president since
World War II. That rate was higher in the 1980s than in the 1950s and
1970s but was substantially lower than the rapid economic growth rate
of more than 4 percent per year in the 1960s. The Kennedy income tax
rate cuts of 30 percent that were enacted in 1964 generated several
years of 5 percent annual real growth.
# Economic Growth per Working-Age Adult. When we adjust the economic
growth rates to take account of demographic changes, we find that the
expansion in the Reagan years looks even better and that the 1970s'
performance looks worse. GDP growth per adult aged 20-64 in the Reagan
years grew twice as rapidly, on average, as it did in the pre- and
post-Reagan years.
# Median Household Incomes. Real median household income rose by
$4,000 in the Reagan years--from $37,868 in 1981 to $42,049 in 1989,
as shown in Figure 2. This improvement was a stark reversal of the
income trends in the late 1970s and the 1990s: median family income
was unchanged in the eight pre-Reagan years, and incomes have fallen
by $1,438 in the anti-supply-side 1990s, following the 1990 and 1993
tax hikes. [14] Most of the declines in take-home pay occurred on
George Bush's watch. Under Bill Clinton's tenure, there has been zero
income growth in median household income.
# Employment. From 1981 through 1989 the U.S. economy produced 17
million new jobs, or roughly 2 million new jobs each year. Contrary to
the Clinton administration's claims of vast job gains in the 1990s,
the United States has averaged only 1.3 million new jobs per year in
the post-Reagan years. The labor force United States has averaged only
1.3 million new jobs expanded by 1.7 percent per year between 1981 and
1989, but by just 1.2 percent per year between 1990 and 1995. [15]
# Hours Worked. Table 1 confirms that hours worked per adult aged
20-64 grew much faster in the 1980s than in the pre -or post-Reagan
years.
# Unemployment Rate. When Reagan took office in 1981, the unemployment
rate was 7.6 percent. In the recession of 1981-82, that rate peaked at
9.7 percent, but it fell continuously for the next seven years. When
Reagan left office, the unemployment rate was 5.5 percent. This
reduction in joblessness was a clear triumph of the Reagan program.
Figure 3 shows that in the pre-Reagan years, the unemployment rate
trended upward; in the Reagan years, the unemployment rate trended
downward; and in the post-Reagan years, the unemployment rate has
fluctuated up and down but today remains virtually unchanged from the
1989 rate.
# Productivity. For real wages to rise, productivity must rise. Over
the past 30 years there has been a secular downward trend in U.S.
productivity growth. Under Reagan, productivity grew at a 1.5 percent
annual rate, as shown in Figure 4. This was lower than in the 1950s,
1960s, and 1970s but much higher than in the post-Reagan years. Under
Clinton, productivity has increased at an annual rate of just 0.3
percent per year--the worst presidential performance since that of
Herbert Hoover.
# Inflation. The central economic evil that Ronald Reagan inherited in
1981 from Jimmy Carter was three years of double-digit inflation. In
1980 the consumer price index (CPI) rose to 13.5 percent. By Reagan's
second year in office, the inflation rate fell by more than half to
6.2 percent. In 1988, Reagan's last year in office, the CPI had fallen
to 4.1 percent. Figure 5 shows the inflation and interest rate trend.
# Interest Rates. In 1980 the interest rate on a 30-year mortgage was
15 percent; this rate rose to its all-time peak of 18.9 percent in
1981. The prime rate steadily fell over the subsequent six years to a
low of 8.2 percent in 1987 as the inflationary expectation component
of interest rates fell sharply. The prime rate hit its 20-year low in
1993 at 6.0 percent. The Treasury Bill rate also fell dramatically in
the 1980s--from 14 percent in 1981 to 7 percent in 1988. In the 1990s,
interest rates have continued to migrate gradually downward, as shown
in Figure 5.
# Savings. The savings rate did not rise in the 1980s, as supply-side
advocates had predicted. In fact, in the 1980s the personal savings
rate fell from 8 percent to 6.5 percent. [16]In the 1990s the average
savings rate has fallen even further to an average of 4.9 percent
[17]--although the rate of decline has slowed.
It's interesting to note that the rate-of-growth in 1990-1995 was only
1.2%. This was supposedly the start of a boom-time of the later-half
of the 90's. The growth during that time was mostly artifical because
of dot-com hysteria and "The Bubble". I don't have exact data on
1996-2000, but I don't think the actual GDP growth rate was much
better than 1.2-1.7%.
By way of comparison, the current growth rate is considered "sluggish" at 1.9%.
So, while the current (Q3-2004) economy is luke-warm and getting
warmer, it's STILL doing better over all than it was in 1990-1995
under Clinton. |
