Yesterday I wrote a lengthy post rebutting Phil Gramm and Glenn Hubbard. Today, Krugman weighs in, augmenting a point I made and then making yet another point.
First, he supports my contention yesterday that ending the early 80s recession was a less complicated matter than ending this one:
...the slump of the 1980s — which was more or less deliberately caused by the Federal Reserve, as a way to bring down inflation — was very different from our current depression, which was brought on by private-sector excess: above all, the surge in household debt during the Bush years. The Reagan slump could be and was brought to a rapid end when the Fed decided to relent and cut interest rates, sparking a giant housing boom.
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Second, he adds the point that government spending--spending that helped defray the damage that could be done by a private sector that wasn't pumping as much money into the economy as it could normally--was much higher under Reagan than under Obama. Yes, you read that right. Per capita spending under Reagan was 14.4 percent, and today is 6.4 percent.
So, Messrs. Gramm and Hubbard, sure, by all means, let's replicate what Reagan did. Let's more than double public-sector spending. Let's bring back revenue sharing. And hey, while we're at it, let's return the top marginal tax rate to the 50 percent it was in 1982 and 83. Yes, you read that right, too--the top income-tax rate paid the wealthy was higher during Reagan's first term than it is today: Reagan did of course lower it from even higher levels, but still, it was 50 percent then as opposed to today's 35 percent. That amounts to lots of revenue.
This is important because these Reagan myths are insidious. There's a bumper sticker story line: He cut taxes, reduced government, and things worked. Well, yes and no. He also raised taxes. He spent at higher levels than we're spending today. And while he did indeed create a lot of jobs in his second term, don't forget that he was Mr. Deficit. They skyrocketed under him.
In fact here's a handy llittle list from Think Progress of 10 Things Conservatives Don't Want You to Know About Reagan. Tripled the deficit; gave amnesty to 3 million undocumented immigrants; and so on. And he did not win the Cold War--the people of Hungary, Poland, and Czechoslovakia did. But we'll get to that another time.
