June 10, 2004,
EDITOR'S NOTE: The August 31, 1992, issue of National Review, set out to set the record straight about the Reagan administration's economic record. We reprint the content of the issue here.
Myth: Social spending was savaged under Reagan.
"While the numbers on welfare increased, the value of assistance fell by more than 30 per cent. During the same time, other federal spending in the cities also dropped. Subsidized housing fell 82 per cent. Job training, 63 per cent. And programs to develop new business, down 40 per cent."
Did the Reagan Administration deeply cut social spending? Total federal payments for individuals the broadest measure of transfer-payment spending rose from $344.3 billion in 1981 to $412 billion in 1989 (1982 dollars), a 19.7 per cent increase. The conventional wisdom insists this rise conceals two divergent trends: an enormous increase in payments to the elderly (mainly Social Security and Medicare), offset by reductions in the "safety net" programs targeted to the poor.
A detailed analysis shows, however, that spending on programs that provide income, food, health care, housing, education and training, and social services to poor families increased substantially (in constant dollars) between 1981 and 1989.
An alternative way of measuring social spending is the percentage of GNP transferred by the Federal Government to poor people. In the Carter years (1977-80) means-tested programs averaged 1.65 per cent of GNP; during Reagan's two terms, this share averaged 1.73 per cent.
Whether measured in real dollars or as a percentage of GNP, the Reagan years can hardly be called a time of declining commitment to the poor. The most persuasive proof of this is the decline in poverty itself. When Reagan took office the poverty rate had been rising from 11.4 per cent in 1978 to 14.0 per cent in 1981. Within 18 months the trend was reversed. After climbing to a high of 15.1 per cent at the end of the recession, the rate declined steadily to 13.0 per cent in 1988. And, according to the Ways and Means Committee's Green Book, when food and housing benefits are taken into account, the 1988 rate was only 11.6 per cent.
Mr. Rubenstein is NR's economist analyst.