What Would Reagan Do?
RightWatch: Faced with a debt ceiling, the Gipper would do the right thing: raise taxes.
While we wait for the arrival of that miracle worker whom my colleague David Swerdlick calls the black Ronald Reagan, it's worth asking, WWGD?
What Would the Gipper Do to resolve the extraordinary crisis over the federal budget and the national debt ceiling if, by some miracle, he had been resurrected and were still our president?
WWGD? is worth asking because conservative Republicans have elevated Reagan to the political equivalent of sainthood. His is the spirit they invoke as they resist every attempt to close the deficit by raising revenues through higher taxes. He is seen as the champion of smaller government, lower taxes and fiscal responsibility, the man who single-handedly pulled America out of the dumps and reignited the maps in the shining city on the hill. He belongs on Mount Rushmore.
Alas, that is the myth that Reagan worshippers have so fervidly embraced, and most of it is untrue. Even worse, it stands in the way of drawing conclusions from Reagan's actual record that might help us cope with the current calamity.
It's no secret that I've never thought much of Reagan -- or the nasty form of race-baiting politics that he practiced. But it is his rebranding of the long-discredited theory of trickle-down economics that concerns us here, because that is what put the U.S. on the road to the fiscal crisis it faces today.
Now known as supply-side economics -- or Reaganomics -- it essentially holds that if the rich got richer, the crumbs that fell from their table would benefit everyone else. Lowering taxes on the wealthiest individuals and big corporations would trigger such an explosion of economic activity that government revenues would go up. Contrary to what common sense and mainstream economic theorists believed, there was indeed a free lunch. It was all spelled out on a napkin by an economic theorist named Arthur Laffer.
We all know how that turned out. As analyst Richard Reeves recently pointed out in the New York Times, "When Reagan became president -- and began to cut taxes -- the federal deficit was 2.5 percent of the national economy. When he left, eight years later, the deficit was 5 percent of the economy."
Moreover, the resulting explosion in government debt was accompanied by huge new disparities in income inequality as the gap between the rich and the poor widened to levels not seen since the Great Depression. By 2008 the top 1/10 of 1 percent of earners took in more than 10 percent of the personal income in the U.S., and the top 1 percent took in more than 20 percent.
These inconvenient facts should have convinced us, Democrat and Republican, that Reaganomics just doesn't work. But that hasn't stopped conservative Republicans from drawing the opposite, disastrously wrongheaded conclusion. To date, 236 current members of the House of Representatives and 41 senators have signed Grover Norquist's lunatic pledge to oppose "any and all efforts" to increase the marginal income tax rate on individuals or businesses under any circumstances.