Monday, June 11, 2012

Why Is This US Recovery Slower Than Past Recoveries?

The GOP is comparing our slow recovery to the more rapid recovery from the 1981 recession.  They argue that Reagan's policies worked, and that Obama's policies have not worked.  What they don't say is that the Reagan recovery was fueled by a rapid increase in federal spending and tax cuts.  This is a classic Keynesian response to recession.  This article points to another important difference in the recoveries.  State and local tax revenues increase during the Reagan recovery.  They have decreased dramatically during our current recovery.  If they had expanded on trend, this recovery would have been faster than the the Reagan recovery.

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