i have to admit that the crack about reagan being so smart because he has a degree in economics made me laugh, hard.
OK, some budget numbers from the GPO page that jshore found (tables 2.1 and 3.1):
Revenues: from 1981 to 1989, Federal revenues increased from $599.272 billion to $991.190 billion.
The Social Security/Medicare payroll tax revenues went from $182.720 billion to $359.416 billion over this period; all other revenues went from 416.552B to 631.774B.
Since the payroll tax underwent a hefty increase during Reagan’s first term, this part of the Reagan revenue increase is largely attributable to…well, a tax hike. Payroll tax revenues went up 96.7% over Reagan’s eight years. All other revenues went up 51.7% over that period, which, by the miracle of compounding, annualizes to 5.3% per year. That wasn’t much more than the inflation rate over that period, so claims that Reagan’s tax cuts ‘grew the economy’ into a revenue boom are somewhat spurious.
Now let’s look at spending:
From 1981-1989, total Federal spending went from $678.249B to $1143.671B, an increase of 68.6% (slightly outrunning a 65.3% revenue increase over the period. Now for the breakdown:
1981 1989 % change
Social Security: $ 138.584B to $ 232.542B
Medicare: $ 39.149B to $ 84.964B SS/M 77.6%
Defense: $ 157.513B to $ 303.559B
Interest: $ 68.774B to $ 169.266B D/I 108.9%
Subtotal: $ 405.020B to $ 790.331B 95.1%
Everything Else: $ 273.229B to $ 353.340B 29.3%
Well, yes and no. While spending on the elderly was responsible for the increase, it was an actuarily predictable increase, or, to be blunt, a constraint. Whoever won in 1980 would have been forced to deal with the increase of these line items. Any tax plan had to take this spending increase into account.
So what we have is a 77.6% increase in Social Security and Medicare over the period - a constraint. And we have a 108.9% increase in defense spending and interest - that spending most directly attributable to Reagan. (The interest, of course, paid for the tax cut.) And finally, we have a 29.3% increase in “everything else”, the stuff that Congress had any say over. That annualizes to 3.3% annually - which, I’m willing to bet, was less than the rate of inflation.
So Congress did NOT - no way, nohow - spend us into deficits during the Reagan years. The record is clear - it was the tax cut, the resulting interest payments, the defense buildup, and the increase in Soc.Sec.-Medicare payments that got us there. We knew about the last one going in; Reagan’s people chose the other three.
Reagan created the deficits of the 1980s. QED.
I think we’ve laid that one to rest.
Ph.D., mathematics, thanks.
Stuff I blew:
“While spending on the elderly was responsible for the increase” should have read:
“While spending on the elderly was responsible for part of the increase”.
And “The interest, of course, paid for the tax cut” should have read:
“The interest, of course, was a down payment on the tax cut.”
After all, we’re still paying for the damned thing.
Thanks again, jshore, for linking to those great tables. I’m lousy at Web research.
From the columns of numbers in current and constant dollars, I back out a total inflation rate of 36.6% over that 8-year period, so yes, that increase was a bit less than the rate of inflation for the period.
Thanks, RTFirefly…I hope we have managed to put some long-lived myths about the Reagan years to rest here!!! [And thanks to Sam Stone for providing the motivation 
and the numbers to get us starting looking into this!]
RTFirefly: Your conclusions baffle me. You admit that government revenue went up by more than the rate of inflation, even excluding the SS revenue. (and BTW, this includes the first two years of Reagan’s administration, in which government revenues actually fell, not due to a tax cut but due to a recession. The revenue changes due to the tax cut aren’t reflected in the budget numbers until 1982 or 1983).
The economy suffered a recession of -2.2% in 1982. One wonders what the recession would have been without the stimulus of Reagan’s 25% tax cut (not enacted until October of 1981). That recession is the reason why the deficit skyrocketed that year and why government revenues fell. But the next six years after that saw spectacular growth.
The last six years of Reagan’s term saw huge increases in tax revenues. As I said, the main problem was not tax cuts, but spending increases. I agree that many of those increases were unavoidable (primarily Social Security), but many were increased. I believe Medicare benefits were increased under Reagan, for example, and those don’t count as discretionary spending.
And you can’t count all of the interest cost against Reagan, since he inherited a debt that was already very large.
Anyway, the reason why many people disagree about the conclusions behind these figures is because there are enough interlinked causes to allow anyone with an axe to grind to draw whatever conclusion they want. You point out that there was a payroll tax under Reagan. I’d counter with the fact that he lost about 50-70 billion dollars a year in tax revenue due to ‘bracket creep’ when inflation was crushed.
The bottom line is that government revenue increased as much or more under Reagan with his tax cuts as it did under Bush and Clinton’s first term, with their two tax increases. Thus, to blame the deficit on tax cuts is ridiculous.
The main problem Reagan had was that he inherited a government with serious structural problems. High inflation, high interest rates, low growth, and a looming structural defect in Social Security. Yet at the end of his eight years the economy was booming, inflation and interest rates were low, unemployment was lower and falling, the military was restored from a total mess to the force that won Desert Storm, the Iron Curtain had fallen, and the economy was poised for the longest expansion in history.
The main weakness of Reagan’s legacy was the huge debt and deficit he left behind, and he has to take the blame for some of that. But he always said that we would grow our way out that problem, and that’s exactly what has happened. But it’s worth remembering that when Reagan took office the U.S. already had a deficit of over 100 billion per year, or 2.7% of GDP. When Reagan left office, it was virtually unchanged at 2.9% of GDP, and had been falling for the last few years of his Presidency.
But you can’t put all the blame for the deficit on Reagan - the economy was a mess and the government was in bad shape. The military really did need funding increases - in 1980 it was demoralized, undertrained, and under-equipped.
Some more data for you:
· Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years.
· Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years.
· Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency.
If a Democrat had presided over this sweeping change in the fortunes of a country, you guys would have erected a shrine by now.
Don’t have enough time to take this all on right now, but I will make a few points.
And your point is? In real (constant dollar) terms, the revenues fell 3.5% from 1981 to 1982 and 7.2% from 1982 to 1983 before finally beginning to rise again in 1984. They didn’t get back to their 1981 value (in real terms) until 1985. Whereas, in real terms again, the revenues were rising steadily up through 1981. So, revenues started falling once Reagan’s first budget (FY1982) took effect. Coincidence? Hmmm…
[By the way, assuming I didn’t screw up the calculation, I find that revenue from personal income taxes didn’t get back up above its 1981 value (in real terms) until 1987! Again, it is social security receipts that were helping out here.]
We’ve just shown this to be untrue, when looked at in real terms. Besides which, we’ve noted, this idea of “tax cuts” and “tax increases” applies mainly to the wealthy. As we noted, payroll taxes increased under Reagan. I don’t know what the net effect was on the poor and middle class, but I don’t recall it being too good. Noone debates the fact that the wealthy did well under Reagan; the question is how everybody else did.
True, it had been, but for the budget years 1982–1989, the deficit averaged 4.2% of the GDP. Before Reagan, 4.2% was the highest it had ever been in a single year (1976) going all the way back to 1950! (Deficits had averaged only 2.4% of the GDP under Carter’s 4 budgets of FY1978–FY1981.) That built up the hefty debt that we are still paying down.
While it was true that the economy was suffering from high inflation and fairly high unemployment, this was due in part to things like the skyrocketing energy prices under Carter. Reagan in fact enjoyed some very good luck in terms of external factors during his 8 years, so if you want to make claims that he had bad luck and circumstances, you have to look at the whole picture.
As for the last set of data you gave us (real growth, real median family income, …), do you have a cite on that? Not that I don’t trust what you say, but I would like to see the raw data…given that the last data you gave us had a certain spin on it that the raw data did not at all bear out! [By the way, all my data above is taken from that Historical section of the FY2001 budget that I gave (well, modulo the year) in the previous cite…Turns out I had downloaded the FY2001 and not the FY2000 one.]
As for this last comment, I don’t see us scrambling to erect a shrine to Clinton, whose economic numbers are much better than Reagan’s in nearly all respects! (So much so that Reaganites are now rushing to try to claim credit to Reagan for the 1990s economy!)
For those who think Reagan was an idiot, try reading this: http://www.reason.com/7507/int_reagan.html
This is an unscripted interview Reagan gave Reason magazine in 1975. Read it for yourself, without prejudice, and try to judge the IQ and general knowledge level of the person in the interview. Remember, these are impromptu, off-the-cuff responses.
Bachelor’s, Eureka College (Illinois), Class of 1932, mostly B’s and C’s. Wow.
But that’s still better than UncleBeer’s claim that he wasn’t in the military chain of command just because he was Commander in Chief.
Sam, I’m really trying to help you here, but you’re not making it easy.
Virtually all printed interviews are cleaned up to some extent, at least to eliminate er’s and um’s and sentence fragments. Reason being the objective, nonpartisan pinnacle of honesty that it is, are you really confident that the interview wasn’t, shall we say, “cleaned up” further? And is it consistent with the tenor of the other interviews and unscripted statements he was making at the time? Try again.
By the way, lest one think from the above exchange that the deficit problem was well on the way to solving itself when Reagan left office, it is worth noting that it jumped up again in the first Bush budget…and in fact continued to average 4.2% of the GDP for the 4 Bush budgets (FY1990-FY1993). The steady decline in the deficit which eventually led to our surpluses began between the FY1992 and FY1993 budgets (FY1993 was Bush’s last budget). Does anyone happen to know if this coincides with when Bush raised taxes?
Reagan’s tax cut was retroactive back to 1/1/81, so the revenue changes in the tax cut are reflected in the budget numbers for the entire period I used.
I certainly admit that revenue growth exceeded inflation over the period. However, ‘real’ growth in non-payroll revenues (growth minus inflation) totalled 15% over the 8-year period. That’s growth, sure, but it’s pretty anemic growth.
What you’d essentially said was that the Reagan tax cuts had produced a surge of revenue that would have eliminated the deficits, if it hadn’t been for Congress’ going on a spending orgy. What we see, instead, is very minimal growth that wouldn’t have wiped out much of anything.
I’m going to leave it to you to verify the nature and cost of the benefit increases. To me, they look more or less in line with the Social Security increases - which were not caused by benefit increases; when Reagan took office, the need for a Social Security bailout was already evident.
Besides, Medicare spending in 1989 is only $46B more than in 1981. If you can somehow attribute, say, 1/3 of that to benefit increases, that still doesn’t do much for you.
I’m not attributing the pre-existing interest to Reagan, only the increase. He’s got to take the hit for that.
The loss of bracket-creep gains reduces his revenue gain, but it doesn’t do away with pre-existing revenue. Besides, shouldn’t that have the same economy-growing effects as any other tax cut, regardless of its origin? I see no reason not to treat this as part of Reagan’s overall package. Doing away with bracket creep was a GOP goal, so their success should have been factored in.
At any rate, inflation wasn’t crushed, IMO; the inflationary effects of the oil price increases of 1979 were absorbed into the economy, and we went back to normal after that.
Hey, we don’t want Bush either; he wasn’t our guy.
Assuming 2001 projections hold up, the non-payroll tax revenue gain from 1993-2001 is 75.3%; for Reagan, it was 51.7% - before inflation, in a time of higher inflation. So if the claim is that tax cuts cause growth that pay for the tax cuts, and tax hikes kill growth, un-paying for the hike, if you will, these numbers don’t show it. Clinton’s hike wins, hands down. And it didn’t exactly choke off the economy, either.
Tax cuts cause loss of revenue. Blaming an unprecedented string of deficits on the enormous tax cut that took place at the beginning of that string is, well, the null hypothesis. Reagan’s tax cut cost the government a shitload of revenue, and produced only modest revenue increases as a result of their effect on the economy. They didn’t ‘pay for themselves’. Hence attributing deficits to them caused by the resulting loss of revenue is the only reasonable option.
Since the GOP was trying to shrink government revenues as a function of GNP, I don’t think that’s an apt comparison. Better to consider the size of the deficit as a percentage of revenues.
In 1980 and 1981, we had deficits of $74B and $79B, which were 14% and 13% of revenues. In 1982-89, the raw deficits were 128, 208, 185, 212, 221, 150, 155, and 153 billion dollars, which were 21, 35, 28, 29, 29, 18, 17, and 15% of revenues, respectively. We’re still paying for those years when we spent 28-35% more than we took in, even though - at the high point of the recovery - Reagan had reduced the deficit, as a fraction of revenue, to almost what it was in Carter’s worst years, the years where the Ayatollah’s oil embargo was killing our economy. So if you put Reagan’s best years against Carter’s worst, Reagan’s deficit is only a little bit worse than Carter’s.
(In 1986 or 87, btw, Reagan got lucky, oil prices plummeted, and the economy boomed. That’s how we ‘grew’ the economy: gas prices dropping from $1.25 to 59 cents per gallon.)
Again, I think 90% of that can be explained by the fluctuations of energy prices.
There may be room to argue about the economy. But the numbers I’ve distilled from the government tables leave no room to argue about where the Reagan deficits came from. They didn’t come from Congress; they came from the tax cuts.
And why oh why does everyone assume that the communists in Central America were Soviet “satellites”? The only one even being given money was Cuba, and that was just to spite the US!
The other countries like El Salvador and Nicaragua were NOT RUSSIAN SATELLITES! Okay? They did NOT want the Russians coming in!
Also, the war in Afghanistan-like it’s much better now there? With the Taliban? Why even bother?
(BTW, I was reading an article about Reagan yesterday-I’ll try and find it tomorrow when I’m back at school-where he said that the Spanish blew up the Maine! No historian worth his salt believes THAT one anymore! Sheesh!)
Well, you asked for it.
And yet he did not believe in gun control. He believed in the Second Amendment.
I’m going to read some more and see if I can’t find any more mistakes and inconsistencies and contradictions made by The Great Liar. (Remember that people called him “The Great Communicator”?)
A cursory reading didn’t reveal any more serious contradicitons or mistakes, but it’s irrelevant, anyway. Reagan’s performance in 1975 doesn’t tell us what he was like from 1981-'89.
Hey Sam Stone, thanks for reminding us 3 times in the span of 5 lines that this was an “unscripted”, “impromptu”, and “off-the-cuff” interview. The lady doth protest too much?
Well I don’t buy it. I think the questions were handed to him prior to the interview, and his “writers” drafted his “script”, he memorized his “lines”, which he rehearsed prior to the director/interviewer yelling “Action!”.
Think about it, an obviously knowledgeable Reagan supporter such as yourself (Sam Stone) can’t find anything intelligent to present from the 8 grand years that Reagan was in the White House, and instead, has to refer to some interview he gave 6 years earlier in order to “prove” his intelligence.
Like I said, I don’t buy it for a second…
Jacknifed juggernaught: Hang on there. I wasn’t LOOKING for anything with which to support Reagan, so I wasn’t scraping the bottom of the barrel - I happen to read Reason Online, and this interview was in their current links due to his 90th birthday.
And sorry, but this wasn’t an interview full of softball questions by some fans of Reagan’s. I don’t know if you know the history of the Libertarian Party, but in 1975 they were NOT fans of the Republican Party. There was conflict between them much like that between Nader and the Democrats today. They asked hard enough questions to actually exasperate Reagan a couple of times.
I don’t doubt that the interview was cleaned up to remove the ‘uhs and ahs’ - all interviews are. But do you believe the editors of a respected political journal did things like insert a reference to Bastiat in order to make Ronald Reagan look smarter? Clearly, the man had wide ranging knowledge, and the intelligence to apply it appropriately off-the-cuff while being interviewed.
The point is that he does not come off as an idiot. I should have expected that you guys would give it a cursory glance just looking for ammo, rather than read it objectively and attempt to get a glimmer of perspective on the man.
If you want to read many of Reagan’s documents yourself, you might spend some time at the Reagan Library Online at http://www.reaganlibrary.net/
It should also be pointed out that Reagan graduated from College at a time when almost no other men of his economic status managed to. Specifically, only 6% of lower-income men during those years attended college. Reagan didn’t go to an Ivy-League school not necessarily because of poor grades, but simply because ‘his kind’ of people had no chance of going there in that era unless they were brilliant.
Reagan was not brilliant. He was a voracious reader, knew a lot of things about a lot of topics, and had an above-average intellect. He wasn’t a genius. But you guys on the left were never willing to give him even that much credit. He was portrayed as a stupid actor who was in way over his head. But by the time he became president he had been active in politics for 18 years, and was a two-term governor of California. Even his time spent as an actor was largely political - he was president of the Screen Actor’s Guild.
Perhaps I should let Mikhail Gorbachev describe him. This is from an interview with CNN in 1997 -
Mikhail Gorbachev:
Jab1: Let’s see, you think that a belief in a need for a police force and military is somehow contradictory with the belief in the 2nd Amendment? How do you make this leap of logic? I’d suggest that perhaps you should look at yourself before dissing Reagan’s political understanding.
RTFirefly: Don’t confuse me with a true-blue supply-sider. The supply-side philosophy says that if you cut taxes, you’ll raise revenue even more than the tax cut. This is obviously not universally true - even the Laffer Curve has a minima where tax cuts cost revenue. I would certainly argue that we are way below that point today, with marginal rates down below 40%. But in Reagan’s first term, marginal rates were so high that the growth potential of a tax cut was much higher than it is today. I don’t know if it was breakeven, or a net revenue generator, or negative. But certainly, if he cut income tax 25% the government would not have seen a revenue reduction of 25%, due to the added growth from the cut.
In any event, in 1981 total income tax revenue was 285 billion dollars. So if the tax cut had not increased growth at all, it would have added about 71 billion dollars to the deficit.
Can we agree that if Reagan had not cut taxes at all he still would have faced a deficit? If the economy shrank 2.2% in 1982, it would have shrunk somewhat more without that tax cut. How much that would have cost is debatable, as is supply-side economics.
As I said before, the main two causes of the deficit were the structural problems with an aging population, which causes an explosion of Social Security and Medicare expenses, and the recession. Recessions are massive budget busters.
And the recession wasn’t Reagan’s fault. It was the result of a rapidly contracting money supply due to the Fed’s anti-inflation strategy.
Sam,
To be honest, I have little interest in how intelligent or stupid, honest and hardworking or lazy, kind or nasty Reagan was. I am willing to give him the benefit of the doubt on at least some of those points. But, what I am not happy about is the revisionist history that tells us that Reagan did a great job for the economy, etc, etc… Because I think this will lead us to repeat the mistakes of the past and I’d just assume avoid that.
And now i just got to add a little amusing story here: Last year, I was with my girlfriend at the time when she was booking flights down to D.C. She was having a very friendly interaction with the US Airways representative. At some point when the US Airways person referred to the Washington airport by its current name (bequeathed upon it by the Republican Congress), Ronald Reagan National Airport, my friend, who had not heard that before, blurted out (with a certain amount of honest bewilderment) “What…Did he buy it?!?”
Simul-post with Sam there.
Well, I am glad to hear you have a realistic view of the whole supply-side / Laffer thing. I can’t stand it when people just say that the Laffer curve shows that when you cut taxes, you get more revenue without even bothering to consider where we might be on the curve (particularly in light of other Western countries with much higher tax rates). Another simplification of the Laffer curve is that it plots something in one dimension which is really infinite-dimensional because you can modify the tax structure in infinitely-many different ways.
Where were we on the Laffer curve (modulo the above caveat about it) in 1980? I don’t know, but the fact that David Stockman and company’s budget projections were so far off the mark suggests that we weren’t anywhere near where they thought we were!
I think the other point that needs to be continuously hammered home is the question of who got the tax cuts. People say, “Well, look, he cut people’s taxes and our revenue base didn’t shrink into oblivion. Isn’t that great!” But, how much was his actual tax cut as a percentage of all government tax revenues…not just income tax revenues? And, who got most of the cuts? (The last question is somewhat rhetorical because we all know damn well who did!)
And, yes, without the tax cuts, there would still have been deficits, but perhaps they would have been something like they were under Carter, which would have added considerably less to our debt. Basically, what Reagan did was run up our credit card to keep up economic growth, rewarding the lion’s-share of the benefits to those who were already well off.