President of the U.S., 1981-1989; Republican Governor (CA)
Enduring economy comes from fiscal integrity & sound money
America should return to President Ronald Reagan's four proven policies for an enduring economic recovery: real and sustained tax relief, fiscal integrity, smart regulatory reform, sound monetary policy. Reagan trusted in Americans' entrepreneurial
spirit, innovative talents, and industriousness, and he agreed with Adam Smith's insight that freedom and prosperity are inextricably entwined and mutually reinforcing. The flexibility of our markets is endangered by excessive regulation, onerous
litigation, and government redistribution of wealth. Special interests promote complex tax loopholes that impede the free flow of capital and divert it for less productive purposes, while the government is not adequately addressing the
anxieties many citizens feel during globalization's era of rapid innovation and change. We must address the public's insecurities to prevent a backlash against the very free-enterprise system that is the foundation of our prosperity.
OpEd: Initiated bankers' free-for-all, at bankers' request
The new era of deregulation resulted in a boom time for the rich getting richer. Reagan opened wide the door for companies to gamble with taxpayers' money. In 1999, the Glass-Steagall Act was repealed, and a real free-for-all began. It was passed in
1993 to keep separate the low-risk commercial banks where we put our deposits, and the brokerage banks that engage in high-risk speculative investments. This worked just fine for more than 50 years. During the Reagan years, the lobbyists for the finance,
insurance, and real estate outfits started pushing to dump the law; then the rules of the game changed totally. Mergers and commercial/investment partnerships skyrocketed. Now banks could start taking multiple home mortgage loans and turning them
into securities to trade on Wall Street. They could all gamble like crazy, and with very little regulation.
How insane was it to destroy one of the main protection devices created out of the pain of the Great Depression.
Inherited tired & cynical country; left it encouraged
Reagan is seen by most Americans as a positive leader who managed to get Americans to believe in themselves. He understood the promise of the American Dream and this was a key platform on which he was elected. He inherited a tired and cynical
United States that readily took to his optimism, so when he declared that: "everyone can rise as high and as far as his ability will take him", people were more than encouraged. When they saw that he could deliver, they were delighted.
Under Reagan's administration more Americans were working than ever before, many new businesses were started up and Wall Street boomed. At the end of Reagan's administration, not all social ills had been solved or even tackled. However, by persuading
Congress to cut taxes and by eliminating unnecessary regulations, he did introduce a period of unprecedented economic growth in the United States.
No great nation abandoned gold standard and remained great
With President Reagan the subject of the gold standard came up. "Ron," the President told me, "no great nation that abandoned the gold standard has remained a great nation."
He indeed was sympathetic, as he was to many libertarian constitutional ideas, but he was also swayed by staff pressure to be pragmatic on most issues.
Source: End the Fed, by Rep. Ron Paul, p. 74
, Sep 16, 2009
Government is not the means to our prosperity
Political leaders since Reagan have disconnected national policy from our core values by telling Americans we can have it all without making the difficult choices. Even Reagan failed to make some of the tough choices of leadership. In order to get his
priorities through a Democrat Congress, he sacrificed his promise "to reverse the growth of government" and to reduce our dependence on foreign oil. He left the nation with large deficits and more dependent for our energy.
While conservatives should no
naively romanticize Reagan as the perfect leader, we can claim an important distinction between Reagan and other presidents of this generation: he made it clear the government was not the answer to our problems. The you-can-have-it-all-and-the-government
will-guarantee-it political leaders since Reagan have fundamentally changed the American mind-set. Any interruption in our "having it all" elicits a knee-jerk response from federal politicians who promise to "bail us out" with more spending and debts.
Deficits don't matter as long as they're used for tax cuts
President Reagan, as well as Bush I and II, insisted that deficits didn't matter as long as the proceeds were used for tax cuts that were supposed to stimulate savings and investment. The policy failed utterly. Savings and investment rates fell, despite
the lower tax rates. America became increasingly reliant for its investment capital on borrowing from abroad. But this deficits-don't-matter theology liberated Republicans from their previous stance as the fiscally responsible party.
President Reagan, as well as Bush I and II, insisted that deficits didn't matter as long as the proceeds were used for tax cuts that were supposed to stimulate savings and investment. The policy failed utterly. Savings and investment rates fell, despite
the lower tax rates. America became increasingly reliant for its investment capital on borrowing from abroad. But this deficits-don't-matter theology liberated Republicans from their previous stance as the fiscally responsible party.
Increased national debt from $1T in 1980 to $3T in 1988
The problem with applying the traditional analysis to current conditions was that under Reagan and Bush, we had built a large structural deficit that persisted in good times and bad. When President Reagan took office, the national debt was $1 trillion.
It tripled during his eight years, thanks to the big tax cuts in 1981 and increases in spending. Under President Bush, the debt continued to increase again, by one-third, in just four years. Now it totaled $4 trillion. Annual interest payments on the deb
were the third-largest item in the federal budget after defense and Social Security.
The deficit was the inevitable result of so-called supply-side economics, the theory that the more you cut taxes, the more the economy will grow, with the growth
producing more tax revenue at lower tax rates than previously had been collected at higher ones. Of course it didn't work, and the deficits exploded throughout the recovery of the 1980s.
Reaganomics: generate growth by stimulating the supply side
Reagan’s first term was dominated by efforts to carry out his economic program-dubbed “Reaganomics” by the media-which consisted in part of large budget reductions in domestic programs and substantial tax cuts for individuals and businesses. The theory
of supply-side economics-generating growth by stimulating a greater supply of goods and services, thereby increasing jobs-was a mainstay of the Reagan approach. Central to the administration’s efforts to combat inflation was rigorous control over
government spending deficits. Early budget cuts of $39 billion were followed by the passage of a 25% tax cut for individual taxpayers and faster tax write-offs for business.
The economic policies had mixed results. Unemployment rose to a level
of 10.6% by the end of 1982 but declined to around 5.5% late in 1988. Inflation, which had peaked at 13.5% in the 1970s, gradually fell to about 4%-6%. Massive federal deficits piled up, however-a reflection of tax cutting & greater defense spending.
Source: Grolier Encyclopedia on-line, “The Presidency”
, Dec 25, 2000
U.S. economy does not need master planners, just freedom
Carter had run for the presidency on a platform calling for what the Democrats called “national economic planning.” I’m sure they meant well - liberals usually do - but our economy was one of the great wonders of the world. It didn’t need master
planners. It worked because it operated on principles of freedom, millions of free decisions how they wanted to work and live, how they wanted to spend their money, while reaping the rewards of their individual labor.
Source: RonaldReagan.com
, Dec 25, 2000
Pundits declared us "radical" but we were right
Back in 1980, when I was running for President, it was all so different. Some pundits said our programs would result in catastrophe. Our views on foreign policy would cause war.
Our plans for the economy would cause inflation to soar and bring about economic collapse. I even remember one highly respected economist saying, back in
1982, that "The engines of economic growth have shut down here, and they're likely to stay that way for years to come." Well, he and the other opinion leaders were wrong. The fact is, what they called "radical" was really "right."
What they called "dangerous" was just "desperately needed."
Common sense told us that when you put a big tax on something, people would produce less of it. So, we cut the people's tax rates, and the people produced more than ever before.
The stock market crashes today, but Reagan strides in beaming like a boy. His bubbling joie de vivre affects gloom in room. His only comment on Wall Street’s nervousness, “Maybe they should change their symbol from a bear to a chicken noodle.”
Chairman of the CEA (Council of Economic Advisors) tries to make him understand the seriousness of the situation. “Mr. President, this is not just a little wiggle in the market we can ignore.
This is a very serious condition.“ Reagan tries to look solemn, but this is difficult to do when one’s mouth is full of jelly beans.
He takes refuge in genial reminiscence, ”Didn’t we do better before there was a Federal Reserve?“
Are you better off now than you were four years ago?
Inflation elected Ronald Reagan in 1980. The hostages in Iran were a temporary distraction. In August of 1979, Reagan’s advisers opened “Policy Memo No. 1” of the campaign with these words: “By a wide margin, the most important issues in the minds of
voters today is inflation.” And by campaign’s end, the candidate who had risen by ideology, the true believer, was asking people to vote their pocketbooks. Over and over Reagan asked, “Are you better off now than you were four years ago?”
Source: Reagan’s America, by Garry Wills, p. 362-3
, Jul 2, 1987
Laffer curve appealed to Reagan’s beliefs, not his economics
Several editorial writers at The Wall Street Journal had become enthusiasts for the ideas of Arthur Laffer. The Laffer theorem was centuries old and beyond challenge in itself-the claim that tax revenues can be so high as to dry up their source.
[The theory was explained] by drawing an igloo shape on a napkin to explain the trajectory of tax returns. The mystique of supply-side economics grew, built around this doodle.
Reagan himself was a cautious convert. Supply-side was inconsistent with
much of what Reagan had said over the years about economic theory; but it fit everything he believed about the American saga, about “what made us great” before there was any government to cripple the lone pioneer on the frontier.
The monetarist and
fiscal-restraint people found aspects of supply-side theory compatible, and dismissed the rest as campaign rhetoric. The supply-side view was a “free lunch” that would restore the economy without pain, reduce inflation without recession.
Source: Reagan’s America, by Garry Wills, p. 364-5
, Jul 2, 1987
Supply-side economics gets govt out of the way of growth
Reagan himself was a cautious convert [to supply-side economics]. He had years of programmed response to overcome-all those years of denouncing deficits, paying homage to the balanced budget, ridiculing the Democrats’ idea that there is any such thing
as a free lunch. But a free lunch [it was]: tax cuts would pay for themselves, since taxes had reached a point where they drained the economy rather than strengthened it. The tax monies released into private circulation would promote savings (to form new
capital) and investment (to use that capital) and growth (the product of that investment). Hastened depreciation and eased regulation would create a wave of new plants capable of cheaper production.
Since government was the problem, not the solution,
just getting government out of the way would be a solution to every economic ill. The Gulliver of American capitalism, tied down with a thousand strings by Lilliputian bureaucrats, would spring up into boisterous activity.
Source: Reagan’s America, by Garry Wills, p. 365
, Jul 2, 1987
David Stockman, Reagan’s director of the Office of Management and Budget, wrote with Senator Jack Kemp a document called “An Economic Dunkirk.” It said that Reagan would need to seize the post-election euphoria, temper and challenge it with predictions
of disaster (“Dunkirk”), declare a state of emergency, and ram through simultaneous measures that would entirely change public expectations. The nerve to cut government revenue while encouraging growth (especially in defense) would falter, on Wall
Street and in the Congress, unless confidence were secured by early victories. The budget had to be cut immediately, along with taxes, to ease congressional apprehension about deficits and business anxiety about interest rates. The government had to
become less competitive for credit while making the private sector more competitive, or the result would be “Thatcherization,” cuts and stagnation. Everything depended on a “hair-trigger market psychology.”
Source: Reagan’s America, by Garry Wills, p. 366
, Jul 2, 1987
Hold taxes & spending down to maintain economic growth
Reagan’s familiar litany was a story of authority usurped by the federal government, of taxes and regulation slowing the national machine. By controlling such abuses, his administration had seen inflation drop dramatically and employment figures rise in
proportion: “We are creating a nation once again vibrant, robust and alive.”
Ahead lay four more years of opportunity to restate America’s traditional values of “faith, family, work and neighborhood,” to continue rebuilding its defenses and to
redirect history “away from totalitarian darkness.”
Twenty-five straight months of economic growth, the President went on, proved his tenet “that freedom and incentives unleash the drive and entrepreneurial genius that are at the core
of human progress.” But deficit spending (for which he took no blame) might cramp that drive even as it gathered force. To combat it, he would ask Congress to hold program spending at current levels for another full year.
