MCCAIN’S FUZZY MEMORY ON REAGAN…. Reporting on President Obama’s intended “spending freeze,” George Stephanopoulos interviewed John McCain this morning — imagine that — to ask about the senator’s position. McCain expressed support for the idea, but added that the White House should also stop its economic recovery efforts.
As the Arizona Republican sees it, the best course is more “tax cuts” and “fiscal sanity.” He added, “If you cut people’s taxes I think it stimulates the economy. We certainly found that out with President Reagan.”
To be sure, it’s a mistake to pretend John McCain knows or cares about details, accuracy, and history. But this notion that Reagan offers a lesson for policymakers deserves additional scrutiny.
Consider this chart, which Paul Krugman posted last week. Reagan’s first big tax cut was signed in August 1981. Over the next year or so, unemployment went from just over 7% to just under 11%. In September 1982, Reagan raised taxes, and unemployment fell.
We’re all aware, of course, of the correlation/causation dynamic, but as Krugman noted, “[U]nemployment, which had been stable until Reagan cut taxes, soared during the 15 months that followed the tax cut; it didn’t start falling until Reagan backtracked and raised taxes.”
Indeed, Stephanopoulos didn’t press McCain on the point — imagine that — but it’d be helpful if more Republicans were asked to consider the contemporary parallel. Conservatives believe Obama’s stimulus didn’t work, and as proof, they point to the unemployment numbers 11 months after the policy became law. But if that’s the appropriate measure, wouldn’t Republicans also have to believe that Reagan’s 1981 tax-cut plan also failed, since unemployment went even higher the year after it passed?
McCain’s worldview is obviously pretty simplistic, but given all the time he spends in television interviews, it’s tempting to think someone would ask him about these things. As far as he’s concerned, tax cuts = growth. Of course, Clinton raised taxes, and the economy soared. Bush cut taxes, and the economy collapsed. Obama’s recovery package featured several elements, and the least stimulative part was … you guessed it … the tax cuts.
I’ll just never know why anyone takes these guys seriously on economic policy.