In a 3/28/09 WSJ op-ed, Robert Reich, Clinton’s Secretary of Labor, compares two economic approaches, Reaganomics (R) and Obamanomics (O).

The key distinction is the role of government in fostering economic growth. R’s essential approach was top down – lower taxes on the wealthy and benefits will trickle down the lower income workers. Before R, the top 1% of earners “took home 9% of total national income.” In 2007, the richest 1% took home 22%.

O’s approach is a bottom up philosophy – help lower income Americans become more productive and the benefits will trickle up. R places little or no value on public spending as an investment in the future. In the past 30 years, “federal spending on education, job training, infrastructure and basic R&D … have all shrunk as a proportion of GDP.”

R focuses on the low cost of labor within a country to be competitive in the global market. This approach “inevitably exerts downward pressure on the real wages of a larger and larger portion of our population.” O focuses on high productivity to gain that same competitive advantage in the global marketplace.

“R assumed that deregulated markets always function better.” Although this is often the case, it is not always the case and when markets don’t work, “all hell can break loose, retarding economic growth.”

O “views appropriate regulation as an essential precondition for sustainable growth.”

My question to Robert Reich is: who decides what is “appropriate regulation?”

Lawmakers like to use three words when they craft legislation: appropriate, reasonable and excessive. They leave it up to administrators and courts to determine what these key words mean. As an example, under Colorado law an employee is not entitled to unemployment benefits if they were terminated for “excessive absenteeism.” As an employer, I think one day absent a month is excessive. A Colorado Unemployment administrator thinks it is not. I can hire an Employment Advocate certified in Colorado to plead my case and they might be successful but it will not be cost effective if I only have a few employees. The state does not reimburse my company for costs if they lose.

R is a top down approach economically but a bottoms up approach on the regulatory side. O is a top down emphasis on the regulatory side but a bottoms up approach on the economic side. There are major problems with both of these systems.

O requires an employer to spend more resources coping with regulation than providing a product or service. R requires an employer to spend more resources to cope with a declining infrastructure and a “no holds barred” marketplace.

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