A peculiar thing is occurring in the shadows of our economic disaster. More and more people are talking about President Ronald Reagan as they look for answers to solve today’s fiscal problems.
Liberals are trying to rewrite history by portraying Reagan as a big government Republican who raised taxes and would support President Barack Obama’s plan to raise taxes to offset his irresponsible and reckless spending.
Reagan cut taxes, reduced government growth, deregulated many industries and created the largest economic expansion in U.S. history that only ended thanks to the reckless spending of President Bill Clinton, who should have reaped huge government surpluses thanks to Reaganomics and a plan known as PAYGO, instituted by President George H.W. Bush.
PAYGO enforces economic restraint by requiring new spending or tax changes to be budget neutral or offset with savings derived from existing funds. It worked well under the Bush administration. However, Clinton began looking for loopholes and ended up spending any surplus we could have had.
The Clinton surplus myth is perpetuated even today. In his last year in office, he borrowed $18 billion. Why would he borrow money if we had a surplus? Only in Washington can government borrow money and claim it had a surplus.
But I digress.
To pull us out of the current mess, we need to look at the Reagan playbook instead of Obama’s misguided belief in the economic model created by John Maynard Keynes, which is basically a fantasy that government can somehow spend its way to prosperity.
The Reagan model had four common-sense elements and he delivered on all four, which led to the long economic expansion.
First, we need to reduce government growth.
Most years of the Reagan administration saw the growth of federal spending below 3 percent, well below inflation. In 1987, government spending actually decreased by 1.4 percent from 1986. Reagan lowered the federal deficit from 6 percent of gross domestic product in 1983 to 2.9 percent in his final budget. So much for liberal attempts to label Reagan as a big spender.
Before Obama took office, our budget deficits were routinely around $100 billion to $400 billion. Under Obama, we’ve had nothing but trillion-dollar deficits as he expanded federal spending and it appears we will for at least the next decade if we don’t curb that spending.
The second leg of Reaganomics is to reduce income taxes.
Reagan reduced the top tax rate from 70 percent to 28 percent. In the 11 instances when Reagan did raise taxes, it was mostly simplifying the tax code and eliminating tax bias and pointless deductions. Our current code could use some flattening and simplifying but the government does not need more money.
We have a spending problem, not a revenue problem. The list of dubious government expenditures is long and storied.
Anyone with any sense of fiscal responsibility knows that raising taxes while the federal government spends $2.6 million to teach Chinese prostitutes how to drink more responsibly on the job or spends money on a university study examining how much alcohol college freshmen women require before agreeing to casual sex is a ridiculous idea.
As Reagan said: “We do not face large deficits because Americans aren’t taxed enough. We face those deficits because the Congress still spends too much.”
The third leg of Reaganomics is to reduce government regulation.
The government does nothing as efficient as the free market. For example, the Postal Service was paying about a million dollars a week to employees to do nothing, thanks to union contracts. And Obama wants that same government mentality running our health system.
The final leg of Reaganomics is to control the money supply to control inflation.
In other words, stop printing money to compensate for the government’s reckless spending policies.
Sane people, when given the choice between doing something that has worked in the past or doing something that has failed in the past, usually take the successful route.
If we are looking for a model of fiscal responsibility to salvage what is left of our economy ruined by the Keynesian economic nightmare wrought by Obama and his Democratic puppets in the Congress, it was laid down 30 years ago by Reagan.