History Lessons: Romney vs. Obama

NEW YORK (TheStreet) -- With the economy sputtering, President Obama would like voters to believe he faces tougher challenges than any president since Franklin Roosevelt and needs two terms to turn things around. Sadly, the president's problems are so daunting only because his policies are not up to the task.

One need only look as far back as Ronald Reagan to find a fair but embarrassing comparison for Obama's special brand of statism.

In 1980, Americans were bearing double-digit interest rates and inflation, growing trade deficits on oil and with export juggernauts Japan and newly industrializing economies in Asia, and stuck in a malaise of self-doubt quite similar to today.

Federal Reserve Chairman Paul Volcker, appointed in August 1979, pushed interest rates even higher to halt runaway inflation, the economy suffered two wrenching recessions, and unemployment peaked at 10.8% just 22 months into the Reagan presidency.

The Reagan recovery package emphasized putting money and decision making back into the hands of ordinary citizens and private businesses. Immediate tax cuts, followed by tax reform -- just three personal income tax rates, a top rate of 28%, and fewer special breaks and loopholes.

He removed Carter-era policies that discouraged domestic oil production, and aggressively sought to right-size regulation -- not slash and burn, but retaining what was needed to keep business honest and foster competition, and jettisoning the rest.

All, strikingly similar to Governor Mitt Romney's platform.

When President Reagan faced voters in 1984, the economy was growing at 6.3% and unemployment was down to 7.3% -- it ultimately fell to 5%, as Old Dutch engineered a 92-month economic expansion.

Not satisfied to rest on his laurels, he pursued free trade, called to task Japan and others for undervalued currencies, and negotiated the 1985 Plaza Accord, which increased the value of the yen by more than 50% and set the stage for export-led prosperity of the 1990s.

Similarly, Obama inherited an economy crippled by gaping trade deficits -- this time with China and again on oil, and too much financial chicanery on Wall Street.

Sadly, President Obama has avoided confronting China on currency manipulation, and the deficit with the Middle Kingdom is up 50% since the recent recovery began.

President Obama has limited offshore drilling in the Gulf, the North Slope of Alaska and Atlantic and Pacific Coasts -- no surprise the petroleum trade deficit is up nearly 70% since the recovery began.

Every dollar that goes to China or for imported oil that does not return to buy U.S. exports is lost demand for U.S.-made goods and services, and together those deficits are costing Americans 10 million jobs.

All this is exacerbated by Dodd-Frank financial reforms, whose bureaucratic burdens are forcing small banks to sell out to their larger brethren on Wall Street, where the deal making, sharp practices and gambling continue seemingly unabated.

Small businesses can't get loans, and a day doesn't seem to pass that the financial press doesn't publish a story about federal and New York State regulators chasing some slippery scam or tax dodge begotten by Manhattan's big-bonus aristocracy.

As President Obama faces the voters, the economy is growing at a 2.2% pace. Unemployment has fallen to 8.3% but only because so many adults have quit looking for work altogether. If the adult labor force participation rate was the same today as when he took office, the jobless rate would be 11% and most economists see little room for improvement on that sad record.

Listen to Governor Romney closely -- he's offering Ronald Reagan's Morning in America all over again -- not a replay of the inept Bush Administration, as Barack Obama would have voters believe.

Encouraging individual initiative and entrepreneurs, an understandable tax system, producing more American oil, getting a fair deal for American workers competing with China, lowering health care costs, and smarter regulation of Wall Street -- it all makes sense.

It's the smart choice.

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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