Looking back at the economic statistics from the 1980s one is struck by a number of things but most of all by the growth in our nation's debt. When Ronald Reagan took office in January 1981 he decried deficits and promised to fix them.
"You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that collectively, as a nation, we are not bound by that same limitation? We must act today in order to preserve tomorrow. And let there be no misunderstanding, we are going to begin to act, beginning today," Reagan said.
Instead, under Reagan, the deficit ballooned from $930 billion to $2.6 trillion over his term, a 280 percent increase. To put that in perspective, imagine today's deficit increasing from $7 trillion to nearly $20 trillion over the next eight years. People would be outraged. Yet many on the conservative side continue to justify the overwhelming debt we have laid at the feet of future generations.
Robert Bartley (see April 15 issue), former editorial page editor of the Wall Street Journal, wrote Seven Fat Years: And How to Do it Again said the 1980s boom was built by supply side economics. Paul Krugman, a columnist for the New York times, disagreed pointing out "that skeptics say that rapid growth after 1982 proves nothing: a severe recession is usually followed by a period of fast growth, as unemployed workers and factories are brought back on line...by the late 1980's the U.S. economy was about where you would have expected it to be, given the trend in the 1970's. Nothing in the data suggests a supply-side revolution."
While George W. Bush has managed to turn surpluses into deficits and set the groundwork for large deficits as far as the eye can see, he hasn't approached Reagan levels. However, distressingly few in the administration seemed to have learned any lessons from the Reagan administration, unless the lesson was that deficits caused by tax cuts reward the rich but crowd out spending on regular Americans.
When former Treasury Secretary Paul O'Neill questioned the need for yet another tax cut, Dick Cheney dismissed him "Reagan proved that deficits don't matter. We won the midterm elections. Our due is another big tax cut."
Apparently Cheney doesn't understand, or care to understand, that the only reason the nation was in shape to consider tax cuts was that Clinton balanced the budget. (According to the New York Times, in 2003 the Cheney's paid 19 percent of their adjusted gross income, though when their income from tax-exempt bonds is considered, the Cheneys' effective tax rate was 12.7 percent.)
How ironic would it be that a failure of the Clinton administration may have been their ability and willingness to balance the budget. Without a balanced budget the GOP would have been unable to consider tax cuts and without those tax cuts the nation would be facing a better economic future.
What a mixed up world!
