If you’re just tuning in, this weekend we’ve been debating whether or not Obama should be judged against Reagan in terms of the strength of their respective economic recoveries.
To recap: James Pethokoukis at AEI wrote a post arguing that it was perfectly fair to compare Obama’s recovery to Reagan’s since even if you strip out the lack of residential construction under Obama, his growth numbers are still poor.
We pointed out that Obama inherited a much worse economy than Reagan did, with the problems going far beyond residential construction, and that seen in the proper context, Obama’s recovery was even more impressive than Reagan’s, especially once you realise how much Reagan expanded the deficit and spending.
Finally, James came back with a much more robust post arguing that A) Reagan’s recovery was objectively stronger and the B) none of the deleveraging arguments really hold water.
Ultimately, the question is somewhat subjective, since the conditions were so wildly different for both Presidents, it’s not obvious which one was “better.”
That being said, we wanted to bring light to one other factor that sharply distinguishes the Reagan era from the Obama era, and that’s the Demographics of the US.
To start with, the population of the US was simply growing faster back in Reagan days. This chart show annual year-over-year population growth.
Now there are two things to note here. The first is that the population was growing faster back in the day, but more importantly, 1980 was the sweet spot for the baby boom generation starting to hit their peak/professional years.
Here’s a look at US birth rates (via Wikipedia) to remind you that about 35 years before Reagan, Americans started pumping out babies like crazy.
The last mini-baby boom happened around 1990, but that’s a generation that’s still far too young to be anywhere close to peak professional years right now. On the other hand, that Baby Boom cohort, which was hitting peak years under Reagan is now rapidly entering retirement years.
Given the importance of demographics in the fate of a nation, this can hardly be ignored.
But even besides the raw, headline demographics numbers, the internals also favoured the Reagan years, from a growth perspective.
The early 80s, for example, were still in the sweet spot for women rapidly entering the workforce.
That progress peaked in the year 2000, and is now drifting lower.
In fact, you hear a lot about labour force participation, and how low it is under Obama, and how the unemployment picture would be so much worse if participation rates had held steady.
But this misses the point, which is that even prior to the crisis of 2008, everyone assumed that the participation rate was due for a decline.
Calculated Risk did some great posts on the subject back in December, but the below chart basically tells the whole story.
Even by 2002, economists already recognised that the US was at “peak participation.”
In the early 80s, the US was still in the midst of a major boom on this front.
Photo: Calculated Risk
Given what side of the slope Obama lands on, it’s really hard to imagine the the current era matching up to the 80s, which again, makes the relative robustness of the current recovery even more impressive.
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