Monday, March 5, 2012

Government Spending in Recessions Under Reagan vs. Obama

As preface to this post, let's remind ourselves of Keynesian guru Dick Cheney's cogent observation, "Reagan taught us deficits don't matter."

Here's Paul Krugman, ensconced as usual at The New York Times, with data on government spending in a recession under Iconic Fiscal Conservative St. Ronald "Gipper" Reagan compared to government spending under Radical Kenyan Socialist Barack Hussein Obama:

This is just current government expenditures divided by the GDP deflator, starting from 1982 (Quarter)IV and 2009 (Quarter)II; no attempt to separate out unemployment benefits, other transfers, etc.. Slightly weaker than the purchases-only comparison, mainly because unemployment benefits fell faster under Reagan, but the story remains the same:

They're Back!

 Mike Konczal at Rortybomb:
The top 1% had a rough Great Recession.  They absorbed 50% of the income losses, and their share of income dropped from 23.5% to 18.1% percent (in 2009.)  Is this a new state of affairs, or would the 1% bounce back in 2010?

Well we finally have the estimated data for 2010 by income percentile, and it turns out that the top 1%  had a fantastic year.  The data is in the World Top Income Database, as well as Emmanuel Saez's updated Striking it Richer: The Evolution of Top Incomes in the United States ...
The takeaway quote from Saez should be: "The top 1% captured 93% of the income gains in the first year of recovery."
...(L)et's get some absolute numbers here.  Here is income by important percentiles, as well as the change from 2009-2010.  I include the change with and without capital gains, to make sure we understand that this is a phenomenon both in and independent of a strong stock market:
The bottom 90% of Americans lost $127, the bottom 99% of Americans gained $80, and the top 1% gained $105,637.  The bottom 99% is net positive for the year because of around $125 in average capital gains.  They can take comfort in efforts by the Right to set the capital gains tax to 0%, which would have netted them an addition couple dozen bucks...