Something feels off in the timing of our debate over the economy. A loss of faith in free markets, among intellectuals and the public alike, was only natural in the 1930s. But today? Intellectuals on the left and the right are more convinced than ever that our economic policies are deeply misguided, at the same moment that unemployment rates and wage growth are the best they have been in decades. When Americans answer polls, they express less and less confidence in free-market capitalism — even as they express more and more satisfaction about economic conditions.
Perhaps people are evaluating these questions against different time horizons. They may, that is, think that the economy is performing well at the moment but has become less capable of delivering broad-based prosperity over the course of a generation. If today’s conditions persist long enough, then, the reputation of capitalism may recover.
Timing is relevant to our evaluation in another way. If our economy has gotten worse at generating sustained prosperity, worse enough to make a loss of faith in capitalism understandable if not justified, then it matters when this decline began.
In 2015, during the last presidential campaign, Hillary Clinton suggested that “for decades” the economy had been offering a worse deal for most people. Her explanation: “For 35 years, Republicans have argued that if we give more wealth to those at the top — by cutting their taxes and letting big corporations write their own rules — it will trickle down. It will trickle down to everyone else.” The election of Ronald Reagan, in other words, was the turning point. It followed that many of his policies should be reversed: The top tax rates should go back up and unions should be strengthened.
If economic conditions have been deteriorating for an even longer period, however, then merely reversing Reaganomics might not be enough. And it is common to run into claims, apparently backed by data, that suggest as much. The Pew Research Center notes that the average wage, adjusted for inflation, fell between 1973 and 2018. It had risen steeply from 1964 (when the data series began) through 1973. Then it dropped for roughly two decades, and over the next two recovered but did not get back to its peak.
If real wages have truly been stagnant for longer than most Americans have been alive, then the economy has not worked in anything resembling the fashion we expect. Economic growth has been mostly an illusion: We have more stuff only because more of us work, large numbers of women having joined the paid labor force. If this picture is accurate, we need to make radical changes either to the economy or to our expectations of ever-rising prosperity.
There are, however, two big reasons to doubt the stagnation thesis. The first is that non-wage benefits have become a larger and larger element of compensation. Perhaps they have become too large an element: The tax code encourages employees to get health insurance through their companies rather than take higher wages and buy coverage themselves, and there are reasons to think we would be better-off if the tax code did not do that. But non-wage benefits have economic value to employees, and so looking at wages alone will cause us to underestimate employees’ material welfare.
The second reason for doubt is that a common method of adjusting for inflation — the one used in the Pew numbers cited above — overdoes it. The center-right social scientist Scott Winship has been indefatigable in explaining why using the Consumer Price Index (specifically a measure called “CPI-U”) as the gauge of inflation is a mistake, and how it warps our understanding of economic trends. It overestimates housing inflation before 1983, and ignores how consumer behavior responds when prices change.
Since inflation compounds, small errors each year add up to major changes over decades. Use a better measure of inflation, one based on personal-consumption expenditures, and the average wage rose by 21 percent from 1973 to 2018. (Average compensation must have risen more.)
The data on median family income also show a reassuring amount of growth. The family in the middle of the pack in 2015 made 45 percent more, with the right inflation adjustment, than its counterpart in 1970.
But the same numbers may also explain some of the public’s dissatisfaction with the economy. Median family income grew by a spectacular 58 percent in the 15 years from 1955 to 1970, then grew another 11 percent from 1970 to 1985, and 24 percent from 1985 to 2000. But the median family income of 2014 was slightly lower than it was in 2000.
What happened is that after the turn of the millennium we went through an extended period of slow growth punctuated by one mild and one severe recession. Median family income dropped more than 7 percent from 2007 through 2011, the sharpest decline since this data series started in 1953. It did not recover completely until 2015.
We have had a few good years since then. But it is not surprising that during the last two decades many Americans came to feel that their economic circumstances were stagnant and insecure. It is not surprising, either, that many of them have the sense that things used to be better — or that a generation of young people who started their work lives in a slow-growth economy tend not to have positive attitudes toward capitalism.
Instead of five decades of economic stagnation, we have had two decades of weak growth. That record does not suggest that the pro-market policies of the 1980s and 1990s were fundamentally mistaken. It suggests, rather, that we have discrete problems that deserve to be tackled.
High on the list of needed changes should be a reform of our monetary regime. It failed badly over the last dozen years. In 2008, excessive fear of inflation led the Federal Reserve to signal that it was going to tighten monetary policy even as the economy was sinking into a recession. It kept monetary conditions too tight after the crisis hit, too, for example by encouraging banks to hold additional reserves. These policies made the recession more severe and the recovery weaker. That these failures are not more widely appreciated is symptomatic of the misguided thinking that continues to govern monetary policy.7
Reforms should be undertaken in other areas, too. Our higher-education system is not working for most young people. Our immense health sector includes immense inefficiency. Regions of the country with high economic growth have imposed regulations that make it prohibitively expensive for less fortunately situated Americans to move there.
So we are called to be ambitious, but not revolutionary. Capitalism does not need to be overthrown or even rethought. Rather, the principles that make markets work need to be applied to some areas where they have not been present. Our economic system does not need dismantling. But it does
If the deal approved, this much is certain — Iran will obtain nuclear weapons, terrorism will increase, an arms race in the Middle East will ensue, and America and our allies will be far less secure.
by George Landrith • President of Frontiers of Freedom
Under the agreement now being celebrated by the Supreme Leader of the Islamic Republic of Iran, Ali Khamenei, and by the President of the United States, Barack Obama, Iran will become a nuclear power in 15 years — perhaps sooner. Even the Obama administration admits that Iran could have nukes within about one year, if it cheats on the agreement. But in any event, the deal paves the way for Iran to have nukes in 15 years — all with the world’s approval and blessings.
If 15 years sounds like a long time, think about your young child, grandchild, niece or nephew and ask if their world will be a safer place if the Islamic Republic of Iran has nuclear weapons when that child is in from high school.
Former Democratic Vice Presidential Candidate and former Senator Joseph Lieberman testified before Congress this week, “The agreement …ultimately allows Iran to become a nuclear weapon state, and indeed legitimizes Iran’s possession of nuclear weapons…. This is a bad deal for America, a bad deal for Iran’s neighbors in the Middle East, and a bad deal for the world.” Continue reading
Martin Anderson, a key adviser to Ronald Reagan, leaves behind a lasting legacy.
By Peter Roff • U.S. News
As an economist and political scientist, Martin Anderson was a man without peer. A senior fellow at Stanford University’s Hoover Institution since 1971, he did much to advance the cause of freedom as expressed in his love of big ideas.
Many credit the case he made against mandatory conscription inside the White House as a special assistant to former President Richard Nixon as an invaluable, perhaps even decisive contribution to the campaign to end the draft, which Nixon did in 1973 as the war in Vietnam was winding down.
In the late 1970s and early 1980s, Anderson was a key adviser to Ronald Reagan, helping him formulate a successful economic policy that permitted the liberation of American capital through tax cuts that, when combined with declining interest rates and a stable monetary policy, triggered an economic boom that led the world out of a long recession and laid the groundwork for the West’s ultimate victory in the Cold War. Continue reading
Washington, DC — Frontiers of Freedom, a public advocacy group founded by the late Sen. Malcolm Wallop, R-Wy., announced Thursday it had presented in 2014 Ronald Reagan Award to actor Gary Sinise in recognition of his efforts to keep Reaganite values alive in Hollywood and for his work in support of wounded warriors and active duty servicemen and women.
“Gary Sinise is a true American patriot. His unselfish devotion to the cause of liberty, which is best expressed by his ongoing commitment to the health, morale, and well-being of America’s fighting men and women, makes him exceptionally worthy of the Reagan Award. The example Gary sets is one that other members of the film and entertainment community should seriously consider following,” George Landrith, president of Frontiers of Freedom said. Continue reading
How often have you heard a Democrat prattle on and on about how well Barack Obama has done with the economy, given the mess he inherited? Usually, it’s some version of, “Things are getting better, but the economy the President started with was so awful, so he’s done as well as anyone could expect.”
When Ronald Reagan took over from Jimmy Carter in ’81, things were actually worse economically compared to when Obama took over from George W. Bush in ’08. Continue reading
I think the poor need another Reagan in the White House.
The income of black heads-of-households dropped by 10.9 percent from June 2009 to June 2013. This decline in black income is more than double the overall 4.4 percent drop nationally in real, adjusted for inflation, median household income during the same four years of alleged “recovery.”
Similarly, real incomes of those under age 25 fell by 9.6 percent over the same period — again, more than double the average drop in household income. Continue reading
The evidence that Vladimir Putin — and not his American public relations firm — really wrote the pugnacious New York Times op-ed on Syria that infuriated both Republicans and Democrats came in a snarky passage near the end that included the phrase: “American Exceptionalism.”
In the old Soviet system, the one that nurtured Putin’s ambitions and his career, party functionaries were long hostile to the very idea that America was special. The offending phrase itself was actually popularized by Joe Stalin. In 1929, Stalin used it in response to a contingent of American communists who claimed that U.S.-style capitalism might constitute an exception to Marxist thought.
Decreeing an end to the “heresy of American Exceptionalism,” Stalin expelled them from the Communist Party; and during the Great Depression, Communist Party USA derided “American Exceptionalism” by way of denouncing free-market democracy. Continue reading
“They came not as Conquerors, but as Liberators”
by Scott L. Vanatter
After speaking at Pointe du Hoc earlier in the day (June 6, 1984), President Reagan also spoke at Omaha Beach, France.
He began by harking to Lincoln’s challenge that “we can only honor” those who stormed the beaches and cliffs “by rededicating ourselves to the cause for which they gave a last full measure of devotion.”
Again that day he reminded a world facing another kind of aggression, a still existent Soviet Union, that the Allies “came not as conquerors, but as liberators. When these troops swept across the French countryside and into the forests of Belgium and Luxembourg they came not to take, but to return what had been wrongly seized.” Continue reading
Ronald Reagan coined the phrase, “Peace through strength,” but it was not a new idea and it had not been an historically partisan concept. It dates back to George Washington who said, “To be prepared for war is one of the most effectual means of preserving peace.” Washington and Reagan understood that peace is achieved through strength and conversely that weakness invites attack. This was once a universally accepted truth among American leaders. Current events prove, it should again become American policy regardless of party.
We live in a dangerous world. Kim Jung-un is threatening military invasions and nuclear attacks. We’ve recently learned that the North Koreans are much closer to being able to put a nuclear warhead on a missile than was previously believed. China, already a nuclear power, is rapidly developing a large navy and stealth aircraft. Russia has been sending its military aircraft into American airspace on provocative test missions. Continue reading
“You can call it mysticism if you want to, but I have always believed that there was some divine plan that placed this great continent between two oceans to be sought out by those who were possessed of an abiding love of freedom and a special kind of courage. . . . Call it chauvinistic, but our heritage does set us apart.”
by Scott L. Vanatter
Later this week the Conservative Political Action Conference will again convene. Thirty nine years ago, in 1974, Ronald Reagan spoke at the very first conference. At the time conservatism was thought by many to be on the ropes, discredited, and out-of-date. Ronald Reagan thought otherwise.
He labeled certain of his conservative contemporaries, even men at the dinner that night, as “prophets of our philosophy.” In this he might as well have been reading aloud his own bio. Not only a prophet for telling the truth, he also led conservative followers in bringing to pass what later became known as, the Reagan Revolution. In Europe there are old bridges still being used to this day which are many times older than the American republic. We are still young. Continue reading
“Every dollar the federal government does not take from us, every decision it does not make for us will make our economy stronger, our lives more abundant, our future more free.”
by Scott L. Vanatter
Granted the privilege of being elected to a second term, it was his first term accomplishments which enabled Reagan to describe the continued path to an even greater future. These concrete accomplishments – in the face of a terrible economy and a palpable lack of hope — gave the country confidence that we could become the shining city on a hill he so often pointed to. His February 6, 1985 State of the Union address cemented these hopes in the minds and hearts of Americans of all walks of life. Reagan’s generous, positive vision of the future was contagious. This contagion was assisted by the results of the politics and policies he pursued. Continue reading
Ronald Reagan, Master of the State of the Union
First laying out his plans, then later his accomplishments, Ronald Reagan mastered the formal setting of the State of the Union. He used these eight events to unify congressional and American opinion in support of his positive, generous vision.
Ronald Reagan’s State of the Union speeches:
“Nothing was more typical of Ronald Reagan than that large-hearted magnanimity, and nothing was more American.”
by Margaret Thatcher
We have lost a great president, a great American, and a great man, and I have lost a dear friend.
CHEERFUL, FRESHNESS, OPTIMISM
In his lifetime, Ronald Reagan was such a cheerful and invigorating presence that it was easy to forget what daunting historic tasks he set himself. He sought to mend America’s wounded spirit, to restore the strength of the free world, and to free the slaves of communism. These were causes hard to accomplish and heavy with risk, yet they were pursued with almost a lightness of spirit, Continue reading
The Need to Explain
by Thomas Sowell
The most successful Republican presidential candidate of the past half century — Ronald Reagan, who was elected and reelected with landslide victories — bore little resemblance to the moderate candidates that Republican conventional wisdom depicts as the key to victory, even though most of these moderate candidates have in fact gone down to defeat.by Thomas Sowell
One of the biggest differences between Reagan and these latter-day losers was that Reagan paid great attention to explaining his policies and values. He was called “the great communicator,” but much more than a gift for words was involved. The issues that defined Reagan’s vision were things he had thought about, written about and debated for years before he reached the White House. Continue reading