[Ed. – The authors, Phil Gramm and Michael Solon, point out that the CBO got it wrong every time, consistently failing to predict how well Reagan’s policies would perform, and how poorly Obama’s would perform.]
The economic policies implemented by Presidents Reagan and Obama were the polar extremes of postwar policies. The economic consequences of those policies defined the highs and lows of America’s postwar experience. These extremes help define what might be expected if this administration and Congress are successful in reversing the Obama program and moving toward a more Reagan-type policy of tax reform and regulatory relief.
Mr. Obama implemented policies dramatically different from the postwar norm. Marginal tax rates soared; federal spending spiraled with a nearly trillion-dollar stimulus; Social Security Disability and food-stamp qualifications were eased; work requirements in welfare programs were suspended; Medicare and Medicaid were expanded and ObamaCare created. Federal debt doubled, and public and private debt held by the Federal Reserve quadrupled. New legislation, an unprecedented number of new regulations, and a torrent of executive orders transformed the role of government in American life.
Dramatically different policies were followed by dramatically different economic results. Economic growth during the Obama years averaged an astonishingly low 1.47%, as compared with the 3.4% average throughout all the postwar booms and busts before 2009. The extraordinary economic failure of the Obama era is not found in the recession that ended six months into his presidency but in the subsequent failed recovery, where real growth in gross domestic product averaged 2.1% per year, less than half the 4.5% average during previous postwar recoveries of similar duration.