Reagan Handled a Worse Economic Situation Much Better: Opinion
NEW YORK (TheStreet) -- The Commerce Department reported Friday the economy grew only 1.5% in the second quarter, down from 2% from the previous period.
Consumer spending slowed under the weight of growing pessimism about the effectiveness of President Obama's economic program, and a growing sense that Mitt Romney will not unseat him. Obama leads in polls in most swing states, and he has made clear his intention to double down on interventionist economic policies.
The trade deficit worsened, increasing its drag on domestic demand and GDP. Administration curbs on domestic oil production and his failure to address Chinese currency manipulation -- the two principal causes of the gaping $600 billion trade deficit and hole in domestic demand -- slow growth more and more each quarter.
In the second quarter, the increase in the trade deficit subtracted seven-tenths of a percentage point from growth, or more than $100 billion and one million jobs.Obama argues he inherited a big economic mess but so, too, did Ronald Reagan. During Reagan's first term, unemployment peaked at 10.4% in contrast to 10% during Obama's tenure. Reagan cut taxes, followed through on deregulation initiated by President Carter, and put his bets on the private sector. When he faced the voters the economy was growing at better than 6%. Obama has shut down much offshore and Alaskan oil production, invested in failing alternative energy projects, and emphasized heavy regulation and state direction of the economy. His growth rate during the current recovery is 2.2%. During Reagan's first term, optimism caused more Americans to seek jobs. The percentage of adults participating in the labor force rose and unemployment fell to 7.2% by Election Day. Since Obama took office, record numbers of Americans have become discouraged and quit looking for work, and the unemployment rate has not fallen nearly as much as it did for Reagan. It hangs above 8% and few economists expected it to fall much further. The difference is plain. Reagan acted to unleash the creative energies of the private sector while Obama has moved in the opposite direction. America is all about private enterprise, and without leadership that believes in the primacy of the private sector, it can't succeed. Twitter @pmorici1 This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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