The United States enters 1991 facing war abroad and recession at home. As pink slips multiply and blood begins to flow, pundits will be working overtime trying to help us forget the Reagan peace and prosperity.
After all, if an outsider like Reagan can do a better job than the savvy insiders currently presiding, the voters might, heaven forbid, send another outsider to the White House.The Reagan years look very good in the statistics, especially from the midpoint of his first term after his policies began to take effect. A record number of jobs were created without causing inflationary pressures, and manufacturing productivity doubled. The way pundits make Reagan's successes statistically vanish is by merging the Reagan 1980s with the unsuccessful policies of the 1970s.
During 1973-81 there was a sharp drop in median income. Reagan turned it around, but pundits hide his accomplishment by comparing, for example, the 1947-73 post-World War II boom with the 1973-88 period. The income growth under Reagan is thus canceled by the poor performance during the 1970s. This allows pundits such as M.I.T. economist Paul Krugman to weigh Reagan down with Jimmy Carter and write of "The Age of Diminished Expectations."
Another favorite trick is to claim that during the 1980s the rich got richer and the poor got poorer. To get this result, pundits use the period from 1979-87, which includes the last two years of the Carter administration - the worst two years of stagflation that were especially tough on poorer families - and the recession of 1981-82, which most economists believe was the inevitable result of the Carter inflation.
Another way pundits make income growth under Reagan disappear is to overcorrect for inflation by using a measure that assumes people bought a new house every month. Since housing prices rose rapidly under Reagan, this measure greatly exaggerates the inflation people experienced and, thus, understates the growth in their real incomes.
Another trick, one used by Kevin Phillips in his Reagan-bashing book, "The Politics of Rich and Poor," is to claim that the Reagan decade "was a heyday for unearned income" while wages took it on the chin. The data do show that while growing in size, wages and salaries declined as a percent of personal income from 66.9 percent in 1980 to 64.2 percent in 1989. However, the offsetting gain was not in rental or dividend income, but in interest income, which rose from 12 percent to 14.7 percent of personal income, reflecting in part the abolition of Regulation Q that had prevented small savers from obtaining market interest rates on their savings.
The pundits are never going to like Reagan, because he doesn't share their values. They will be forever after him with spurious comparisons that water down his successes with the follies of others. In the 1980s people were able to get jobs and to pay their bills. We will see what happens in the post-Reagan 1990s.
In the meanwhile, we will see many more biased comparisons indicating that the good Reagan years never existed. All of these comparisons assume the American people are stupid and were tricked in three presidential elections: Reagan's election in 1980, his re-election in 1984, and George Bush's election in 1988 as Reagan's heir on the basis of his promise, since abandoned, to continue with Reaganomics.
As the old saying goes, politicians can trick all of the people some of the time, and some of the people all of the time but can't trick all of the people all of the time. If Reaganomics hurt everyone but the rich, how come the people voted overwhelmingly for it three times in a row? Obviously, people can tell when they are employed, putting food on the table, and paying their bills - even if savvy pundits confuse Reagan with Carter.