Columns » Ernest Dumas

Reagan's tax increases


If President Bush is going to wrap himself in Ronald Reagan's shroud for the rest of the election he ought to compare himself with the man and not the myth. That would be good for the president, if he's capable of learning from history, and ultimately good for the country. While admiring commentators have jumped on Reagan's death to celebrate the political kinship between the presidents, nothing unites their administrations except their orthodox rhetoric - unless you count the deep economic stagnation that both men ushered in not long after they took office. The recession that began in the fall of 1981, months after Reagan won passage of his big income tax cut, mostly benefiting the wealthy, was the longest and harshest since the Great Depression, bringing unemployment rates of nearly 10 percent. They remained above 7 percent most of his presidency. Reagan said the media prolonged it, famously complaining on his weekly radio show, "Is it news that some fellow out in South Succotash someplace has just been laid off?" But here's the difference between them. While their tax cuts and fiscal policies sent the nation's budget deficits soaring to record heights, Reagan didn't cut taxes again and spent the next seven years earnestly wrestling with the mammoth deficits and raising taxes to bring them down. Bush responded to the same stimulus by cutting rich people's and corporations' taxes again and again. Oh, no, they say, Reagan never raised taxes! But, honestly, he did - along with Congress, of course - in five of the next seven years. Here's the year-by-year story: 1982 - To stem the flood of red ink, Reagan and Congress late in the year crafted legislation that raised taxes $100 billion over three years. The stock market surged and interest rates fell on the news. In the next six months the economy rebounded. 1983 - Following the recommendations of his Social Security commission, Reagan signed a bill raising payroll taxes on employees and employers, subjecting Social Security benefits to income taxes and postponing the retirement age. Alan Greenspan said it would provide money in the short term to trim the deficit. 1984 and 1985 - The economy grew and no taxes were raised. 1984 was the year that Reagan had said would be the latest that he would balance the federal budget. The deficit reached $212 billion in '84. At Little Rock three days before the '84 election, he said taxes would be raised in his second term "over my dead body." The vow stood for one year. 1986 - Reagan's sweeping tax reform bill produced a net increase in taxes. It restored full income tax rates to long-term capital gains and shifted $120 billion of new taxes to businesses. Bush wants to eliminate taxes on capital gains and corporations. 1987 - After the stock market crash, Reagan agreed that higher taxes were needed to reduce the deficit and signed legislation with modest tax increases. 1988 - Reagan signed a bill making "corrections" in his 1986 tax-reform bill and raising taxes about $5 billion and also a bill expanding Medicare benefits and requiring millions of Medicare beneficiaries to pay an income tax surcharge. Even though Congress reduced his budget every year and shifted money from defense to domestic programs, the deficits soared, but they would have been greater without what Reagan called "revenue enhancements." If Bush wants to emulate Reagan's foreign policy, he should study the Reagan record - not the myth. Sure, he shouldn't try to imitate Reagan's fondness for anticommunist dictators - Saddam Hussein (he sent Donald Rumsfeld to Baghdad to woo him), Ferdinand Marcos, Augusto Pinochet and El Salvador's bloody leaders or defend racial tyranny, as Reagan did with South Africa's apartheid regime. But he could learn a lot from Ronald Reagan. What if Bush dropped his bluster and go-it-alone foreign policy and embraced Reagan's collaborative and peacemaking approach with allies and the enemy, the Soviet Union. All that is remembered now is Reagan's utterance in 1983 of Peggy Noonan's famous line "the evil empire." Seeking detente, Reagan softened the rhetoric and talked thereafter about "peaceful competition." By 1987 and 1988, he was saying that "evil empire" was not a relevant term. And if he really did have a big role in ending the Cold War, as all the eulogies last week claimed, it was not because he uttered a catchy phrase or spent more on weapons, ball-peen hammers and toilet seats but because he acceded to Mikhail Gorbachev's urgings that they phase out intermediate-range nuclear missiles and signed a treaty to do it. That gave cover for Gorbachev against the Kremlin's hard-liners because it showed that Gorbachev actually could win concessions from the West. It gave the Soviet leader more time to carry on his momentous economic and political reforms at home and lift the Soviet yoke from Eastern Europe.

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