For all of Obama’s attempts to achieve the indubitable status as Reagan’s polar opposite, he has yet to achieve such a distinction. Yes, unemployment has grown 2% under his watch, and internationally the US looks to have about as much strength as a chocolate éclair. But to really achieve that coveted standing as the Anti-Reagan, Obama would have to preside over record economic losses on the same scale as Reagan’s economic gains of the mid-1980’s. The president has yet to close in on such ignominy in 2010, but 2011 may well prove a different story.
The first year and a half of the Reagan presidency saw many similar or worse economic indicators than those we are seeing today. Unemployment topped out at just over 10% near the end of 1982. GDP growth was completely flat. Americans simply didn’t trust their president, their congress, or their country. Sounds familiar, right?
Year 3 under Reagan was when everything changed. January 1, 1983 was when the famed Reagan tax cuts went into effect. 1983 saw the economy grow by almost 8%, the most of any year since the Great Depression. 1984 saw another 6% of growth in the economy. After the tax cuts, the unemployment rate dropped every year of Reagan’s presidency. At the same time government tax receipts increased.
Year 3 of the Obama presidency will also witness a dramatic shift in tax law. The Bush tax cuts will lapse in 2011. Income tax and capital gains taxes will increase dramatically, and the “death tax” makes its vaunted return. Then there’s also potential cherry on top of the sundae in the former of a threatened Value Added Tax.
Such a situation will probably induce businesses and individuals to ramp up production, sales, and possibly even consumption near the end of the year to take advantage of what time they have left. This will likely give the economy a nice little bump and the President some nice press going into the mid-term elections. But come January investors and producers alike will probably retrench in an attempt to stave off higher losses. Unemployment will rise, production will fall, and the markets will drop.
Of course President Obama could try to push through another pork heavy stimulus package to give the economy a temporary boost. However, with a government already running record deficits, we would have no way to pay for such a maneuver, making such a move inconceivable for even the most jaded politician, right?
