It happened today - August 13, 2015
Remember Ronald Reagan? The conservative who actually ran on what he believed in, brushed aside liberal contempt with his own, rallied a nation and restored America’s greatness? Oh yeah, that guy.
Well, on August 13 of 1981 he signed the Economic Recovery Tax Act (a.k.a.Kemp-Roth) into law. Along with a subsequent bill in 1986, it cut the top marginal rate on high-income earners from 70 to 30% and helped trigger a long boom including the personal computer revolution. Looooooser.
Reagan was of course mocked for his “supply side” economics during the 1980 campaign. All urban sophisticates knew that deficit spending stimulated the economy and that there was a tradeoff between inflation and unemployment. True, both were skyrocketing at that point but never mind. Keynes said big government was the answer and by golly it was the answer people wanted.
As noted, Reagan mocked the mockery, and unleashed the creative energy of the American people instead of that of the American government. And he was hardly the unlettered senile moron of liberal mythology. He instinctively understood the Laffer Curve and the arguments of people such as, particularly, Jude Wanniski in The Way the World Works. But he also understood them in much more detail than most newspaper columnists believed. And he put them forward with conviction.
Maybe we could try it again, huh? People seem to feel that the United States is over the hill now, a fading power, divided and over-governed. Well, what do you think was going on in the 1970s? If the Land of the Free could have marginal tax rates over 70% then (and that was down from the 90%+ of the dreaded Eisenhower era, admittedly inherited from FDR). And people think Canada is hopelessly and irrevocably a big-government country.
It is of course true that the United States ran deficits under Reagan and budgets continued to grow not shrink. It’s not all his fault; Congress passes budgets, not the president, and the Democrats controlled the House and didn’t give him everything he wanted. Still, if he’s to get credit for pushing through tax reform he can’t hide in the bushes on spending, on which he did not fight as hard or as successfully. But revenue was up under his lower tax rates from where it had been forecast to be under Carter’s higher ones.
It’s a bit odd that having mocked supply side economics before it was introduced on the grounds that it could never work, liberals proceeded to start mocking it for having worked the wrong way, for having made the rich richer and the poor poorer blah blah blah. Hey, at least it did work. And you’d think conservatives would have something good to say about it.
Instead we are all, as Richard Nixon infamously said in 1971, Keynesians now. Stephen Harper and company ran deficits in the face of hard times with all the enthusiasm of Barack Obama and more, indeed, than FDR himself ever mustered.
Perhaps Reagan was a better role model, there and here. Perhaps an appropriate legacy would have been a dramatic reduction in tax rates, instead of endless loopholes, big deficits and meddlesome arrogance.
At least, you know, for conservatives.