Lessons in Reaganomics

"He knows less about the budget than any president in my lifetime.  He can't even carry on a conversation about the budget.  It's an absolute and utter disgrace."
--House Speaker Tip O'Neill, after a meeting with Reagan, November 23, 1981

"For the last 30 years he's been in a dream world....  I think he actually believes that giving more to rich people will make them work harder, whereas the only way to make poor people work is to tax their unemployment benefits."
--NAACP executive director Benjamin Hooks commenting on Reagan's economic policies, January 25, 1983

"Reagan, who more than any president in history railed against government benefits and spending, set the standard for all members of his administration.  In addition to his presidential pension of $99,500 a year for life and his annual pension as a former governor of California of $30,800...he received Secret Service protection from forty full-time agents and other security at a cost to the government estimated at $10 million annually, more than double that of other living presidents.  A suite of offices atop a new thirty-four-story office building twenty minutes from his home, commanding a view that extended from the Pacific Ocean to the towers of downtown Los Angeles, cost the government $173,000 a year to lease."
--Haynes Johnson, Sleepwalking Through History: America in the Reagan Years

"At his seventh press conference, President Reagan...responds to a question about the 17% black unemployment rate by pointing out that 'in this time of great unemployment,' Sunday's paper had '24 full pages of...employers looking for employees,' though most of the jobs available--computer operator, for example, or cellular immunologist--require special training, for which his administration has cut funds by over 30%."
--Paul Slansky, The Clothes have no Emperor

"What we have found in this country, and maybe we're more aware of it now, is one problem that we've had, even in the best of times, and that is the people who are sleeping on the grates, the homeless who are homeless, you might say, by choice."
--President Reagan, defending himself against charges of callousness on Good Morning America, January 31, 1984

"The Agriculture Department [under Reagan proposes] cutting the size of school lunches....  In addition, condiments such as ketchup and pickle relish would be reclassified as vegetables."
--Paul Slansky, The Clothes have no Emperor

"Bob Cratchit was paid 10 shillings a week, which was a very good wage at the time....  Bob, in fact, had good cause to be happy with his situation.  He lived in a house, not a tenement.  His wife didn't have to work....  He was able to afford the traditional Christmas dinner of roast goose and plum pudding....  So let's be fair to Scrooge.  He had his faults, but he wasn't unfair to anyone."
--Ed Meese (Reagan's attorney general) telling the National Press Club that Dickens' Ebenezer Scrooge suffered from "bad press in his time," December 15, 1983

"The epitaph of the Reagan presidency will be:  'When Ronald Reagan became President, the United States was the largest creditor nation.  When he left the presidency, we were the world's largest debtor nation.'"
--Lester Thurow, MIT professor of economics

"[A] lapse into fiscal indiscipline on a scale never before experienced in peacetime."
--David Stockman (Reagan's budget director) describing the 1980's, The Triumph of Politics: Why the Reagan Revolution Failed 

"In the Reagan years, more federal debt was added than in the entire prior history of the United States."
--Richard Darman (Reagan adviser), Who's in Control? Polar Politics and the Sensible Center

"Reagan's theory was really 'trickle down' economics borrowed from the Republican 1920s (Harding-Coolidge-Hoover) and renamed 'supply side.'  Cut tax rates for the wealthy; everyone else will benefit.  As Reagan's budget director David Stockman confided to me at the time, the supply-side rhetoric 'was always a Trojan horse to bring down the top rate.'  Many middle-class and poor citizens figured it out, even if reporters did not."
--William Greider, "The Gipper's Economy", The Nation, June 28, 2004

The Reagan Legacy -- Debt and Deficits

Two years into Reagan's presidency, the United States experienced its worst recession since the Great Depression, with unemployment peaking at 10.8 percent.  Rather than take responsibility, Reagan attempted to blame the 1982 recession on his predecessor, Jimmy Carter.  (for details click here)

Likewise, Reagan would blame the explosion in red ink (debt and deficits) that occurred during his years in office on the U.S. Congress.  Regarding federal deficits, Reagan's shirking of responsibility was especially egregious.  This can be seen from Reagan's statements during his 1980 campaign and the early days of his presidency:

"Mr. Carter is acting as if he hasn't been in charge for the past three and a half years; as if someone else was responsible for the largest deficit in American history."
--Ronald Reagan, nationally televised campaign speech, October 24, 1980.  (Federal deficits totaled $252 billion under Mr. Carter.  By the end of Mr. Reagan's presidency, federal deficits would total over 1.4 trillion.)

"For decades we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present.  To continue this long trend is to guarantee tremendous social, cultural, political, and economic upheavals.  You and I, as individuals, can, by borrowing, live beyond our means, but only for a limited period of time.  Why, then, should we think that collectively, as a nation, we're not bound by that same limitation?  We must act today in order to preserve tomorrow.  And let there be no misunderstanding:  We are going to begin to act, beginning today."
--President Reagan, in his inaugural address, January 20, 1981

"A trillion dollars would be a stack of $1,000 bills 67 miles high."
--President Reagan warning in February 1981 that the national debt, accumulated over the United States' 200 year history, is approaching $1 trillion.  (Under Reagan, the national debt would nearly triple to $2.9 trillion.)

"[A] drastic reduction in the deficit...will take place in the fiscal year '82."
--President Reagan, news conference, cited in The New York Times, March 6, 1981.  (In fiscal 1982, the first full year of Reagan's presidency, the government ran up a record budget deficit of $128 billion.)

Early in his presidency, Reagan chose as his economic advisers a group that espoused a radical economic theory called "supply-side."  The supply-siders told Reagan that if he gave tax cuts to the top brackets (the wealthiest individuals) the positive effects would "trickle down" to everyone else.  Tax cuts, they argued, would produce so much extra growth in the economy -- and therefore extra tax revenue -- that America could simply outgrow its deficits.  The proposition was that tax cuts would pay for themselves.  Reagan bought into supply-side theory, which is why in 1981 he predicted that there would be a "drastic reduction in the deficit."

However, Reagan soon discovered that his supply-side advisers were wrong.  Tax cuts, instead of reducing the deficit, caused the deficit to balloon.  After 1981, Reagan made no more rosy predictions regarding the deficit.  

At this point, Reagan would change strategy.  He would blame the U.S. Congress for the record deficits that accrued during his years in office.  Reagan would say that Congress was responsible, because Congress did not slash spending enough--meaning social spending, since Reagan always championed increased military spending.

Reagan chose to ignore the fact that his own Republican Party was in control of the Senate from January 1981 to January 1987, and that Congress actually spent less than what he originally had asked for.  (for details click here)

Federal deficits would continue unabated until the presidency of Bill Clinton when fiscal responsibility would finally be restored.  President Clinton would achieve a balanced budget (and even record surpluses) in large measure by restoring higher taxes on the wealthy.

Shoulders of Giants Investor

Addendum -- The Post Clinton Years:

"America has a strong economy and a surplus....  Now is the time to reform the tax code and share some of the surplus with the people who pay the bills."
--George W. Bush, nomination acceptance speech, 3 August 2000

After the election of 2000, Bush and a Republican-led Congress reduced income taxes, with the majority of the tax cuts going to America's wealthiest individuals.  With the introduction of Bush's tax cuts, the budget surplus immediately disappeared and deficits resumed.  By the end of Bush's eight-year term, the national debt stood at $10 trillion -- double its level when Bush assumed office.

"This is an impressive crowd -- the haves and the have-mores.  Some people call you the elites; I call you my base."
--George W. Bush, at the annual Al Smith Memorial Foundation Dinner, 19 October 2000