By ROBERT BARRO

Ronald Reagan and Barack Obama have at least one similarity. They both were confronted by great economic challenges when they became president.

Mr. Reagan’s immediate challenge was that inflation and interest rates were out of control. He met this great test by allying with the Federal Reserve chairman, Paul Volcker, in accomplishing a return to price stability, even through the 1982 recession when the unemployment rate hit 10.8%.

Reagan’s success is not in doubt. Inflation and interest rates were reduced dramatically, and the recovery from the end of 1982 to the end of 1988 was strong and long with an average growth rate of real GDP of 4.6% per year. Moreover, Reagan focused on implementing good economic policies, not on blaming his incompetent predecessor for the terrible economy he had inherited.

Mr. Obama was equally in position to get credit for turning around a perilous economic situation that had been left by a weak predecessor. But he has pursued an array of poor economic policies, featuring the grand Keynesian experiment of sharply raising federal spending and the public debt. The results have been terrible and now, two and a half years into his administration, Mr. Obama is still blaming George W. Bush for all the problems.

Friday’s downgrade of the U.S. credit rating by Standard & Poor’s should have been a wake-up call to the administration. S&P is saying, accurately, that there is no coherent long-term plan in place to deal with the U.S. government’s fiscal deficits.

The way for the U.S. government to earn back a AAA rating is to enact a meaningful medium- and long-term plan for addressing the nation’s fiscal problems. I have sketched a five-point plan that builds on ideas from the excellent 2010 report of the president’s deficit commission.

First, make structural reforms to the main entitlement programs, starting with increases in ages of eligibility and a shift to an economically appropriate indexing formula. Second, lower the structure of marginal tax rates in the individual income tax. Third, in the spirit of Reagan’s 1986 tax reform, pay for the rate cuts by gradually phasing out the main tax-expenditure items, including preferences for home-mortgage interest, state and local income taxes, and employee fringe benefits—not to mention eliminating ethanol subsidies. Fourth, permanently eliminate corporate and estate taxes, levies that are inefficient and raise little money.

Fifth, introduce a broad-based expenditure tax, such as a value-added tax (VAT), with a rate around 10%. The VAT’s appeal to liberals can be enhanced, with some loss of economic efficiency, by exempting items such as food and housing.

I recognize that a VAT is anathema to many conservatives because it gives the government an added claim on revenues. My defense is that a VAT makes sense as part of a larger package that includes the other four points.

The loss of the U.S. government’s AAA rating is a great symbolic blow, one that would cause great anguish to our first Treasury secretary, Alexander Hamilton. Frankly, the only respectable reaction by our current Treasury secretary is to fall on his sword. Then again, “the buck stops here” suggests that an even more appropriate resignation would come from our chief executive, who, by the way, is no Ronald Reagan.

Mr. Barro is a professor of economics at Harvard University and a senior fellow of Stanford’s Hoover Institution.

In fact, Mr. Plouffe was right.

In and of itself, an unemployment figure will not drive voters one way or the other. As others were quick to point out, however, that should be of little consolation to the Obama White House. For the question that Mr. Plouffe should be worried about is how people think the unemployment figure affects themselves and their hopes for the future. Ronald Reagan understood this well, which is why his question at the end of his only debate with Jimmy Carter was so devastating:

“When you make [your decision to vote next Tuesday],” he said to the American people, “it might be well if you would ask yourself: Are you better off than you were four years ago? Is it easier for you to go and buy things in the stores than it was four years ago? Is there more or less unemployment in the country than there was four years ago? Is America as respected throughout the world as it was?”

These days parts of America feel like a rerun of the 1970s, with Washington emanating malaise and Americans told to ratchet down their dreams and expectations for the future. Yes, the White House is correct that we shouldn’t draw too many broad conclusions from any one or two jobs reports. But the challenge facing the president is that the jobs numbers reflect a larger unease about where things are headed.

Moms and dads, for example, know that they are paying more to put food on the table. They are also paying nearly $4 per gallon when they fill up their cars. Even those who have jobs are scared—some because they might lose them, others because the lack of strong economic growth means that they have fewer opportunities to move up the ladder.

The official response from all the president’s men is not likely to dispel these fears. When asked about the latest numbers, Austan Goolsbee, chairman of the White House Council of Economic Advisors, stated that the best-case scenario for 2012 will be an unemployment rate of 8.2%. If so, lots of people will remember that 8.2% is still higher than the rate was when Mr. Obama entered office, notwithstanding all his spending and all those promises of jobs “created or saved.”

So what’s a president going to do, given a present situation that seems stagnant and a future prosperity that even his own people are now saying is ever more distant?

In a recent post on his Washington Post blog, Chris Cillizza provided the likeliest answer Mr. Obama would give to the “Are you better off?” question. According to Mr. Cillizza, President Obama’s argument on the economy will boil down to 10 words: “You should have seen how bad it would have been.”

How different that is from 2008. In 2008, Mr. Obama was the man of the future, the candidate of change who declared that his nomination would mark the moment “when the rise of oceans began to slow and our planet began to heal.” Alas, instead of assuring us that a brighter future is just ahead, these days the president seems focused on painting the past in ever darker colors.

From his first days in office, of course, President Obama has made “the worst economic crisis since the Great Depression” a standard talking point. More recently, however, he added that he “did not realize the magnitude, because most economists didn’t realize the magnitude, until fairly far into it.”

Ditto for Treasury Secretary Tim Geithner. When David Gregory asked on NBC’s “Meet the Press” whether the Treasury secretary was denying responsibility for the economy, Mr. Geithner also invoked the past—”how difficult it was going to be to fix,” how we were “falling off the cliff” when Team Obama arrived, how the specter of a “second Great Depression” loomed, etc.

The problem, says the Obama administration, isn’t its own performance but the public’s unrealistic expectations. In other words, George W. Bush was even worse than we thought.

Maybe that’s a winning message. Maybe Americans who believed Mr. Obama when he said unemployment wouldn’t go past 8% if we passed his stimulus will now be persuaded by his explanation that his job was tougher than he or his economists expected. Maybe that’s the only way to get around the “Are you better off?” question.

Whatever you call it, it’s a long way from “hope” and “change.” And the more the president tries to justify the nagging unemployment and sluggish economic growth by rewriting the past, the more he leaves the argument over the future to his GOP rival.

What brilliant good it can do a country when the world respects, and will not forget, one of its leaders. What was vividly true 30 years ago is true today: The world looks to America. It doesn’t want to be patronized or dominated by America, it wants to see America as a beacon, an example, a dream of what could be. And the world wants something else: American goodness. It wants to have faith in the knowledge that America is the great nation that tries to think about and act upon right and wrong, and that it is a beacon also of things practical—how to have a sturdy, good, unsoiled economy, how to create jobs that provide livelihoods that allow families to be formed, how to maintain a system in which inventors and innovators can flourish. A world without America in this sense—the beacon, the inspiration, the speaker of truth—would be a world deprived of hopefulness. And so we must be our best selves again not only for us but for the world.

These are the thoughts that follow eight days of celebration, in Eastern Europe and London, of the leadership of Ronald Reagan. History is rarely sweet, but it was last week when they raised statues of him in his centenary year. People old and young stopped for a moment to think and speak of him, and to define what his leadership meant to them and their countries. The celebrations in Krakow, Budapest, Prague and London were a reminder that we are all traveling through history together, that you are living not only your own life but the life of your times, as Laurens van der Post once said. And your era can actually be affected, made better, by what you do.

The subject matter was the fall of the wall, the end of communism, the reunification of Europe—those epochal events the world is still absorbing and that in retrospect seem even more amazing. Good people picked good leaders—the Big Three of the Cold War, Margaret Thatcher, Pope John Paul II, Reagan—and together they pushed until walls fell. Man is not used to such kind outcomes. A feeling of awe and gratitude colored the ceremonies: “My God, look what was done, I still can’t believe it. Let’s talk about how it happened and take those lessons into the future.” Now of all times we could use the inspiration.

In Krakow, the city from which Karol Wojtyla was called to Rome to become John Paul II, there was a thanksgiving mass celebrated by Cardinal Stanislaw Dziwisz, who said in his homily: “President Reagan . . . took great pains to bring about the demise of that which he so aptly named ‘the evil empire.’ This empire of evil denied many people and nations their freedom. It did so by way of a pernicious ideology . . . the result of this experiment was the death and sufferings of millions.” “There can be no doubt,” he said, that Reagan and John Paul brought about “the collapse of communism.”

Martin Kozlowski

 

In Budapest, in a special session of the Hungarian Parliament, Deputy Prime Minister Zsolt Semjen spoke of the end of Hungary as a captive nation and its beginnings as a democracy. Reagan, he said, “helped Hungary find itself.” Member of Parliament Janos Horvath spoke of Reagan’s style of peaceful liberation. What America did by being strong, by being serious in its focus, by speaking plain and true, not only inspired the victims of communism but weakened their oppressors. Reagan had “the imagination” to understand that the Hungarian Revolution of 1956 was a historic event: “He kept quoting Harry Truman’s commitment to the liberation of the captive nations. That, for Reagan, was a more important thing than for other presidents.” Hungary knew Truman had been “infuriated” by what the Soviets did, “arresting people, including myself.” Reagan made clear he “felt the indignation.” And so, “Hungary took seriously what America meant—human rights, democracy.” It left Horvath an optimist. “I have faith that the right thing prevails. This is the Ronald Reagan mentality.”I asked a member of Parliament whether the people of Hungary had felt any bitterness over the fact that President Eisenhower did not commit U.S. military forces to help the Hungarians in 1956. At first he was puzzled. Bitterness? Any residual disappointment, I said. No, he said. “We understood your position.” Meaning, he explained, our position as a superpower in the nuclear age, and our position on freedom. They knew whose side we were on.

A veteran diplomat in the area, an American, said later that everything he’d heard in the speeches left him thinking how the great progress of the past quarter-century had been made not through warfare but through diplomacy, tough decisions, aid, encouragement and rhetorical clarity and candor.

Rather stunningly, the leader of Hungary’s government bluntly ended his speech with a sentiment often heard in Omaha, Tucson, Morristown and Tallahassee: “We need a Ronald Reagan. Is he there, somewhere, already?” The world misses him as much as we do. It misses grand leadership as much as we do.

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In Prague they named a street for him. In London, on the Fourth of July, 235th birthday of the United States, they unveiled a statue in front of the U.S. Embassy in Grosvenor Square. Two other presidents grace that square: a heroic FDR in flowing cape, and a steely-eyed Eisenhower in army uniform. The day was nonpartisan, non-narrow. A great American was being justly honored by his British friends who, as Foreign Secretary William Hague said, “will never forget” him. A statue, he said, is not just a remembrance. With statues we come “face to face” with the great men and women of the past, and ponder their greatness.

That night, members of Parliament gathered for a formal dinner in London’s magnificent Guildhall. There were speeches, some beautiful. Among the packed tables there was a former member of Mrs. Thatcher’s cabinet, who in his day had taken heavy blows for his unrepentant conservatism. Now, white-haired, he listened to the speeches, as across the room a woman watching him remembered the greatest speech in English history: “Old men forget: yet all shall be forgot/ But he’ll remember with advantages/ What feats he did that day.”

And so Mr. Reagan’s centennial nears its close. We remember him—and Thatcher, and John Paul—for many reasons. To reinforce and reinspire. To keep fresh our knowledge that history can be made better. To be loyal to the truth.

And another reason. That night in conversation, former Prime Minister John Major asked how our teaching of history was in America. Not good, I said. He said in Britain it was the same, and it concerned him. We were across from a huge, heroic sculpture of the Duke of Wellington. If we don’t teach who he was and what he did, we will not make any more Wellingtons. Glory lives only when you pass it on.