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February 01, 2009

Newsflash: Ronald Reagan Raised Taxes (You Idiots)

Posted in: Uncategorized

url.thumbnail.jpgToday on Stephanopolous, Jim DeMint repeated the mantra that we never spent our way out of a recession.  As he said when defending his "stimulus" bill, which had nothing other than permanent tax cuts:

Long-term corporate, small business and family tax relief will work. John F. Kennedy’s 1963 tax reductions led to 9 million new private-sector jobs in five years. Ronald Reagan’s 1981 tax cuts led to 7 million in the same period.

DeMint is part of a high pyramid of historical revisionists who are in denial about Reagan’s legacy of taxation.   But he’s sitting on the fat heads of conservative pundits, neocon fantasists and professional gasbags like Rush Limbaugh:

[T]ax cuts are the surest and quickest way to create permanent jobs and cause an economy to rebound. That happened under JFK, Ronald Reagan and George W. Bush. We know that when tax rates are cut in a recession, it brings an economy back.

They know it’s true because the Heritage Foundation, which does their thinking for them, tells them so:

Despite the steep recession in 1982–brought on by tight money policies that were instituted to squeeze out the historic inflation level of the late 1970s–by 1983, the Reagan policies of reducing taxes, spending, regulation, and inflation were in place. The result was unprecedented economic growth.

Let’s make an uncomfortable detour into reality with Joshua Green’s 2003 article from the Washington Monthly:  

It’s conservative lore that Reagan the icon cut taxes, while George H.W. Bush the renegade raised them. As Stockman recalls, "No one was authorized to talk about tax increases on Ronald Reagan’s watch, no matter what kind of tax, no matter how justified it was." Yet raising taxes is exactly what Reagan did. He did not always instigate those hikes or agree to them willingly–but he signed off on them. One year after his massive tax cut, Reagan agreed to a tax increase to reduce the deficit that restored fully one-third of the previous year’s reduction. (In a bizarre bit of self-deception, Reagan, who never came to terms with this episode of ideological apostasy, persuaded himself that the three-year, $100 billion tax hike–the largest since World War II–was actually "tax reform" that closed loopholes in his earlier cut and therefore didn’t count as raising taxes.)

Faced with looming deficits, Reagan raised taxes again in 1983 with a gasoline tax and once more in 1984, this time by $50 billion over three years, mainly through closing tax loopholes for business. Despite the fact that such increases were anathema to conservatives–and probably cost Reagan’s successor, George H.W. Bush, reelection–Reagan raised taxes a grand total of four times just between 1982-84.

This record flummoxes the best efforts of today’s Reagan hagiographers to explain away. Peter Wallison, for instance, after proclaiming that Reagan "stayed the course against changes in his economic plan," later dismisses the president’s tax increases as "a modest rollback" that "seems to have been the result" of his accepting a Democratic promise to cut spending by twice that amount. (Whatever happened to "Trust, but verify"?)

Reagan continued these "modest rollbacks" in his second term. The historic Tax Reform Act of 1986, though it achieved the supply side goal of lowering individual income tax rates, was a startlingly progressive reform. The plan imposed the largest corporate tax increase in history–an act utterly unimaginable for any conservative to support today. Just two years after declaring, "there is no justification" for taxing corporate income, Reagan raised corporate taxes by $120 billion over five years and closed corporate tax loopholes worth about $300 billion over that same period. In addition to broadening the tax base, the plan increased standard deductions and personal exemptions to the point that no family with an income below the poverty line would have to pay federal income tax. Even at the time, conservatives within Reagan’s administration were aghast. According to Wall Street Journal reporters Jeffrey Birnbaum and Alan Murray, whose book Showdown at Gucci Gulch chronicles the 1986 measure, "the conservative president’s support for an effort once considered the bastion of liberals carried tremendous symbolic significance." When Reagan’s conservative acting chief economic adviser, William Niskanen, was apprised of the plan he replied, "Walter Mondale would have been proud."

 Despite Peggy Noonan’s wild delusion that Reagan "said he would cut the budget, and he did," he expanded it significantly.  Neither did he reduce the size of government — the number of federal workers rose 61,000 under Reagan, as opposed to Clinton who cut 373,000 jobs.  The deficit tripled from the time he took office until the time he left.

I understand that Republicans are responsible for the complete and utter failure of supply side economics and the damage that the unfettered implementation of their crackpot theories has wrought, and they’re struggling to rationalize why anyone should listen to them.  But their continuing need to transmogrify Ronald Reagan in order to gin up an excuse only underscores how morally impoverished, intellectually bankrupt and justifiably discredited the conservative movement is right now.


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