History of the World part 1, Or How I Learned to Love Capitalism

The history of the economy from 1981 (Reagan) to present (Obama).

In 1981, Reagan inherited, what was a worse recession than what “Obama inherited” (we’ll get to that later) in 2009.  The unemployment rate was worse, the interest rates were worse, and the rate of government spending was worse.

Labor Participation Rate

At the end of his term in Office he slashed the progressive tax code to two rates, and got rid of almost all of the exemptions and loop holes.  He slashed the rate of government growth, and helped defeat the Soviet Union.

He also gave us the *highest* level of post WW2 employment participation of any President ever.  It was his policies that carried that rate through 2001.

So Bush I took office in a landslide, most people thought he would continue Reagan’s policies.

They were wrong.  Bush Sr didn’t believe in limited Government and the first chance he got, he increased taxation and spending.

Labor Participation

This caused the employment participation rate to stall out, and even drop down lower than it was at the end of Reagan’s term.  Because Bush I wasn’t a solid conservative he lost to Ross Perot and Clinton.  The first thing Clinton did was raise taxes and threaten to push Hillarycare.

Labor Participation

economic revival.  This helped push the employment participation rate back to where it was in the 80’s under Reagan.

 

Bush II won over Gore by a thread, and the natural cycle of Capitalism and terrorism took it’s toll on the economy.  Bush started out his policies as a progressive and trying direct stimulus payments.  He then tried tax cuts (but not as big as Reagan’s).  This helped stop the economy from sliding further, but did not grow it to Reagan’s 68% participation rate.

 

Labor Participation

That downward tail is where it gets fun.  That was another creative destruction bit of capitalism, and having too much money invested in housing.  This was completely a government driven bubble and a government driven collapse.

 

1) The Government under Carter and Clinton pushed the CRA forcing banks to give bad loans.

2) Groups like ACORN (that Obama worked for) sued large banks to make sure they were giving out bad loans.

3) The Federal Reserve entered the era of cheap money, lowering money supply why below it’s market value.  This made it quick money, which attracted people to bad loans.

4) Democrats increased volatility in the job market by threatening to repeal the Bush tax rate and raising the minimum wage.

 unemployment vs minimum wage

(http://www.foxbusiness.com/economy/2013/02/13/higher-minimum-wage-higher-unemployment/)

Even though the unemployment rate has finally fallen to 7.9% by the end of 2012, the total labor participation has fallen to 63% and has been stuck.

This is the end result of Obama’s economic policy.  From ObamaCare, to massive government spending, to increasing the tax burden of the job creators.
It all adds up to a labor participation rate, that we last saw in the 70’s.

Obama-Labor-Participation

Conclusion?

We need to go back to Reagan’s policies, and part of that policy shift is the repeal of ObamaCare.

Steps to recovery:

1) Cut spending to 18% of GDP.  Shift the way money is spent, to spend the taxes collected last year, not the taxes forecast for this year. REPEAL the Affordable Care Act!

2) Get rid of the corporate income tax, and get rid of the progressive income tax, shift to a flat sales tax of 10%.

3) Massively gut the Leviathan.  The EPA, the CPSC, the DEA, the ATF, Homeland Security, etc.  All of them need to be shut down, and every regulation they created must be repealed.

If we did these 3 things, we’d see businesses start moving back to America, you’d see workers wages INCREASE.

(all Labor Force Participation graphs from BLS.gov)

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