Myths of the Reagan Deficits (and the Clinton Surpluses)

The conventional progressive narrative goes something like this:

The reality is that we had low debt and no fiscal problem before Reagan; then an unprecedented surge in peacetime, non-depression deficits under Reagan/Bush; then a major improvement under Clinton; then a squandering of the Clinton surplus via tax cuts and unfunded wars of choice under Bush. And yes, a surge in debt once the Great Recession hit, but that’s exactly when you should be running deficits.

The point about the fake history that expunges the Clinton years is that it turns the budget into a story in which nobody is at fault because everyone is at fault, and the problem is a generic issue of runaway spending. No, it isn’t; we would have come into this crisis with very little debt if the GOP hadn’t always insisted on tax cuts.

-I have bolded all the true (and arguable) statements in this narrative. Any statements nonbolded are, by the above definition, not true. Or arguable.

There was definitely a fiscal problem before Reagan, as the deficit swelled due to the 1970s stagflation.

Reagan’s deficits were “precedented” in 1975. And the “surge” was precedented in 1948-1949, as well as in 1975. And if 1982 doesn’t count as a depression, I don’t know what does. 1982 had higher unemployment in the U.S. than 2009. And, unemployment-adjusted, Reagan had the tightest fiscal policy since Herbert Hoover.

The War in Iraq was one war. Not multiple. And the “Clinton surplus” (really, more a result of Gingrich’s obstruction) was more than fully “squandered” by the 2001 recession. So if there’s anyone to blame for the squandering of the Clinton surplus, it’s Greenspan, not Bush.

I don’t know what sort of crack our brave economist’s smoking, but it’s definitely the case that it was recessions, not tax cuts, were responsible for most of the debt increase of the past forty years. Though it’s clear the Bush tax cuts and Iraq War contributed to the deficit, if Clinton-era policies had been followed, there would have been a surplus only in late 2006-early 2007-not enough to have come into the crisis with “very little debt”.

There was a Clinton surplus (for one quarter, Q4 2000, if not counting increases in intragovernmental holdings as revenue), but it was largely due to a stock market bubble, good Fed policy, the computer boom, and low oil prices.

BTW, the above narrative comes from a dude (Jewish, Nobel laureate, serial liar, actually sensible most of the time before 2000, admirer of Scandanavia, hater of all conservative parties) another prominent economist claims is “always right”. He is not. He is a very shaky reed, indeed.