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Jay Murdock

Wash. Times Celebrates Reagan’s Birthday By Rewriting His Economic Record


February 04, 2011 12:51 pm ET

The Washington Times is celebrating Ronald Reagan’s 100th birthday by advancing the falsehood that Reagan ended the 1981 recession by cutting taxes and making misleading claims about Reagan’s record on taxes and spending.

Wash. Times: Reagan’s “Tax Cuts … Worked An Economic Miracle”

Wash. Times: Reagan’s “Tax Cuts Also Worked An Economic Miracle, Kicking Off An Economic Expansion That Lasted 93 Straight Months.” In a February 3 editorial, The Washington Times wrote that Reagan “took office in a time of economic uncertainty, high unemployment and stagnation” and that his “tax cuts also worked an economic miracle, kicking off an economic expansion that lasted 93 straight months.” From the Times:

Though he took office in a time of economic uncertainty, high unemployment and stagnation, he knew, “In this present crisis, government is not the solution to our problem; government is the problem.” Instead of having Washington stimulate the economy, Reagan wanted Americans to lead their own recovery. Federal taxes and regulation had strangled innovation, so he wanted to slash marginal rates and eliminate bracket creep, allowing individuals to keep the reward for their hard work. The 1981 tax cut plan was widely ridiculed as dangerous and impractical, especially given the Democratic domination of the House of Representatives.

Reagan did not bow to the pressure; he turned to the airwaves. He appealed directly to the American people for support, and they responded by lighting up the Capitol switchboard. Reagan met with 467 lawmakers during his first 100 days in office. They didn’t always agree, but Reagan made sure that they parted on friendly terms. It worked; the tax-cut bill passed the House with 43 extra votes. Reagan never believed for a second that “government by an elite group is superior to government for, by, and of the people.” He knew drawing Americans into the battle was the key to success.


The tax cuts also worked an economic miracle, kicking off an economic expansion that lasted 93 straight months. The “morning in America” that was the keystone of Reagan’s 1984 campaign was a reality. Reagan won a landslide re-election because he had underpromised and overdelivered. [The Washington Times, 2/3/11]

Feulner Op-Ed: Reagan Tax Cuts Led To “Genuine Economic Miracle.” In a January 31 Washington Times op-ed, Heritage Foundation president Ed Feulner wrote that “[s]tarting from the ‘stagflation’ mess his predecessor handed him, Reagan created a genuine economic miracle” after implementing tax cuts:

The fable of the left (the hard left, anyway – many others are coming around) is that this was all smoke and mirrors. But the facts tell a different story. Starting from the “stagflation” mess his predecessor handed him, Reagan created a genuine economic miracle. After a three-stage tax cut and a reduction in government growth, our economy began to expand – by 31 percent from 1983 to 1989 in real terms. Americans of every class – rich, middle-class and poor – saw their wealth increase. [The Washington Times, 1/31/11]

In Fact, Economists Attribute Reagan-Era Recovery To Interest Rate Cuts

CBO: “Lower Interest Rates After Mid-1982 Permitted The Recovery To Begin.” An August 1983 CBO report, titled “The Economic and Budget Outlook: An Update,” concluded that “[l]ower interest rates after mid-1982 permitted the recovery to begin”:

The Economy At Mid-1983

Recovery started in December 1982 from the deepest postwar recession, the second of two since 1980. Both recessions were brought on by monetary restriction aimed at bringing inflation under control. Lower interest rates after mid-1982 permitted the recovery to begin. Real GNP grew at a 2.6 percent annual rate in the first quarter and at an 8.7 percent annual rate in the second quarter of 1983.

The report also concluded: “A dramatic decline in inflation, a fall in interest rates from levels that were extraordinarily high to levels that are merely high, and the stock market boom have contributed to the improvement in economic conditions.” [CBO report, 8/20/83]

Reagan Economist Suggests Interest Rate Cuts Drove Economic Recovery. Michael Mussa, a member of Reagan’s Council of Economic Advisers, wrote in an essay for American Economic Policy in the 1980s that when the Federal Reserve cut the discount rate a half percentage point on July 20, 1982, it “signal[ed] the beginning of what would become a four-and-a-half-year period of quite rapid monetary expansion. During this period, interest rates, both short and long term, would be driven significantly lower, and the U.S. economy would substantially recover from the devastation of both inflation and recession.” [American Economic Policy in the 1980s, University of Chicago Press, 1994]

Krugman: “Right Now, The Interest Rate Is Zero. The Fed Can’t Rescue Us This Time, And That’s Why We Can’t Do The Things We Did In The ’80s.” Nobel Laureate Paul Krugman said during the February 6, 2009, edition of MSNBC’s Morning Joe that “in 1982, when the economy was deeply depressed, the Federal Reserve said, ‘OK, we’ve got to do something about this,’ and they cut interest rates from 13 percent to around 7 percent and the economy took off.” Krugman continued: “Right now, the interest rate is zero. The Fed can’t rescue us this time, and that’s why we can’t do the things we did in the ’80s. We have to have an approach that harks back to the things that worked very well in the first four years of the New Deal until Franklin Roosevelt was persuaded to go orthodox all over again.” [Media Matters, 8/2/10; Media Matters, 11/26/08]

Wash. Times Paints Misleading, Incomplete Picture Of Reagan’s Record On Taxes

Wash. Times: Reagan, “For The Most Part,” Kept Tax Hikes “Off The Table.” The February 3 Washington Times editorial stated that “Reagan held firm to his veto pen, keeping tax hikes, for the most part, off the table.” [The Washington Times, 2/3/11]

Reagan Repeatedly Increased Taxes, Including “Largest Tax Increase In U.S. History” At The Time

Reagan Raised Taxes Repeatedly After 1981, Including “The Largest Tax Increase In U.S. History” At The Time. In a July 9, 2010, article titled “What Would Reagan Really Do?” Newsweek reported that, in 1982, Reagan was responsible for “the largest tax increase in U.S. history,” and he repeatedly increased taxes in the years following:

It’s doubtful, for example, that a contemporary Reagan figure would seek to solve every problem by cutting taxes. In 1981, the former California governor swept into office promising to slash taxes to their lowest-ever levels–and with the Economic Recovery Tax Act, that’s exactly what he did. When Reagan arrived in the White House, the top marginal tax rate was 70 percent; by 1987 it was 38.5 percent (roughly the same as the rate under Bill Clinton). But while today’s conservatives continue to call for lower taxes in the name of the Gipper–Grover Norquist’s Americans for Tax Reform, for example, pressures Republicans to sign a “no new tax” pledge every election cycle–there’s simply no evidence in Reagan’s record to suggest that he would’ve followed his signature achievement by pushing for ever lower rates.

In fact, much the opposite. In 1982, Reagan agreed to restore a third of the previous year’s massive cut. It was the largest tax increase in U.S. history. In 1983, he raised the gasoline tax by five cents a gallon and instituted a payroll-tax hike that helped fund Medicare and Social Security. In 1984, he eliminated loopholes worth $50 billion over three years. And in 1986, he supported the progressive Tax Reform Act, which hit businesses with a record-breaking $420 billion in new fees. When it came to taxation, there were two Reagans: the pre-1982 version, who did more than any other president to lighten America’s tax burden, and his post-1982 doppelgänger, who was willing (if not always happy) to compensate for gaps in the government’s revenue stream by raising rates. Today, a truly Reaganesque leader would recognize (like Reagan) that the heavy lifting was finished long ago; last year, for instance, taxes fell to their lowest level as a percentage of personal income since 1950. And he would dial back the antitax dogma as a result. [Newsweek, 7/9/10, emphasis added]

Krugman: “[N]o Peacetime President Has Raised Taxes So Much On So Many People” As Reagan. In a 2004 New York Times column, Krugman wrote:

But Ronald Reagan does hold a special place in the annals of tax policy, and not just as the patron saint of tax cuts. To his credit, he was more pragmatic and responsible than that; he followed his huge 1981 tax cut with two large tax increases. In fact, no peacetime president has raised taxes so much on so many people. This is not a criticism: the tale of those increases tells you a lot about what was right with President Reagan’s leadership, and what’s wrong with the leadership of George W. Bush.

[…]

For many middle- and low-income families, this tax increase more than undid any gains from Mr. Reagan’s income tax cuts. In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent; but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down. [The New York Times, 6/8/04]

Feulner Suggests Reagan Oversaw Reduction In Government Growth

Feulner: Economy Expanded Under Reagan After Tax Cuts, “Reduction In Government Growth.” From Feulner’s January 31 column:

The fable of the left (the hard left, anyway – many others are coming around) is that this was all smoke and mirrors. But the facts tell a different story. Starting from the “stagflation” mess his predecessor handed him, Reagan created a genuine economic miracle. After a three-stage tax cut and a reduction in government growth, our economy began to expand – by 31 percent from 1983 to 1989 in real terms. Americans of every class – rich, middle-class and poor – saw their wealth increase. [The Washington Times, 1/31/11]

But Federal Outlays And Federal Employment Grew Under Reagan

Federal Outlays Increased During Reagan’s Term. According to the Office of Management and Budget’s (OMB) historical data, total federal government outlays (in constant 2005 dollars) increased 22 percent under Reagan. [OMB, Budget For Fiscal Year 2011, Historical Tables, 2010]

Federal Employment Also Grew Under Reagan: Newsweek also reported that the “federal employment grew by more than 60,000” under Reagan, noting that “in contrast, government payrolls shrank by 373,000” during Bill Clinton’s presidency.

In doing so, a 21st-century Reagan would free himself up to finish a bit of business that his predecessor never got around to: reducing the federal deficit. In the 1980 campaign, Reagan pledged to do three things if elected: lower taxes, win the Cold War, and curb government spending. But in his haste to achieve the first two goals, he abandoned the third. On his watch, federal employment grew by more than 60,000 (in contrast, government payrolls shrank by 373,000 during Clinton’s presidency). The gap between the amount of money the federal government took in and the amount it spent nearly tripled. The national debt soared from $700 billion to $3 trillion. And the United States was transformed from the world’s largest international creditor to its largest debtor. [Newsweek, 7/9/10, emphasis added

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