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On the one hand, lore says that Reagan Administration is the paradigm of how a lack of economic intervention by the state is able to improve the economical condition.

On the other hand, according to this article (Reagan Was a Keynesian) by Nobel Prize Paul Krugman, one of the greatest advocate of Keynesianism nowadays, the economic intervention by all-levels state (federal, state, local), the public spending, and all-level public debt raised in the US. Whereas this view-point may be well-known by many readers of this question long before Krugman wrote that article a couple of years ago, it was new to me.

I remember taking a look at several graphs on the Internet that seemed to confirm that view (an increase in public spending and debt). In addition, Reaganomics entry in Wikipedia says:

Spending during Reagan's two terms (FY 1981–88) averaged 22.4% GDP, well above the 20.6% GDP average from 1971 to 2009. In addition, the public debt rose from 26% GDP in 1980 to 41% GDP by 1988. In dollar terms, the public debt rose from $712 billion in 1980 to $2.052 trillion in 1988, a roughly three-fold increase.

which apparently confirms again that Reagan Administration achievements were due to Keynesian measures.

However, as a non-expert at all in the US politic, I would like to ask: how accurate is Krugman's picture of Reagan Administration economical policy? Did Reagan use public spending to make GDP grow? (Regardless of whether the public spending was social or not or whether was for the poorest or the richest).

N. B.: I am interested in the political aspects of this subject rather than in the historical or purely economic facets of this matter. Please, see and participate in this meta question before closing this question.

Note (2014/07/29): After reading some comments, I would like to clarify that I am asking whether or not the rise of the GDP was (in part) due to the big public spending.

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  • @Chad The 1st part of my question is about the accuracy of Krugman's picture, so that I guess that it is the 2nd part (implications) the one you think it's too broad. Let me delete that part and focus on the first one. Is that ok?
    – drake
    Jul 21, 2014 at 19:28
  • Yes I think that would be good. I updated your title to be reflective of the new question though.
    – SoylentGray
    Jul 21, 2014 at 19:49
  • I wouldn't know how to answer this question accurately. For one, Keynesian Economics is supposed to be cyclical, you aren't supposed to continually be deficit spending. Increase spending on infrastructure (Reagan spent it on Defense) during recessions, and rasing taxes to cool demand-side growth and prevent inflation. Which of Reagan's policies are supposed to be Keynesian?
    – user1873
    Jul 22, 2014 at 4:08
  • @User1873 - The question is not was Reagan a Keynesian. The question is are Krugman's assertions supported by facts.
    – SoylentGray
    Jul 22, 2014 at 12:55
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    @Chad, "what [sic] apparently confirms again that Reagan Administration achievements were due to Keynesian measures." His assertions are that Reagan's actions were motivativated by Keynesian reasons. Keynesian economics died back in Nixon days. Reagan believed in trickle-down economics, which doesn't include increasing spending by the government to stimulate growth.
    – user1873
    Jul 22, 2014 at 13:02

1 Answer 1

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Spending levels in USA aren't controlled by the President.

It's controlled by Congress (especially the House of Representatives).

Which was Democrats-led for most of Reagan's presidency (House Democratic majority all 8 years - including Tip O'Neill's term as Majority leader when he cut the infamous "taxes for spending deal" with Reagan - and Senate Democratic majority since 1986)

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    This is not realistic. Certianly congress can limit presidential spending but the president drives the government and is the one(his staff anyway) who does the actual spending. Until his final term congress was pretty acquiescent in dealing with Reagans request. For the record I think Reagan was the greatest president of the 20th century, and probably the greatest president since our founding fathers held the office.
    – SoylentGray
    Jul 22, 2014 at 13:00
  • @Chad - The president doesn't spend the money that Congress doesn't allocate. They may "acquiesce" to his suggestions, but they are the ones making the decisions and holding the purse strings.
    – user4012
    Jul 22, 2014 at 15:36
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    The president gets buckets of money with a few things ear marked the vast majority of it is just allocated for the handling of the nations business. It is the executive branch that decides how to actually spend that money. And while there are obligations they are expected to meet we have been ignoring our obligation to Social Security and Medicare for decades.
    – SoylentGray
    Jul 22, 2014 at 18:54
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    @Chad - they get to choose how to spend the money. But the amount is ALREADY allocated in the budget passed by Congress
    – user4012
    Jul 23, 2014 at 17:01
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    @Chad - the quote specifically talks about spending amounts... and question says "Regardless of whether the public spending was social or not or whether was for the poorest or the richest"). All government spending is public spending
    – user4012
    Jul 23, 2014 at 19:51

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