President Reagan’s policies embraced anti-austerity Keynesian economics to a greater degree than President Obama has, and that’s why Obama is in trouble, argues Nobel Prize-winning economist Paul Krugman.
Appearing Sunday on ABC’s “This Week,” the New York Times columnist and Princeton professor argued that Reagan was able to reduce unemployment after taking office in part because he grew government jobs — unlike Obama, who has significantly cut them.
“If you actually look at the actual track record of government spending, government employment, Reagan is the Keynesian and Obama — mostly because of political constraints, although a little bit of lack of conviction on the part of his own people — has been the anti-Keynesian,” Krugman said. “He’s been the one who’s been doing what Republicans say is the right answer.”Just over three years into Reagan’s first term, government jobs grew by 3.1 percent; at the same time during Obama’s tenure, they’ve been cut by 2.7 percent. Hundreds of thousands of public sector jobs have been shed in recent years. Government jobs also grew under President George W. Bush, which helped keep unemployment down during most of his two terms.
“After there was a recession under Ronald Reagan, government employment went way up. It went up after the recessions under the first George Bush and the second George Bush,” Obama said last month on the campaign trail. “So each time there was a recession with a Republican president, compensated — we compensated by making sure that government didn’t see a drastic reduction in employment. The only time government employment has gone down during a recession has been under me.”
More broadly, federal spending growth under Obama has been remarkably low by historical standards. The pressure from the GOP and D.C. political elites, who have been hostile to Keynesian economics in recent years, has put the administration in a tough spot.
The Keynesian theory holds that government spending is necessary help lift the economy when it’s under-performing. Data shows that Republicans tend to accept it when they’re in power and that they benefit from it. But they’ve relentlessly attacked Obama’s efforts to stimulate the economy in the wake of the Great Recession, and have led the charge against financially helping cash-strapped states avert layoffs of public employees like teachers and police.
And that has fueled economic struggles across the nation, which were confirmed by the lousy jobs report last Friday which saw the unemployment rate tick up to 8.2 percent.
The irony of the situation wasn’t lost on Krugman.
“We’re actually practicing government austerity on a scale that we haven’t seen in 60 years. It’s not the president’s policy,” he said Sunday. “In effect, we’ve already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.”