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Reagan, entering office in 1981, inherited Johnson’s 70% top marginal income tax rate and immediately lowered it to 50%, then to 38.5% and finally to 28%. His theory was that high taxes stifle economic growth, while lowering taxes unleashes growth and creates jobs.
It was a great national experiment, and the result was conclusive: It didn’t work. Growth averaged 3.4% per year during Reagan’s presidency, hardly better than Eisenhower’s, while unemployment averaged a shocking 7.43%, far worse than Eisenhower’s and hardly better than the much-maligned Obama record.
That’s not to say that Reagan’s top-tier tax cut had no economic impact. The effect was profound. Combined with several other factors, including his slashing anti-union policies, it allowed a near-doubling of the share of total national income going to the wealthiest 1% of the population, from 8.3% of every dollar earned in 1981 to 15.2% in 1988. It also launched the national debt into its unending upward spiral, growing from $998 billion when Reagan entered office to nearly $2.9 trillion when he left.
As for great national projects, the biggest was probably his covert war in Central America (in violation of an explicit congressional ban), the first American war to be financed not from tax revenues but by selling arms illegally to Iran.
The debt has continued to grow, of course, an enduring monument to Reagan’s economic theories. Bill Clinton slowed its growth in the 1990s, raising the top tax rate to 39.6% and closing the annual deficit for four years running. But George W. Bush famously took his foot off the brakes again, lowering the top rate to 35% and boosting the debt from $5.8 trillion when he entered office to $11.9 trillion when he left. Further inflating Bush’s debt were his unfunded Medicare drug benefit and his two unfunded wars. Unlike Reagan, he didn’t even try to close the gap through illegal weapons sales to an enemy. Meanwhile, the share of national income going to the top 1% had risen by 2007 to 23%, nearly triple the level before Reagan took office.
So the next time you listen to a presidential debate, remember that nobody up there is taking the Democratic side. The debate we’re having today is between a robust Reaganism and a faint, timid echo of Eisenhower Republicanism. In fact, when you get down to it, the Democrats can’t even bring themselves to take Eisenhower’s side with any conviction. We’re all touting variations on a flimflam theory that’s been tried and proven a colossal failure.
Contact J.J. Goldberg at firstname.lastname@example.org