By Paul Kengor
Tuesday, March 04, 2014
Last Tuesday, The Center for Vision & Values at Grove
City College hosted its eighth Ronald Reagan Lecture, a much-anticipated annual
event. This year featured Art Laffer and Roger Robinson. Laffer is the namesake
of the Laffer Curve, a cornerstone of President Reagan's supply-side economic
policies. Robinson spearheaded the extraordinary economic-warfare campaign
against the Soviet Union for Reagan's fearless National Security Council.
The discussion covered many issues, including how the
policies pursued by Ronald Reagan to stimulate economic growth were so
completely different from Barack Obama's. It's worth highlighting those
differences here. We ignore them at our peril.
Reagan inherited an abysmal economy from Jimmy Carter.
His prescription for recovery rested on four pillars: tax cuts, deregulation,
reductions in the rate of growth of government spending and carefully managed
growth of the money supply. He wanted to stimulate economic growth via tax
cuts, allowing the American people to keep their money and invest it more
wisely and efficiently than government.
This was, in effect, private-sector stimulus — a stark
contrast to President Obama's massive $800 billion public-sector (read:
government) “stimulus” in 2009. Among Reagan's tax cuts, the federal income tax
reduction was the centerpiece. Reagan secured a 25 percent across-the-board
reduction in tax rates over a three-year period beginning in October 1981.
Eventually, the upper-income rate was dropped from 70 percent to 28 percent.
In the process, Reagan also dramatically simplified the
tax code. When he was inaugurated, there were 16 separate tax brackets. When he
was finished, there were only two. Not only did this simplification eliminate
complexity, it also eliminated loopholes and removed 4 million working poor
from the tax rolls; they no longer paid any federal income tax.
Reagan presided over the largest tax cut in American
history and accomplished it in tandem with a huge Democratic Party majority in
the House. It was a bipartisan triumph that The Washington Post called “one of
the most remarkable demonstrations of presidential leadership in modern
history.” Unlike President Obama, who derided his Republican congressional
opposition as “hostage takers” and denounced their desire for tax cuts, Reagan
found a way to work with the opposition to advance the country.
After a slow start through 1982-83, the stimulus effect
of the Reagan tax cuts was unprecedented, sparking the longest peacetime
expansion/recovery in the nation's history: 92 consecutive months. The bogeymen
of the 1970s — chronic unemployment and the deadly combination of double-digit
inflation and interest rates — were vanquished. The poverty rate dropped; the
standard of living soared. The Dow Jones industrial average, which, in real
terms, had declined 70 percent from 1967-82, nearly tripled from 1983-89.
Contrary to liberal demonology, African Americans and
other minorities did extremely well during the Reagan years. Real income for a
median African American family had dropped 11 percent from 1977-82. But from
1982-89, coming out of the recession, it rose by 17 percent. In the 1980s,
there was a 40 percent jump in African American households earning over
$50,000.
African American unemployment (which has increased
significantly under President Obama) fell faster than white unemployment in the
1980s. The number of African American-owned businesses increased by almost 40
percent while the number of African Americans enrolled in college increased by
almost 30 percent (white college enrollment increased only 6 percent).
There were likewise impressive numbers for Hispanics and
women. Hispanic-owned businesses in the 1980s grew by an astounding 81 percent
and the number of Hispanics in college jumped 45 percent.
Overall, the “Reagan Boom” not only produced widespread
prosperity but — along with the attendant Soviet collapse — generated budget
surpluses in the 1990s. Carter-era terms like “malaise” and “misery index”
vanished. Only during the Obama years, and specifically in 2011, has America
re-approached similar misery-index levels, reaching a 28-year high.
All of this is not just history. It's a crucial economics
lesson that we need to learn and remember. We neglect it to our detriment.
No comments:
Post a Comment