Reagan’s stubborn tax facts

WASHINGTON — Democrats must be running out of
arguments against tax cuts. They keep bringing up the
booming ’80s — egad! — to remind us of how bad we
had it after the last major tax cut.

Don’t fall for such “fool’s gold,” they warn. Reagan’s
tax cuts didn’t really stimulate the economy, and
neither will these.

“We were promised that if we gave huge tax cuts to the
wealthiest Americans, the benefits would trickle down,
deficits would disappear and the economy would
flourish,” Senate Minority Leader Tom Daschle said
recently, comparing the 1981 tax-cut proposal to
President Bush’s.

“It was a huge mistake,” he continued, without so much
as a twitch of shame. “Deficits skyrocketed. The
national debt quadrupled. High interest rates choked
American industries. Unemployment soared.”

Other Democrats have even tried to claim that Reagan’s
tax cuts fanned runaway inflation in the ’80s.

It’s one thing to spin. But this is economic
revisionism at its worst. Apparently Democrats —
taking a lesson in gall from Bill Clinton — think
Americans won’t recall basic facts from 20 years ago.

Lest they have forgotten, here’s a refresher —
gleaned from the historic tables in the back of
Clinton’s own recent “Economic Report” to Congress:

Fact: Interest rates eased after Reagan slashed
tax rates.

The long-bond yield was 13.45 percent in 1981. By the
time Reagan left office in 1989, it had dropped to
8.45 percent. Mortgage rates fell from 14.70 percent
to 10.13 percent over the same period.

Fact: Inflation cooled.

In the year before Reagan’s tax cuts took effect, the
annual rate of consumer inflation was 13.5 percent. In
the first year of his tax cut, 1981, inflation was
10.3 percent. In the second year, it was 6.2 percent.
By the third and final year, 1983, inflation had
dropped to 3.2 percent. When Reagan left office,
inflation stood at a tame 4.8 percent.

Fact: The economy reached full employment.

Before Reagan’s full tax-relief package took effect,
the jobless rate hit 9.6 percent. But as tax cuts
worked their magic in the economy, unemployment
dropped every year after 1983, reaching a low of 5.3
percent in 1989.

Tax cuts benefited minorities, too. The jobless rate
among blacks plunged from 19.5 percent in 1983 to 11.4
percent in 1989.

Fact: Government revenues nearly doubled after
Reagan’s sweeping tax cuts.

Before his 25 percent across-the-board cut in
individual income-tax rates went into effect,
government receipts from individual income taxes
trickled in at $244.1 billion. The year Reagan left
office, they totaled $445.7 billion — an 82 percent jump.

In the tax-hiking, supposedly “fiscally responsible”
’90s, by comparison, individual tax receipts rose a
comparable 86 percent.

More key, individual tax receipts grew at a compound
annual rate of 6.9 percent from 1980 to 1989 (compared
with a 7.1 percent rate from 1990 to 1999).

Meanwhile, however, federal outlays grew at a faster
7.6 percent compound annual clip from 1980 to 1989, causing
the yawning budget gaps.

The problem, you see, was spending, not tax cuts — a
distinction the intellectually dishonest
redistributionists on the left fail to make when they
cluck about the skyrocketing deficits and mounting
debt under Reagan.

And for that, Democrats share the blame.

Yes, Reagan ballooned defense spending. But Democrats,
who controlled appropriations back then, refused to
give him the corresponding cuts in other domestic
programs — and instead increased spending.

In fact, the Democrat Congress outspent every one of
the nine budgets Reagan proposed, but one.

This is what Treasury Secretary Paul O’Neill meant
when he recently said, “we put ourselves in a ditch
that was horrendous.”

Daschle, House Minority Leader Dick Gephardt and the
other class warriors in their party have taken
O’Neill’s comments out of context to make it sound
like he was bashing the Reagan tax cuts.

In testifying before Congress last month, O’Neill
discussed the 1981 budget deal and budget deficits.
Here’s the full text:

“You know, I was outside the government when all of
that transpired, and it was actually clear to me that
what was going to happen was in the cards. And maybe
you weren’t here, but other members were here,” he
said, responding to a question from a Democrat.

“This was the year of the famous flying asterisks,
when we had $42 billion worth of unidentified budget
reductions that no one ever put together,” he added.
“And as a consequence of enacting the [tax] side
without dealing with the spending side, we put
ourselves in a ditch that was horrendous.”

Sounds to me like O’Neill was OK with the tax cuts, so
long as they came with corresponding budget cuts.

But Democrats have twisted the quote into a disclaimer
of tax cuts by the top financial member of Bush’s
cabinet.

Speaking of the Reagan tax cuts last month, Daschle
said, “It was a huge mistake. As President Bush’s own
treasury secretary, Paul O’Neill, said recently, it
put America ‘in a ditch that was horrendous.'”

If there were laws against it, Daschle would be guilty
of intellectual malpractice.

It’s the height of irresponsibility for an elected
official of such high stature to spout such
disingenuous and demagogic rhetoric (which, it should
be noted, has passed largely undigested through the
tax-loving, Reagan-hating Washington media).

In revising history, Daschle is counting on average
Americans — who don’t have historic data at their
fingertips, or don’t know where to go to find them —
to have short memories.

Politicians who have to go to such lengths to distort
the record of an opposing fiscal policy — in this
case, supply-side economics and laissez-faire
government — must be trying to fool people about the
merits of their own policies. This is exactly what the
central planners in Moscow did, and what Beijing’s
planners are still doing.

It’s called propaganda. Isn’t it funny how those with
the worst arguments make the best propagandists?

But, as Reagan said, facts are stubborn things. And
they’ll survive propaganda.