January 26, 2005
When someone like Larry Kudlow writes:
Larry Kudlow on the George W. Bush’s Second Inaugural Speech on NRO Financial: The president’s goal is to restructure the American economy, Reagan-style. His plan is to reduce the demand for government services through supply-side, market-oriented incentives and a renewed emphasis on personal choice and accountability....
does he know that federal spending went from 21.6% of GDP in 1980 to 21.2% in 1988? Reagan changed the composition of federal government spending. He raised defense spending. He raised debt interest. He lowered discretionary domestic spending. He cut taxes and then raised them repeatedly, lowering marginal rates and (after 1986) broadening the tax base.
These were big and important changes. But a "Reagan-style" "restructur[ing] of the American economy" leaves the demand for government spending largely unchanged.
Does Larry Kudlow not know this? Did he once know it--but has since forgotten it? Is it a convenient myth to trot out--that of Reagan the spending-cutter--because even though it is a myth it makes Republicans feel good and energized?
I genuinely do not know.
Posted by DeLong at January 26, 2005 01:32 PM