Oh look, I found our GDP missing since Reagan

 We're missing $11 trillion real GDP since Reagan.

 

Is the Trump economic policy doing anything positive for economic growth since 2016?

 Only if you squint.

The trend line inclines slightly from 1.3% seasonally adjusted annual rate in mid-2016 to 2.5% in mid-2026.

That's just part of a larger negative trend, however, since the Reagan Revolution in the 1980s. With the exception of the pandemic circus in 2020, quarterly real GDP hasn't been close to 10% since the mid-1980s.

We have fallen from a great height.

 

Trump era since 2016

Reagan era since 1983

Pre-Reagan era

 

Marco Rubio is not far from the kingdom of God

 Secretary Rubio: America Made A "Terrible Mistake" Deindustrializing For Globalization "Fantasy"

The Reagan tax revolution made America ripe for globalization, but you can't explain that to a mouthbreather.

The goal wasn't globalization.  

After all the dotcom malinvestment, the entry of China into the WTO opened a door to a ready, welcome, and fateful solution which became globalization, funded by oodles of low marginal ordinary income tax rates.

We need more philosophers, and fewer Rubios. 

 

 

Real GDP today might have been $35 trillion instead of $24 trillion had it not been for Ronald Reagan

Real GDP today might have been $35 trillion instead of $24 trillion had it not been for Ronald Reagan. 

From 1Q1947 to 1Q1984, real GDP grew at a compound annual rate of 3.585% from $2.18268 trillion to $8.03484 trillion.

Since 1Q1984 through 2Q2026, updated yesterday, the compound annual growth rate fell to 2.651% so that real GDP today is $24.26961 trillion when at the previous rate it might have achieved $35.58524 trillion.

The 26% cut to the growth rate resulted in underperformance of nearly 32%, represented by $11.3 trillion in missing real GDP after 42.25 years.

Did recipients of massive ordinary income tax rate cuts know best what to do with their own money?

The answer in China is Shì de.

  

The calculation is 35585.24 = 8034.84 * (1 + 0.03585) ^42.25

 

 

Increases to the Federal Debt since 4Q2000, as horrible as they may seem, are part of a macroeconomic growth trend for federal debt which is lower since 1984

If the macroeconomic growth trend for federal debt as a percentage of GDP were higher, however, that would be different, but that too was arrested in the early 1980s.

Of course, that picture would look so, so much better if the real GDP growth trend since 1983 weren't so disappointing.

The Reagan Revolution delivered on reducing the federal debt growth trend, but not on increasing the economic growth trend. 

The biggest failure of the Reagan Revolution was its misplaced faith in human nature.

We liked hearing that we knew best what to do with our own money. "Tax cuts will boost economic growth". It made us feel so good, so optimistic.

But owners of capital promptly pocketed the windfalls and ultimately invested them elsewhere.

 

Federal Debt:

4Q2000 $5.662T

4Q2008 $10.699T: +$5.037T (+88.9%) Bush 43

4Q2016 $19.976T: +$9.277T (+86.7%) Obama

4Q2020 $27.747T: +$7.771T (+38.9%) Trump I

4Q2024 $36.218T: +$8.471T (+30.5%) Biden

Now $40T: +$3.782T (+10.4%) Trump II to date

 

 

Larry Kudlow is back touting a non-existent booming economy just like he did during Trump's first administration

 This Is the Best 'Hard Goods' Boom in Decades

... Tuesday’s industrial production report showed back-to-back gains in June and July for both total production and manufacturing production. ...

Larry is rightly happy about the increase in the durable manufacturing index. 

No doubt about it, it is up, but notice that it is still not as high as it was in Trump 2018 or Obama 2014. 

More importantly, percent change in the index for 1H2026 was 1.94, lower than the 2.28 in 1H2018 when Trump was president the first time.

But this isn't an economic boom, and neither was that. 

Those are welcome highpoints but in a long-term trend all down hill since the 1980s when Reagan was president, and no one asks why.

Kudlow & Co. never go back in the data as far as they should, even though they served in the Reagan Revolution and touted the results for the economy of the posthumous JFK tax cut in the Revenue Act of 1964, which cut the top marginal rate from 91% to 70%.

Today they use these data sets which go back only to the beginning of 1972, but even at that there is a giant durable goods growth spike of 9.02% in 2H1983 which we have been unable to reproduce since then, which should make them ask themselves, What went wrong?, but it doesn't.

Socrates said that the unexamined life isn't worth living.

So let's examine it.

Robust post-war growth is a truism which is true!

Industrial production generally, and for manufacturing specifically, grew robustly year over year, and the trend for those growth rates was itself strongly positive, as the chart for 1948 to 1984 shows.

But look at what happens after 1984. 

You still get positive growth rates year over year, but not as robust as before, and the trend for those growth rates becomes strongly negative.

Something changed in the 1980s to cause this.

I say it's the Reagan Revolution in ordinary income tax rate reductions which caused this, not because tax cuts for rich people is bad, but because Reagan unintentionally sabotaged the tax rate arbitrage which before those tax cuts existed had pushed rich people for decades to make long term capital investments here at home in order to get low capital gains taxes in return.

In other words, Reagan destroyed the negative incentives which drove domestic investment. Take away the penalty of high ordinary income tax rates, and suddenly there's no reason to plow your money into the investments which drive business, jobs, and GDP, especially as enthusiasm for regulations of all kinds began to grow and hamstring profits. 

The new tax cut windfalls freed up a lot of money to seek return wherever it could be found, and in the aftermath of the Reagan era that money increasingly went abroad. For people who lived through it, the one persistent theme of the business news was one business after another closing up shop in America and moving production overseas. After China entered the WTO, the steady departure of businesses from America became a flood.

And that's why that last chart, for 1984 to the present, looks like hell.

It has nothing to do with the U.S. Dollar being the world's reserve currency either. That is the dumbest thing I've heard in years, and I can't tell you how amusing that is coming out of the mouth of a Yalie. I guess they don't teach 'em at Yale that the dollar was the world's reserve currency 1948-1984.

I am not an economist. I do not know how to wave a magic wand of policy to make it all right again. 

I am just a scholar in the humanities who wanted to know what turned my world upside down in 2007 and why I and millions like me have never recovered.

I have made a life for myself in spite of it all, as people do, but I tell you what, America was pretty great once, so don't tell me this is an economic boom.

I knew the economic boom. The economic boom was a friend of mine. And Larry, this isn't an economic boom.

 

 

Industrial production missed the consensus estimate yesterday, so they trotted out Larry Kudlow to tell you otherwise lol

 For month over month in July, the consensus estimate was for +0.3%. Instead we got +0.2%.

Meanwhile the big picture shows, like so many indicators, that industrial production hit the big brick wall of Reaganism in 1984.

Post-war industrial production grew handsomely and its growth rate trended upward from 1948 to 1984, but not after.

Why is that?

I think it's because the incentive to invest in domestic industry went away because of the Reagan tax revolution.

Up to that time, high ordinary income tax rates had pushed owners of capital to invest in America for decades because by doing so they could take advantage of relatively much lower long term capital gains tax rates when they wanted to take income. After the dramatic Reagan cuts to ordinary income tax rates, that arbitrage disappeared. From that time onward owners of capital, now flush with cash from taking income at low ordinary income tax rates year upon year, found it more advantageous to invest abroad where low labor costs and unregulated markets promised even more fabulous returns on investment as America hobbled itself with regulation at home. The exit of businesses of all sizes from the United States to East Asia which began from this time turned into a flood after China was admitted into the WTO in 2001.

But today J. D. Vance thinks the U.S. Dollar's status as the world's reserve currency is the cause of all our problems.

If you want to know what makes me despair, that's it.

The following news story was more accurate than Kudlow. 

US: Industrial Production Up Again in July as Modest Manufacturing Recovery Continues 

The current economic growth rate continues to underperform the post-war compound annual growth rate to Reagan by 42%

 1Q2026 real GDP in the third estimate today came in at an annualized rate of 2.1%.

The first estimate was 2.0%. The second was 1.6%.

The revision back up again and a little higher was "primarily reflecting a downward revision to imports", which are a subtraction from GDP.

Expect higher GDP in 2Q on the strength of oil exports. 

The post-war economic growth rate to Reagan was 3.64% compound annual vs. 2.1% now.

The compound annual rate 2017-2025 was 2.48%.

Trump is even underperforming himself by 15%. 

 

 

US economic growth peaked during the Reagan administration because America is a debt-based economy and we turned our backs on the formula during it

 The trend for the growth of the total universe of US debt, TCMDO or total credit market debt outstanding, rolled over after 1985, one year after GDP did.

TCMDO is the real money, almost $108 trillion at the end of 2025. In 1985 it was $9 trillion.

M2 was merely $22 trillion at the end of 2025. 

TCMDO is the sum total of debt expansion throughout the sectors of the economy.

Historically, most people have experienced it this way.

You get a full time job, which itself was created by a business selling debt in the form of stocks and bonds in order to expand its operations and future profits, and you go buy a house, putting down $100k on a $500k property. The bank loans you the $400k through fractional reserve lending on a small portion of its reserves but secured by the house. That new money is created out of thin air but is actually represented by the "guaranteed" future income stream of your job for 30 years, because you're a smart, reliable guy who never misses a day of work. TCMDO expands, and expands some more each time this happens.

When the conditions disappear for full time job creation, the process slows down. You can see the decline in the growth of the economy in the decline of the growth of the debt. Yes, everything is still growing, but not as vigorously.

Full time as a percent of population peaked 26 years ago, in 2000, at 53.55%, but retested the 1975 low of 46.74% in 2010 and 2011 at 46.97%, back-to-back years in the Late Great Recession.

Housing strength persisted in the immediate post-Reagan period on the illusory basis of windfalls from massive ordinary income tax cuts combined with the demographic peaking of the 1957 Baby Boom turning 40 in 1997 driving demand, but the hollowing out of the economy had already begun with the move of 20,000 manufacturers abroad after the 1986 tax reform.

Early warning signs began flashing already during the Clinton era.

Clinton immediately raised taxes in 1993 after he promised not to raise them in 1992, began a long series of cuts to federal government employment, and gutted the US Navy.

Americans were already struggling at the time and ominously tapped housing equity to sustain their middle class standard of living. Owners' Equity in Real Estate averaged 70% 1982-1986 inclusive, but plunged ten points within a decade to 60% 1996-1999 inclusive.

Homes had become piggy banks, preparing the way for 1997, the year Clinton and the Republicans went further still and turned homes into mere commodities, which in turn prepared the way for the housing catastrophe of 2008. From 1997 a flood of 70,000 more manufacturers began moving out as globalization kicked into high gear and China gained admission to the WTO in 2001.

Almost no one today wants to say out loud how unpatriotic this whole business was. 

Reagan tried to convince us that we know best what to do with our own money, and we promptly turned around and staked our fortunes on foreign investment, not domestic.

Libertarianism is a lie.  

Today you will be hard-pressed to identify a major manufacturing concern with 100% of its operations in the US. Tesla is a standout (heavily subsidized by the federal government!), but other than that most of the businesses which remain patriotically committed to the American idea are pretty small beer compared with how it used to be. 

The formerly domestic debt expansion was exported abroad, creating middle classes where none existed before, especially in East Asia, and doing so cost businesses A LOT less, the key attraction for them.

As a result, enormous profits accrued to the owners of capital while wage earners here struggled to maintain the American dream. Wealth inequality soared, and now our children are 40 before they buy their first home.   

TCMDO grew at a compound annual rate of 8.355% 1945-1985, but at only 6.398% 1985-2025. The change from optimism to pessimism can be traced in the trend lines.

Continued growth of TCMDO at the former rate but after 1985 would have yielded TCMDO at the end of 2025 of $223 trillion, or 106% more "money" than we actually have.

$115 trillion is "missing", or at least something like that. We will never know for sure, but some of us can still imagine because we watched the great betrayal actually happen.

This is why I say socialism is the future, not because I want it or because I think it will work.

People are going to figure this out eventually, get angry, and do the wrong thing, just like we did during the Reagan administration. 

 

 

Ronald Reagan's faith in the American people's better judgment about how to spend their own money was . . . misplaced

"Well, our loyalty lies with little taxpayers, not big taxspenders. What our critics really believe is that those in Washington know better how to spend your money than you, the people, do. But we're not going to let them do it, period."

-- Ronald Reagan, Nationally Televised News Conference, June 30, 1982

The secret of Ronald Reagan's success was that he stroked the vanity of the people. 

Nominal return from SPX since he made those remarks has been 12.48% per annum through April 2026.

Just socking away a one time investment of $2,000 in the S&P 500 that summer and forgetting about it would have yielded you almost $353,000 by now.

But today just 2.6% of Americans in general have at least $1 million in a retirement account, and HALF of retirees aged 65-74 have only $200,000 or less.

Meanwhile, our betters in Washington have put the country $39 trillion in debt, and 73% of us die in debt ourselves, with the average owed just under $62,000.

The government we deserve!

 

In 1982 Ronald Reagan was really upset about the federal government spending $2 billion a day, in 2025 we spent $20 billion a day

 "Our Government is spending money at a rate that is intolerable, if not incomprehensible. Almost $2 billion a day, $1,400,000 a minute... We must reverse the process."

-- Ronald Reagan, 1982 

Federal outlays in 2025 are estimated at $7.266 trillion, or $19.9 billion per day. 

The consequences of the Reagan Revolution: $11.1 trillion missing real GDP since 1Q1984

 Real GDP in 1Q2026 reached $24.175 trillion.

Had real GDP continued to grow at the pre-1984 rate to now, it would have been $35.273 trillion, 46% more than it is.

That's the difference between a compound annual growth rate from 1947 to 1984 at 3.585% continued to 2026 instead of at 2.657% since 1984 to now.

IDEAS HAVE CONSEQUENCES. 

 

Ha, taxes coerce behavior whether you like it or not, so you'd better decide what behavior you want because you're going to get it good and hard either way

 Tax Power Not Designed To Coerce Behavior - Gary Abernathy, RCEnergy

... the Fifth Circuit’s ruling is a welcome nod to the fact that the federal government cannot take tax laws intended to increase revenue and twist them merely to regulate business activities. ...

I mean, do these people not remember Ronald Reagan?

“If you want more of something, subsidize it; if you want less of something, tax it.” 

But Ronald Reagan ignorantly reduced high marginal ordinary income tax rates, destroying the need for the owners of capital to make the arbitrage decision going forward between either choosing low long term capital gains tax rates or the high ordinary income tax rates. 

The owners of capital had been no dummies and had picked the low rates for years. That drove domestic investment throughout the post-war because it had to, and produced the good paying full time jobs and GDP which too few even remember now. But faced with an easier path to low taxes, they took it.

The tax windfall set the conditions for the hollowing-out of the U.S. economy when those billions of dollars met the opening to China in 2001, where they worked for pennies on the dollar and regulations were practically non-existent.

20,000 domestic manufacturing establishments alone were lost in the wake of the 1986 tax reform, and 70,000 more after 1997. Millions of manufacturing jobs went with them, and with them the American middle class and the American dream.

All because Ronald Reagan, the liberal, thought rich people knew best what to do with their own money.

In the mid-1980s we had maybe 35 billionaires and people in their 20s routinely married and bought their first home. Today we have 1,135 billionaires and people are nearly 40 before they can afford to buy their first home. And we have Ph.D.s all over the place who can't spell in their own language let alone in a foreign one.  

Put a random set of 100 people in a room and the fact is only 25% of them are college material, but the rest need and deserve good jobs the same as they do, and they aren't going to be "knowledge" jobs.

I can still remember my company's HR head telling my truck-driving employees in the 1990s that they had to start thinking of themselves as "knowledge workers" instead of as what they were. I got the hell out of there. By 2003 most of those new "knowledge workers" of mine had lost their jobs driving truck when the company had to "restructure". Just one tale in tens of thousands of such tales.

America will not begin to be great again without tax policy which favors the American people over some eggheaded libertarian's idea of a principle which favors only the rich. 

Post-Reagan GDP underperformed the immediate post-war by over 26%, Trump-era GDP underperforms it by almost 32%

Ronald Reagan didn't make America great again, and neither has Trump.

The watershed tax changes throwing away the threat of high ordinary income taxation under Reagan in 1986 and Trump in 2018 have got to go.

The country needs genuinely domestic, long-term investment to bring back economic growth. Reward that with low tax incentives and penalize everything else.

Rich people OBVIOUSLY haven't demonstrated that they know best what to do with their own money, otherwise they would have done it already.

We watched helplessly year after year, especially after 2000, as one business after another moved its production abroad seeking lower labor and regulatory costs to make themselves rich, not us.

We have to make them reverse it, because they aren't going to do it otherwise. Tax the shit out of them until they do the right thing, and keep the threat of taxes hanging over their heads to keep them doing the right thing. 

Real GDP Compound Annual Growth Rates

GDPCA 9 April 2026

1947-1984: 3.638%

1984-2017: 2.679%

2017-2025: 2.476%

 

Ronald Reagan's goal of a 600-ship U.S. Navy made it to 594 in 1987, but in 2026 we can barely deploy 300 because of Bill Clinton, but Trumpty Dumpty never mentions that

 

 After the end of the U.S.S.R. in 1991, Bill Clinton gutted the Navy.

We went from 541 ships in 1992 to 336 by 1999.

And now we can't stop the Houthis in the Red Sea, nor Iran in the Persian Gulf. 

Ronald Reagan didn't make America great again, and neither has Trump

 Ronald Reagan didn't make America great again, and neither has Trump. 

Real GDP Compound Annual Growth Rates

1947-1984: 3.652% 

1984-2017: 2.675% 

2017-2025: 2.416%

 

 

That right there is a stagflation headline

 Fourth-quarter GDP revised down to just 0.7% growth; January core inflation was 3.1%

Economic growth was much slower than expected in the final three months of 2025 while core inflation rose to start 2026, the Commerce Department reported Friday. ...

The first revision of the GDP reading was a sharp step down from the previous estimate of 1.4% and well below the Dow Jones consensus forecast for 1.5%. It also marked a considerable slowdown from the 4.4% gain in the prior period. For the full year, GDP posted a 2.1% increase, or one-tenth of a percentage point lower than the previous reading. In 2024, the economy rose at a 2.8% pace. ...

On the inflation side, readings for January were mostly in line with estimates, though they showed price increases running well ahead of where the Federal Reserve would like. ...  

      

Core pce inflation has been range-bound around 3% since Dec 2023. For 2009 through 2020 it averaged half that, 1.5%.

The compound annual rate of real GDP growth since 2017 has been 2.416%, almost 34% lower than the post-war rate for 1947 through 1984 of 3.652%.

The rate for 1984 through 2017, also using today's data, was 2.675%, also higher than the rate since the Trump tax reform eight years ago.

Trump has not made America great again, any more than Reagan did. 

 

 

SPX return since August 2000 vs. Jan 1871-Jul 1982

 

Aug 2000-Jan 2026: 8.19% pa / 5.53% real

Jan 1871-Jul 1982: 8.15% pa / 6.18% real

Jul 1982-Aug 2000: 18.99% pa / 15.28% real 

GDP in 2025 would be double what it is had economic growth continued after 1984 at the 1929-1984 compound annual rate of 6.869%

 Nominal GDP in 2025 would be $61.524 trillion instead of $30.778 trillion had economic growth continued at the 55-year 1929-1984 compound annual rate of 6.869%.

That's the difference the 26% reduction in the growth rate to 5.079% has made in the 41 years since 1984.

The compound annual growth rate since the Trump tax reform from 2017 has been slightly, but not a lot, better at 5.795% on an annual basis. Measured 4Q on 4Q over the 8 years the compound annual rate is a little better still at 5.814%. 

Meanwhile the seasonally adjusted annual rate of real GDP growth fell from 4.4% in 3Q2025 to 1.4% in 4Q2025 in today's report: 

Fourth-quarter U.S. GDP rose just 1.4%, badly missing estimate; inflation firms at 3%

American leadership continues to avoid the elephant in the living room of economic growth.

1984 marked the turn, contrary to Ronald Reagan, when America's best days truly were behind her, and economic growth then hit the big brick wall after 2007 and nothing anyone has done has fixed it.

In the 78 years to 2007 nominal GDP (GDPA) grew at a compound annual rate of 6.525%, but only at 4.281% in the 18 years since then.

The corresponding real values are 3.448%, and . . . just 1.982%.

Yes, that's right. Real GDP (GDPCA) has been growing at sub-2% since 2007. 

Politicians who talk up economic growth aspire to better days but do not deliver.

The first step to authentic economic recovery means admitting that you have a problem. 

 

It's OK when I do it: Hypocritical Trump lauds $36 billion Japanese investment in U.S. oil and gas, one week ago bashed Reagan era $25 billion equivalent in U.S. automotive sector

But Trump's sin could end up dwarfing Reagan's by 22 times. 

 

 Trump lauds Japan’s pledge to invest $36 billion in U.S. oil, gas and critical mineral projects

U.S. President Donald Trump has welcomed Japan’s pledge to invest nearly $36 billion in oil, gas and critical mineral projects in Texas, Ohio and Georgia. 

The commitment represents the first tranche of investments by Japan following a landmark trade deal between the two countries, one in which Tokyo pledged to invest $550 billion in American-based projects and Trump cut tariffs on most Japanese imports to 15%. ...