The Right's Love Affair With Austerity is Slowing Our Recovery

No one is more associated with the conservative cause of small government than Ronald Reagan.

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there's a tension between Reagan's rhetoric and what actually went down between his inaugural and farewell speeches. Both the national debt and the size of the federally employed workforce rose during Reagan's tenure. Government spending grew as a share of the economy, then returned to exactly where it was when Reagan started.

But what's most interesting about this contradiction is that, in all likelihood, Reagan's failure to deliver on his own small government rhetoric is a big part of why the famed Reagan economic boom happened.

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The 1981 recession and recovery exhibits the classic pattern that economists grew accustomed to after the mid-century: A sharp downturn followed by an equally steep rise. But ever since 1981, the rises have become more and more gradual, with both the post-2001 and post-2007 recoveries growing at an abysmally slow rate.

This is where the comparison between the Great Recession and Reagan's 1981 recession really stands out: Reagan's recession was even deeper, with an output gap of 7.6 percent. But the reason Reagan isn't remembered for presiding over a grinding seven-year Great Recession like President Obama is the comparative speed of the recovery Reagan enjoyed.

According to Bivens, the reason for that difference boils down to two words: government spending.

http://www.theweek.com/articles/642128/how-ronald-reagan-zapped-recession-massive-government-spending