Let's Spend Like Reagan

Krugman: He was a bigger spender than Obama in first years
By Mark Russell,  Newser Staff
Posted Jun 8, 2012 1:15 PM CDT
Ronald Reagan addresses the Republican National Convention in Dallas on August 23, 1984.   (Getty Images)

(Newser) – At this point in his presidency, Ronald Reagan was presiding over a strong recovery, and President Obama clearly is not. The biggest difference? Government spending, writes Paul Krugman in the New York Times. Real per-capita government spending is up 6.4% under Obama, but under Reagan it soared 14.4%. That rise wasn't so much due to Reagan's military spending as it was to an increase in state and local spending under his watch. Under Obama, they have fallen.

But Krugman does not use Reagan's spending rise as pure evidence of Keynesian economics, noting that the slump of the early 1980s was caused by the Fed's anti-inflation measures. Those tough times could be fixed by lowering interest rates, but that's not an option these days because rates are already so close to zero. This malaise is caused by debt deflation, which is the kind of problem that could be helped best by increased spending. "Reagan may have preached small government, but in practice he presided over a lot of spending growth—and right now that’s exactly what America needs," writes Krugman. (Read more Paul Krugman stories.)

My Take on This Story
Show results without voting  |