In the report, I ask “Is it time for Reaganomics 2.0?”
This week, I’m going to look at key economic issues and see whether Reagan’s policies worked and whether similar policies are needed again today.
We’ll start with fiscal policy. Here’s Figure 2 from the study, showing that the burden of federal spending, measured as a share of economic output, increased significantly during the 1970s.
Most troubling, almost all of the increase was because of additional domestic spending.
What happened during the Reagan years? Did policy improve?
As you can see from this next chart, Figure 3, Reagan reversed that worrisome trend. The burden of government spending fell during his years in office (Reagan’s budgets covered 1981-1989, but I also included 1980 and 1988 for people who focus on election years).
Most impressively, Reagan reduced the burden of domestic spending (both entitlements and discretionary) by 2.5 percentage points of GDP.
For those who want more information on Reagan’s successful spending restraint, I recommend this 2011 video.
The purpose of today’s column, though, is to focus on the future. Specifically, what are the challenges we face today and would a Reagan-style approach be appropriate?
The first part of that question is easy to answer. The federal government is far too big and America’s fiscal burden is projected to become an even bigger problem in the near future.
In the study, I included this chart from the Congressional Budget Office, which shows that the burden of federal spending is on a very bad upward trajectory over the next three decades.
The second part of the question also is easy to answer.
Reagan’s approach was to restrain spending and that same approach is needed today. Here’s some of what I wrote.
America’s spending problem today is worse than it was when Reagan was elected and inaugurated. The overall burden of spending has reached more than 24 percent of economic output and domestic spending by itself consumes more than 19 percent of GDP. …All this spending…undermines growth by diverting resources from the productive sector of the economy. …Domestic discretionary spending is a very ripe target for budget savings. …Entitlements are the major budget challenge. More than 70 percent of the federal budget is allocated to these programs, and that share will increase since entitlement spending is projected to become an even bigger burden in the future. …some sort of spending restraint would be desirable. One option is a…spending cap. The best model in the United States is Colorado’s Taxpayer Bill of Rights. The TABOR provision in Colorado’s constitution effectively limits spending so that it cannot grow faster than the combination of inflation plus population. …Globally, the best model is Switzerland’s spending cap.
And I also make the case for entitlement reform, including Medicare, Medicaid, and Social Security.
To conclude this column, let’s look at the big picture.
I wrote that some sort of spending cap is needed. To help make the case, I showed what would have happened to federal spending if Washington was subjected to a TABOR-style spending cap at the start of the Trump years.
As you can see in Figure 5. the savings would be enormous. Limiting spending increases to population plus inflation would have resulted in a federal budget of about $5 trillion for 2023, which is more than $1 trillion less than politicians actually spent.
Early in the morning on July 29, 2011, Wall Street Journal columnist John Fund spoke to a large and enthusiastic crowd at the downtown branch of the Kansas City Public Library. The topic was the relationship between Milton Friedman and Ronald Reagan, and the positive effects on the national policy that Friedman’s influence and Reagan’s actions bestowed. The talk was in celebration and remembrance of Milton Friedman, and coincided with other talks around the nation also sponsored by the Friedman Foundation for Educational Choice. July 31st would have been Milton Friedman’s 99th birthday.
Milton Friedman and Ronald Reagan: An Enduring Relationship – John Fund – Show-Me Institute
Related posts:Milton Friedman’s “Free to Choose” film transcripts and videos here on http://www.thedailyhatch.org
I have many posts on my blog that include both the transcript and videos of Milton Friedman’s film series “Free to Choose” and here are the episodes that I have posted.
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Here are the posts and you can find the links in order below this.
The Power of the Market from 1990
The Failure of Socialism from 1990
The Anatomy of a Crisis from 1980
What is wrong with our schools? from 1980
Created Equal from 1980
From Cradle to Grave from 1980
The Power of the Market 1980
Debate on Inflation from 1980
Milton Friedman is the short one!!!
Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1
Milton Friedman The Power of the Market 5-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
By Everette Hatcher III | Posted in Milton Friedman | Edit | Comments (0)
Milton Friedman The Power of the Market 4-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
By Everette Hatcher III | Posted in Milton Friedman | Edit | Comments (0)
Milton Friedman The Power of the Market 3-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
By Everette Hatcher III | Posted in Milton Friedman | Edit | Comments (0)
Milton Friedman The Power of the Market 2-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
By Everette Hatcher III | Posted in Milton Friedman | Edit | Comments (0)
Milton Friedman The Power of the Market 1-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
By Everette Hatcher III | Posted in Milton Friedman | Tagged arnold schwarzenegger. | Edit | Comments (0)
Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1
Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full) Published on Mar 19, 2012 by NoNationalityNeeded Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. Abstract: Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of […]
By Everette Hatcher III | Posted in Milton Friedman, spending out of control | Edit | Comments (0)
Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full) Published on Mar 19, 2012 by NoNationalityNeeded Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. Abstract: Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of […]
By Everette Hatcher III | Posted in Milton Friedman, spending out of control | Edit | Comments (0)
Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full) Published on Mar 19, 2012 by NoNationalityNeeded Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. Abstract: Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of […]
By Everette Hatcher III | Posted in Milton Friedman, President Obama | Edit | Comments (0)
Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full) Published on Mar 19, 2012 by NoNationalityNeeded Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. Abstract: Ronald Reagan introduces this program, and traces a line from Adam Smith’s “The Wealth of […]
By Everette Hatcher III | Posted in Milton Friedman, President Obama | Edit | Comments (0)
Milton Friedman: Free To Choose – The Failure Of Socialism With Ronald Reagan (Full) Published on Mar 19, 2012 by NoNationalityNeeded Milton Friedman’s writings affected me greatly when I first discovered them and I wanted to share with you. We must not head down the path of socialism like Greece has done. Abstract: Ronald Reagan […]
By Everette Hatcher III | Posted in Milton Friedman, President Obama | Edit | Comments (1)
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