Reagan’s initiative was the antithesis of President Obama’s $800 billion “stimulus” that didn’t stimulate. The2009 version was the single greatest contributor to our record $1.5 trillion deficit. It was, plain and simple, what Reagan didn’t do.
When Reagan signed the Economic Recovery Act at his ranch near Santa Barbara, it was the largest tax cut in American history. He also revealed leadership that Democrats and Republicans alike agree we are not seeing currently from the White House. EvenTheWashington Post called Reagan’s action “one of the most remarkable demonstrations of presidential leadership in modern history.”
As biographer Steve Hayward notes, even when Reagan compromised with Democrats on tax increases in exchange for promised spending cuts in 1982, he “never budged an inch on marginal income tax rates.” Reagan understood that not all taxes, or tax increases, are equal.
Yet it is clear today that we have refused the proper lessons of history. For one, our problem remains excessive spending. Obama must bear this in mind if he’s considering tax increases (which hamper growth) as part of his “balanced” approach to deficit reduction. More than that, the best “stimulus” relies on the tried-and-true American way: Let free individuals stimulate the economy through their earnings and activity.