In the 1980s, Ronald Reagan said: “The nine most terrifying words in the English language are, 'I’m from the government and I’m here to help.'”
Four decades later, President Biden says: "Help is on the way." Is Reaganomics dead? One of President Reagan's top economic advisors tells us, "Yes, and good riddance."
Bruce Bartlett, columnist for The New Republic. He was a domestic policy adviser to President Ronald Reagan. Author of nine books, including "Reaganomics: Supply-side Economics in Action" and “The New American Economy: The Failure of Reaganomics and a New Way Forward." (@BruceBartlett)
Is the sun setting on Reaganomics?
Bruce Bartlett: “It's hard to say. I mean, as you know, I wrote a book saying that Reaganomics was essentially dying or dead quite some years ago. So in substance, I think Reaganomics has been dying for a long time. But of course, it's still had very powerful political support that got Donald Trump elected. So it's taking time for the reality to reach down into the perception of the American people. And it's quite possible that it is. But it's too soon to say that the COVID crisis has changed fundamentally the political dynamics in this country. That just remains to be seen.”
Lee Drutman: "Reaganism in America is dead. ... It has outlived its usefulness as a policy solution if it ever had usefulness and neither party supports it. The Republican Party has basically given up on that. The Republican Party is no longer the party of Reagan. It's the party of Trump now. And Republican voters overwhelmingly supported the stimulus plan. Republican voters are much more supportive of taxing the rich and spending on social welfare. Republicans are no longer the party of free trade, and there's no more anticommunism."
Remind us a little bit about what was happening in America in the late 70s that allowed the Reagan administration to institute such major philosophical changes in people's belief in government.
Bruce Bartlett: "There were two really important things that have been somewhat forgotten. One is inflation. People who were younger than me probably don't remember it very well. But it was a very, very powerful political force that supported the idea that government was somehow responsible. The deficits were responsible. The government spending was somehow responsible. And so the inflation very powerfully supported a conservative political view, political economic view.
"And second is that inflation interacted with taxes, it caused people to get pushed up into higher tax brackets. When their houses increased in value, their property taxes went up. And this led to a tax revolt, in particularly in California, with something called Proposition 13 in 1978. Which every politician interpreted as meaning we have to cut taxes. So between the inflation and the higher taxes, you had very strong political support for Reagan's program."
On Bill Clinton declaring 'the era of big government is over'
Bruce Bartlett: "[In] his inaugural address in 1996 ... he said the era of big government is over. So basically, the idea that Reagan had articulated was internalized. Basically, people in both parties pretty much bought into it. And let's not forget that Obama put through a large deficit reduction package, as did Bill Clinton. So these ideas are not just Republican ideas. They were accepted by Democrats as well."
On what's behind the fall of Reaganomics
Bruce Bartlett: "Part of it, of course, is the gross failure of Trump, who was Reagan on steroids. He showed that if you do every single thing on the right wing wish list, it really doesn't do very much good. I mean, we cut taxes massively. Did we have a huge spurt in growth? No, we did not. And we saw during his incompetent handling of the COVID virus that we've done too much to slash government.
"And I think it's important that people understand that a lot of what government does is prepare for the worst, and COVID is the perfect example. It's like a family deciding how much money can we afford to keep for a rainy day. And year after year, you look at that money sitting there and nothing terrible happens and you think, 'Oh, I guess we're OK, let's take a vacation.' And then all of a sudden, you know, somebody gets sick, you have an accident. Who knows what.
"It's the same thing with government. You have to build up these institutions, such as the Centers for Disease Control and the National Institutes of Health and things like this to be constantly on the watch for things that you hope will never happen. And then all of a sudden they do. And I think that this is the way you have to articulate a vision of competent, efficient government that we really need."
On changes in Republican tax philosophy
Bruce Bartlett: "I think there's something that's important that has changed in terms of the Republican tax philosophy that I don't think very many people know. But I think Glenn Hubbard would agree with me about this, is the idea in the 80s was to try to get the rate of taxation, as the statutory or marginal tax rate, as low as it could get, given the amount of revenue that needed to be collected. So, in other words, it was as much about the structure of taxation as it was about the amount of taxation.
"And as we pointed out already, Reagan was happy to raise taxes when it needed to be done. And remember, one of his greatest accomplishments was the Tax Reform Act of 1986, which cleaned up the tax code and lowered the marginal tax rates. Now, after Reagan, that idea just completely got lost in Republican policymaking circles. What they did is they started creating tax credits, in many cases refundable credits to accomplish the goals that they wanted to accomplish. Because for some reason, in the Republican mind, if I give you a refundable tax credit, that's good. That lowers the size of government.
"But if I give you a direct spending program, that's bad because that increases government, even though there is absolutely no economic difference between the two. So I think we've had a kind of a disguised growth in government on the tax side under Republican administrations, and that hasn't accomplished as much as it appears to have accomplished. And I think, you know, somehow we need to get away from that and get back to more straightforward government programs."
On the future of Reaganomics in America
Lee Drutman: "I think that that era is coming to an end as well. I mean, these things move in broad cycles and there's been 40 years of the idea that less government, limited government, lower taxes is what gets the economy moving. And we're at a level of inequality that is [un]sustainable.
"Taxes on the rich are going to have to increase at some point. ... I think that's just inevitable. The public supports it. I think even many Republicans would support it. I mean, the hold of the Koch brothers on the Republican Party at this point is loosening. And there is a new populism that's emerging in the likes of Josh Hawley and Tom Cotton. That is a very different type of Republican Party."
From The Reading List
Washington Post: "I helped create the GOP tax myth. Trump is wrong: Tax cuts don’t equal growth." — "Four decades ago, while working for Rep. Jack Kemp (R-N.Y.), I had a hand in creating the Republican tax myth."
Washington Post: "Why the GOP should stop invoking Reaganomics" — "In their debates, ads and speeches, the candidates for the Republican presidential nomination are vying for the label of most Reagan-esque."
The Guardian: "Opinion: Bidenomics beats Reaganomics and I should know – I saw Clintonomics fail" — "A quarter-century ago, I and other members of Bill Clinton’s cabinet urged him to reject the Republican proposal to end welfare. It was too punitive, we said, subjecting poor Americans to deep and abiding poverty."
New York Times: "2020 Was the Year Reaganism Died" — "Maybe it was the visuals that did it. It’s hard to know what aspects of reality make it into Donald Trump’s ever-shrinking bubble — and I’m happy to say that after Jan. 20 we won’t have to care about what goes on in his not-at-all beautiful mind — but it’s possible that he became aware of how he looked, playing golf as millions of desperate families lost their unemployment benefits."
This program aired on March 19, 2021.