President Obama’s approval numbers are at the same point in his presidency as Ronald Reagan and for similar reasons. The economy was struggling in 1981, much like it is today, except interest rates were much higher. The economy bounced back big in 1983 and 1984 which helped propel Reagan to a landslide reelection. History could repeat itself, but there’s no guarantee. Reagan and Obama have vastly different ideas on how to jump-start the economy. Reagan cut taxes and Obama has signed a massive pork bill. The horrendous stimulus bill that Obama shamelessly promised would save jobs is a dud. If a Republican president passed a bill like that it would be the subject of ridicule. The White House’s fake number of jobs saved is hilarious, but it’s not making waves outside the beltway.
Greg Mankiw cites a new paper from Harvard’s Alberto Alesina and Silvia Ardagna about fiscal policy.
We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. (emphasis added)
There’s nothing shocking about this paper. Common sense is obviously lacking right now on Capitol Hill. The nation is facing a recession and the White House is pushing a partisan health care bill through Congress that will increase the debt burden. This isn’t going to restore confidence in investors, entrepreneurs and small businesses. It seems as if Obama and the Democrats have forgotten who fuels economic growth in this country. It’s not the federal government.