It's 1981. Ronald Reagan became President in January. We were in the worst recession since the Great Depression. Worse, inflation was hitting rates of over 18%. Unemployment was over 11%. The dollar was crashing and gold soared to over $800 an ounce after having been stable at $35 an ounce for decades.

After meeting with his economic advisors, Reagan announced his plan to return the American economy to prosperity. He submitted a plan to Congress to cut tax rates drastically, return the money supply to stable and historic levels, initiate free trade among nations, and cut regulations and government controls to unshackle businesses and individuals from government red tape and allow them to create and produce unhampered.

This was traditional free-market economics. But it was attacked not only by the left, but by many free-market economists and laymen alike because it allowed the deficit to soar. Reagan argued that the deficits would be temporary and as the economy grew the deficits would shrink as a percentage of GDP. But this did not satisfy the purists of the Republican Party, and a new branch split off consisting mostly of gold bugs, conservatives, and libertarians.

They insisted that what became known as "Reaganomics" would lead the nation into a new financial crisis. Now after 35 years, it is clear that those fears were unfounded. But, through all of those years and right up to this very day, the critics were and are not silenced. They continue voicing the same discredited claims of the past. They claimed that the deficits would lead to a "crowding out" effect in the bond market leading to sharply higher interest rates. Instead long-term interest rates fell from over 20% to the present 2.5%.

They insisted that the deficits would lead to higher inflation, and again, year after year, inflation fell, even to the point of deflationary fears setting in at times replacing inflationary fears. Yet every year we are told that inflation is imminent! We are still told that massive inflation is just around the corner; that "it's inevitable."

They insisted that the dollar would crash and burn; that we as a nation would lose our reserve currency status; that the fiat system would come tumbling down. We were told this in 1979 and throughout the eighties as the dollar skyrocketed, and again when the Euro was created as competition to the dollar. During the last decade we were told it again and again and were warned that a Chinese, Russian, or mid-eastern currency would replace the dollar as the international currency of choice. And all this came at a time when the deficit turned to surplus - as Reagan said it eventually would.

The fact is that the dollar is approximately the same value today as it was in 1979. At that time it was 83 and today it's 84 in terms of the DXY, an index of major currencies. As a monetary unit it has been stable, accepted universally, and even hoarded at times by people and governments all over the world. Yet not a week goes by that we don't hear from the same people that have been predicting the death of the dollar over most of our lifetimes, telling us again and again, "it's just a matter of time."

As we approach November of 2014, some 35 years since the Reagan Administration took over, we should remind ourselves that from 18% inflation rates, a crashing dollar, 20% interest rates, 17% mortgage rates, and double-digit unemployment, it took only 18 months for free-market economics to take hold and begin repairing the economy. The result of this free-market solution was almost unstoppable growth from 1982 to 2007. There were only four quarters of negative growth in all that time!

In 1982 the economy was in recession. GDP in March of that year was falling a negative 2.4%. One year later it was running at a 4.5% positive rate of growth -- a dramatic turn-around. In April it jumped to 6% growth rates, and by January 1984 it was roaring along at a 7.4% clip. In contrast, it's taken 6 years for the economy to even begin to return to normal under Obama -- the longest recovery ever recorded in the history of this country.

From 2008 through 2014 we have stagnated at about 2% growth rates. Obamanomics is the exact opposite of Reaganomics and has had the exact opposite economic effect. It is a policy of greater and greater government controls and regulations. It restrains businesses and individuals from making decisions for themselves and replaces them with government rules, edicts and mandates. It promotes central planning rather than market solutions. And it believes in government choice over individual choice. This economic model failed in every country it was ever tried in.

Obama asked for an $800 billion dollar stimulus plan to initiate shovel ready projects that would decrease unemployment and increase economic growth. It failed. It did neither. Instead, we saw continued record levels of unemployment and stagnant growth and all we had to show for it was $800 billion in new debt.

Obama raised taxes while Reagan lowered them. Reagan's tax cuts stimulated economic growth. Obama's tax increase and his mountains of new regulation led to a freeze in economic activity as confusion, uncertainty and fear ran through businesses, financial institutions, and households. Obamanomics in effect froze human action and therefore normal economic activity.

And it's also what Obama did not do that led to stagnation -- he allowed us to become the highest corporate tax country in the world. As all other countries reduced corporate taxes to 25, 20, and 15% rates, American taxes remained at 35%, making us the least competitive place to do business in the world. In spite of bi-partisan pleas to lower the tax rate, Obama ignored both parties and looked the other way. Money stayed abroad rather than come home and be double taxed. Today 1.3 trillion dollars resides abroad due to Obamanomics.

Obama also ignored the Simpson-Bowles recovery plan. This was a bi-partisan committee set up by Obama to provide a plan to get the economy back on track. Obama thanked the committee, shelved the plan and never referred to it again. Most economists, Democrat and Republican alike believe that that plan was the way out of the recession. But Obama killed it without debate.

Then there's the Keystone Pipeline that Obama has refused to allow to come into existence, preventing new jobs and cheaper oil and gas for US citizens. A vast majority of Americans are in favor of allowing the Keystone Pipeline and the evidence of environmental studies over 7 years has concurred. Again both Republicans and Democrats are for building the Keystone Pipeline, yet Obama has fought to prevent its construction every month of his presidency.

Dodd-Frank was a signature piece of legislation by the Obama Administration and Democrats in Congress. It amounts to over one thousand pages filled with thousands of rules and regulations that to this day businesses are forced to comply with. Many top business people complain that this one piece of legislation is taking up the time business would otherwise spend on producing things. One business leader recently complained that he spends 70% of his day trying to figure out how to comply with the thousands of new rules and regulations. Almost all businesses see this as a tax, since the expense of compliance is huge. Economic growth once again is the victim of this signature legislation. 

Obamacare is no better. No other piece of legislation has ever affected 1/6th of the economy in one fell swoop. Has it reduced premiums and costs and stimulated the economy as advertised? No. "The Affordable Care Act" has helped a few that could never afford or get insurance, but the economy remains mired in stagnation. Much of the reason is the time and expense the nation has been forced to take in order to comply with the new dictates of Obamacare. And once again the burden falls on businesses.

Through all of this, what is the main issue Obamanomics is championing? Does it want lower taxes, lower regulations, or legislate any pro growth policies? No. It wants to impose a national increase in the minimum wage law. The fact that the minimum wage would only affect 3% of the workforce and do absolutely nothing to reduce unemployment or help the economy is unimportant to Obama. It's a matter of principle.

And what is this principle? A minimum wage severs wages from production and institutes government decisions over private contracts. The rule of law is thereby undermined and the principle of government decree over voluntary choice and personal contract is institutionalized. Once production is separated from earnings, wages become whatever the biggest gang says they should be. It becomes political rather than economic by nature. And this is what those on the Left are fighting so hard to implement: wages that can be dictated rather than earned.

Talk about the failed policies of the past! Obamanomics strives to mimic the failed policies of such nations as the Soviet Union, Cuba, East Germany, and Venezuela. Obamanomics embraces the failed policies of those past economic models, and refuses to accept any of the policies of Reaganomics which was one of the most successful periods of economic expansions known to Man.

The record is clear for anyone to see. The free-market principles of classical economics worked as they have always worked, and State control did not work as it never has. Some may credit Bill Clinton for the years of prosperity during his term, but hardly a thing was changed from Reaganomics during his presidency. He increased tax rates a little but not nearly enough to change behavior, and he cut the capital gains tax which was very Reagan of him. He also declared the days of big government over, and phased out the welfare system as we knew it. Indeed, Clinton followed in the footsteps of Ronald Reagan. Clinton was a fiscal conservative.

Barack Obama, however, is marching to his own drum, a drum that has been sounded only in the darkest days of modern economics. It is Barack Obama and his economics of Central Planning where the blame can be laid for the worst economic recovery in the history of the United States.

Paul Nathan
PaulNathan.biz