The Big Economic Lie

There they go again. The presidential election of 1992 is bringing out among politicians and the media the Big Economic Lie. Virtually all editors today allow their reporters to broadcast this lie uncritically: “During the 1980s under Reaganomics the poor and the middle class lost income.” Any journalist determined not to fall for partisan tricks can falsify this claim from official government data on income and poverty.

For this Big Lie rests on one huge deception. It includes under “the eighties” three years of Jimmy Carter’s economics: 1979, 1980 and 1981. 1981 was the year before the first Reagan tax cuts began to take effect, a year whose legislation was mainly Jimmy Carter’s. 1979 and 1980 were Carter’s, every single day and without a doubt.

Senator Phil Gramm (R-Texas) has singled out three (among many) sources of the Big Lie. The House Ways and Means Committee Green Book (1991) prints a table showing that the average income of the poorest two-thirds of American families declined between 1979 and 1989. But this table includes the three years 1979, 1980, and 1981 (the Carter years), during which, indeed, there was a decline in income among these families of 8 percent. In the actual Reagan era, 1982-1989, the same incomes rose by 13 percent.

The Joint Economic Committee also wrote of “The Growing Income Gap in America” that “the lowest 40 percent of the distribution actually had lower incomes, on average, in 1989 than they did in 1979.” Here again, the Democratic staff attributes the Carter damage to Reagan.

Then the same Democratic staff had the gall last March to upbraid Senator Pete Domenici and Senator Gramm for beginning to count the Reagan years in January 1982, since this “ignores the hole that was dug in the first years of the Reagan-Bush era.” (Senator Gramm wryly notes the plural “years.”)

The truth is that the heaviest damage done to the poor and the middle class in postwar history was done during the Carter years. This damage was so great and so visible that Reagan’s quip in the final debate of 1980 “If you are better off tonight than you were in 1976, vote for him” was a challenge Reagan could not lose. Inflation had been running in double digits for two years (and would continue for a third, until Reaganomics could slam it to a halt). Under Carter, those on fixed incomes lost a third of the value of their money. Everyone got hit, bad.

Those were the years when the poor and middle class lost income. Senator Gramm uses government figures to show conclusively that during the two indisputable Carter years, 1979-1980, the average income of the bottom 40 percent fell by 7 percent in real terms; the income of the middle 20 percent fell by 6 percent; and the income of the top 40 percent fell by 5 percent. Under Carter economics, everybody lost.

The same government figures show that during the years for which Ronald Reagan was responsible, from January 1982 until December 31, 1988, the incomes of every single income group of Americans went up. Those of the bottom 40 percent grew in real terms by 8 percent; those in the middle 20 percent by 10 percent; and those of the top 40 percent by 17 percent.

In addition, the whole nation experienced the greatest economic boom in modern U.S. history. The number of employed civilians grew from 99 million in 1980 to 115 million in 1988. By 1989, adult employment reached 63 percent, the highest percentage in U.S. history. Interest rates that in 1981 stood at 19 percent dropped to 9 percent by 1988. Inflation—under Carter 11 percent—was soon defeated. Total U.S. exports grew from $147 billion in 1980 to $226 billion in 1988. U.S. manufacturing output grew from $635 billion in 1982 to |854 billion in 1987. In addition, brilliant new technologies came on line, as venture capital became abundant and the mechanical age yielded to the electronic age: personal computers, word processors, laptops, fiber optics, cellular phones, fax machines. There has seldom been a more creative economic period in U.S. history. GNP grew from $3.17 trillion to $4.88 trillion.

Why aren’t CBS, NBC, ABC, CNN, and PBS reporting the raw truth about the dramatic difference between the Carter years, 1979-1981, and the Reagan years, 1982-88? That this is not a partisan point is shown by the fact that ever since the policies of George Bush took effect in 1990 (allowing Reagan responsibility for 1989, as Carter bears it for 1981), the U.S. economy has again been going downhill. President Bush favors old money; his vision of economics belongs to the GOP School of Political Dentistry: “If it doesn’t hurt, it isn’t good for you.” So we have higher taxes and more regulation. Bush abandoned Reaganomics. He brought the country stagnation and a sharp increase in poverty.

For the good of the country, the Big Lie has got to be stopped. Much as they will hate to do it, the editors of major newspapers and periodicals—who are the reference group of television journalists—must stop hiding the tragedies of 1979-1981 under the false banner of “Reaganomics.” Not to do so is to forget the policies that caused the successes of 1982-1988 and to bring back the policies of 1979-1981.

Michael Novak is the George Frederick Jewett Scholar in Religion and Public Policy at the American Enterprise Institute and a member of the Editorial Board of First Things.