The Failed Policies of the Past

by Richard H. Frank

How many times over the past 3 years, beginning with the 2008 Presidential campaign, throughout the first two years of Obama’s Administration, have we heard that “We cannot return to the failed policies of the past?”  Well, just what are those failed policies and where and when did they begin?  For the most part these policies have their beginning with our Founding Fathers enumerating their beliefs in our Declaration of Independence which state “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, among these are life, liberty and the pursuit of happiness.”

Two hundred and five years later our 40th President, Ronald Reagan, expressed his economic principles as having their roots deeply planted based on freedom, individual responsibility and the power of our free enterprise system to create and sustain America as the beacon of freedom and prosperity for the rest of the world to emulate.

Contrary to the Democratic view of Reagan’s policies as having been a monumental failure, the Joint Economic Committee reported in April 2000 that Reagan’s record included sweeping economic reforms, deep across-the-board tax cuts, market deregulation and sound monetary policies to contain inflation.  The results were the largest economic boom in American history and the creation of an estimated 35 million jobs.

If, indeed, these policies of the past were failures how do the Democrats, Nancy Pelosi, Harry Reid and Barack Obama explain the following facts as reported by the Joint Committee of the House and Senate for the 106th Congress?

1983-90 1991-99 Total Period
Real GDP Expansion Expansion
Total Growth 35.70% 33.00% 80.90%
Av.Annual Growth 4.10% 3.30% 3.60%
Real GDP/Person
Total Growth 26.70% 22.40% 54.20%
Av Annual Growth 3.20% 2.30% 2.60%
Real Consumption/Person
Total Growth 26.80% 24.10% 56.90%
Av Annual Growth 3.20% 2.50% 2.70%
Industrial Production
Total Growth 28.90% 38.70% 78.90%
Total Growth 19.9 M 16.4 M 35.0 M
Dow Jones Ind.Average
Average Annual Growth 14.50% 16.10% 15.00%

Today the Democrats assert that tax cuts initiated by the Reagan Administration and compounded by the Bush Administration in 2001 have drained the U.S. Treasury.  Let’s look at the facts and reality of the situation.

  • Total Federal revenues doubled from approximately $517 billion in 1980 to more than $1 trillion in 1990.  This amounted to a 28% increase in revenue in constant inflation-adjusted dollars for the period.
  • As a percent of GDP Federal revenues declined slightly from 18.9% in 1980 to 18% in 1990.
  • Individual taxes climbed from $244 billion in 1980 to $467 billion in 1990.  A 25% increase in inflation-adjusted dollars while lowering the marginal tax rate for individuals.

So what is the real failure of these policies of the past?  Looking at the facts it certainly could not be attributed to the lack of growth and the resultant increase in revenues to the Federal Government.  Therefore, something else must account for the current economic and fiscal difficulties we find our country in today.

The real culprit lies within Congressional spending.  If you provided an additional dollar to our Federal Government, rest assured Congress would find a way to spend $1.50 on some social crisis, real or imaginary.  Let us look at the record the facts for the ten-year period between 1980 and 1990.

  • Federal spending grew from $591 billion in 1980 to $1.25 trillion in 1990.  This is an increase of 35.8% in constant inflation-adjusted dollars.
  • As a percent of GDP Federal expenditures grew slightly from 21.6% in 1980 to 21.8% n 1990.  Congress loves to cite percentages when it suits their purposes to aid their extravagant, out-of-control spending binges.
  • Contrary to popular belief, inflation-adjusted defense spending increased by 50% from 1980 and 1989.  It was curtailed at the end of the cold war and fell by 15% from 1989 to 1993.
  • However, means-tested entitlements, excluding Social Security or Medicare, rose by over 102% between 1980 and 1993 and continued to rise ever since.

Critics of the Reagan economic policies argue that the Federal tax burden was shifted to lower-income groups and away from upper-income groups by adding the Social Security payroll tax to the burden.  Ronald Regan’s tax changes were in the income tax marginal rates, not the Social Security payroll tax.

Payroll tax increases were imposed by  Congress and proponents of Big Government entitlements over the past 50 years.  It is Congress and not the Reagan Economic policies that should be held accountable for the redistribution effects of Congressional spending legislation.

One again, let us review the facts.  If we include the Social Security payroll tax as argued by critics of the Reagan tax cuts:

  • Payments for the top 1% of taxpayers increased from 12.9% in 1980 to 15.4% in 1989.
  • the top 5% from 27.3% in 1980 to 30.4% in 1989.
  • The top 20% from 56.1% in 1980 to 58.6% in 1989.

Total Federal tax payments declined for four groups accounting for 80% of wage earning taxpayers:

  • The second-highest 20% went from 22.2% in 1980 to 20.8% in 1989.
  • The middle 20% went from 13.2% n 1980 to 12.5% in 1989.
  • The second lowest 20% from 6.9% in 1980 to 6.4% in 1989.
  • The lowest 10% from 1.6% in 1980 to 1.5% in 1989.

Today, and over the coming two-year Presidential campaign, Barack Obama and the Democrat machine will vilify anyone that supports the Reagan economic policies of small Government and individual freedom.  Their efforts to rewrite history will not stand the test of facts surrounding the most successful economic policy of the 20th Century.  The real threat to our economic well-being is that of Big Government intervention into our everyday lives and the nanny state mentality of the liberal progressives retaining power in our Federal Government.

During Ronald Reagan’s State of the Union Speech in 1986 he said “Government growing beyond our consent had become a lumbering giant, slamming shut the gates of opportunity, threatening to crush the very roots of our freedom… What brought America back?  The American people brought us back – with quiet courage and common sense, with undying faith in this Nation under God, the future will be ours, for the future belongs to the free.”

If the Reagan legacy is a result of “the failed policies of the past” then I say it is time to return to those policies and not those of the Big Government liberal progressive proponents.

3 Responses

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