You Can’t Grow Your Way Out: The GOP’s Debt Delusion Exposed
As of 1980, the rolling 10-year and 20-year real GDP growth rates stood at 3.2% per annum and 3.5% per annum, respectively.
Owing to a slight boost from the good parts of Reaganomics—sweeping deregulation, tax rate cuts, and sound money, which were partially offset by the long-term ills owing to the abandonment of balanced budgets—the respective moving averages rose a tad to 3.5% and 3.6% per year by 1988, respectively.
Still, these rounding error gains in the moving averages of growth should be a reminder that whatever its philosophical virtues—and they were considerable—Reaganomics did not usher in a decisive or even measurable break from prior trends. That is to say, 1960 to 1980 was pretty much the heyday of Keynesian economics in Washington, and the 20-year moving average of growth at its endpoint in 1980 was 3.5%.
Yet in 1989, after a decade of Reaganomics–and at which point Bush the Elder had not yet moved his lips on tax increases—the 10-year moving average stood at, well, 3.1%. In other words, there was not a dime’s—nay, even a penny’s—worth of difference in the economic growth trend between the pre-1981 era of Keynesian economics and the half-assed version of supply-side economics implemented in the 1980s.
Of course, after that we got what amounted to Washington pragmatism, embodied in the tax increase and spending cut packages of Bush the Elder in 1990 and Bill Clinton in 1995.
What happened, of course, is the Federal budget was brought back to surplus, but this persistent withdrawal of so-called “stimulus”—whether viewed as supply-side tax incentives or Keynesian demand-side fiscal juice—did not detract from the almighty “growth” rate in the slightest. In fact, by the year 2000 when the Federal government ran a culminating +1.8% of GDP surplus, the 10-year moving average of growth stood at 3.2%, exactly where it had posted in 1980.
That is to say, after a round trip from Harvard Keynesianism through supply-side and back to the Wall Street-tinted Keynesian playbook under Bob Rubin and Larry Summers in the late 1990s, the trend of the GDP growth needle barely moved. The saving grace, of course, is that 3.2% per annum growth wasn’t all that bad.
Between 1980 and 2000, in fact, even as the Federal government was clawing its way back to balanced budgets and temporarily eschewing the practice of shifting the tax burden to future workers, the real median family income grew from $69,700 to $84,600 or by a healthy 1.0% per annum.
But that’s all she wrote. As of 2024, the true long-term economic weather vane—the 20-year moving average of real GDP growth—had fallen to just 2.0% or barely half the 1988 p
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LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.
