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What can explain this except to say the policies adopted by each of these men either helped the economy climb out of the hole OR exacerbated the fiscal crisis by making the hole even deeper?
Reagan did do a good job of improving the economy and cruised easily to a second term. Reagan had the fortune of not having to revive an economy during a global financial crisis. That is a major factor missing from the comparison, so the two don't equate that well.
Reagan did do a good job of improving the economy and cruised easily to a second term. Reagan had the fortune of not having to revive an economy during a global financial crisis. That is a major factor missing from the comparison, so the two don't equate that well.
A president has ZERO power or influence to revive an economy.
The simplistic attempt to compare different recession's who's characteristics are completely different is not a valid data point. Secondly, the chart from the Minn. Bank is attempting to one thing and one thing only; compare Employment & Output, not the policies created by their respective administrations. That's what you're trying to do. The charts and the summary both show how the 2007 was deeper and longer than the 1981 recession, by several magnitudes. Third, the 1981 recession was a W shaped recession (although some consider TWO recessions to have occurred, w/ both being V shaped).
The 2007 recession's shape has not completely been charted, but most believe it was also a W shaped recession, w/ much longer and deeper entry and exit points.
However, the main difference between the two recessions is the 1980-82 recession was a inflationary contraction of monetary policy...or an Aggregate Demand recession. The 2007 recession was a credit (liquidity) and equity crisis, or a financial Aggregate Supply recession. In the 80's the FED raised rates to almost 22%. In the mid 2000's the FED lowered rates to what are now essentially 0%.
The 1980-82 recession and the 2007-2009 recession...HAVE NOTHING SIMILAR other than tangential inputs to compare.
But if you want to talk about the repercussions of the monetary policy created by those recessions, that would be another thing all together.
The 1980-82 recovery was fueled by MASSIVE debt spending, MASSIVE tax cuts and MASSIVE cuts in "entitlements" and social programs. The spending combined w/ cuts and deferments of payments to previous debt obligations led to a snowballing of debt interest and manipulations to allow for a continuation of economic "growth". Massive deregulation in an attempt to create new markets and revenue fueled many new speculative markets, based on the premise that should a failure occur, there will always be a government bailout.
The 2007-2009 recovery was also fueled by MASSIVE debt borrowing. The continuation of tax cuts from a previous administration that was proven to reduce income, leading to a government revenue crisis to cover the lack of required reserves to fund mandated and necessary functions. The recovery was further fueled by the MASSIVE stimulus (which was another round of debt borrowing), which preserved temporary employment. This lead to private consumption falling even further in spite of the Federal Reserve attempts to spur a liquidity injection into the system. However due to the continued negative effects of massive deregulation that occurred in the previous 25 years, the efforts to stop gap the falling credit and liquidity levels failed as there was no confidence and enforcement of the recovery efforts.
Reagan did do a good job of improving the economy and cruised easily to a second term. Reagan had the fortune of not having to revive an economy during a global financial crisis. That is a major factor missing from the comparison, so the two don't equate that well.
When the dollar is the world currency, Reagan did pull us out of a very bad economy. Not only here but world wide.
You must not be old enough to have lived through the Carter years.
If you look at the last two recessions and recoveries - 2001 and 2007 you'll see that the most recent recession had a deeper fall in employment --> +/-6% vs. +/-2%.
Then compare the recoveries and you'll see that the employment hasn't changed after 18 months versus a -1% fall in the 2001 recovery.
If you also look at the 1990 recovery employment rose by only a fraction of a percent after 18 months.
What the graph is telling me is that the recoveries from the last three recessions took longer and were less vigorous than what had come before. It doesn't bode well for recessions to come.
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The charts tell the story.
