We enjoy a cordial dialogue with Brian Calle of the Register’s editorial desk but his recent column suggesting that President Obama ought to take a page from the Ronald Reagan playbook on tax cuts has us scratching our heads.
From Calle’s column: “Friday (August 13) marked the 29th anniversary of the signing of the Economic Recovery Tax Act of 1981 and should remind us, in a similar time of economic tumult, of better approaches for stimulating the economy and strengthening the American pocketbook. President Obama, take note.
The ERTA was simple in approach but momentous in outcome. Its purpose, as stated, was to amend the tax code â€œto encourage economic growth through reductions in individual income tax rates, the expensing of depreciable property, incentives for small businesses, and incentives for savings, and for other purposesâ€ ERTA was a 25 percent across-the-board tax cut affecting individual marginal income tax rates, among other reforms. As Andrew Chamberlain for the Tax Foundation once said, the law was a â€œwatershed event in the history of federal taxation.â€
What the Gipper understood uncommonly well was that the best place for money to reside was with those who earned it. Those are the same people who will know best how to spend it. In his own words, â€œOur loyalty lies with little taxpayers, not big spenders. What our critics really believe is that those in Washington know better how to spend your money than you, the people, do. But weâ€™re not going to let them do it, period.â€
President Reagan sought to put money back in the hands of the American people through tax cuts.”
Calle then goes on to criticize President Obama’s stimulus package in great detail.Â Oh if Reagan hadn’t died and we could repeal that nasty Constitutional Amendment to make him president for life!
Before we get to the myth of the economic prosperity created by Reagan’s tax cuts, some words about the stimulus.
The Wall Street Journal reported that 70 percent of economists surveyed said stimulus helped (March 12) that 38 of the 54 economists it surveyed said “the American Recovery and Reinvestment Act boosted growth and mitigated job losses, while six said the legislation had a net negative effect.Â The Congressional Budget Office (CBO) estimates job impact of between 1.2 and 2.8 million for the first quarter of 2010. The CBO also estimated that the unemployment rate would be 0.7 percent to 1.5 percent higher today without the stimulus package.Â ABC News reported a panel of economists believe that the economy would be worse without the stimlus package than with it.
Calle calls for Obama to cut taxes and completely disregards the massive federal tax cut that is included in the stimulus bill — a $288 billion tax cut to those who make less than $250,000 a year in fact that results in an even lower federal tax burden than the Bush tax cuts whcih primarily benefited with wealthiest 2 percent of taxpayers.Â Including in the Obama tax cuts were a tax credits of $400 to $800 a year, an increase in the earned income tax credit, an increase in the refundable portion of the child tax credit, first time home buyerÂ incentives as well as tax incentives for business– all in the effort to stimulate the economy. CBS News reportedÂ last April 15 that “taxes are at their lowest levels in 60 years.”Â Even Bruce Bartlett, a former advisor to Reagan and Bush 41, says Obama has done the job on cutting taxes.Â He said, “Federal taxes are very considerably lower by every measure since Obama became president. And given the economic circumstances, it’s hard to imagine that a tax increase would have been enacted last year.”
The notion that the Reagan tax cuts and Reagan’s fiscal policies were good for this country in the long term is a complete myth.Â Reagan cut taxes in 1981. Â For the years 1981-1984, tax revenue from individual taxpayers (in billions) was 286, 298, 289 and 298.Â Â Reagan increased taxesÂ by signingÂ the Deficit Reduction Act of 1984 whichÂ raised taxes by $18 billion annually.Â Â The Consolidated Omnibus Budget Reconciliation Act of 1985 and Even the Tax Reform Act of 1986, both raised taxes.Â The Omnibus Budget Reconciliation Act of 1987 also raised taxes.Â The net effect of all these tax increases was to raise taxes by $164 billion in 1992, or 2.6 percent of GDP which is theÂ equivalent of nearly $300 billion in today’s dollars.
Reagan also called for cuts in government spending.Â And he did, largely to things like education and social programs while military spending ballooned.Â In 1980, the last year the Carter Administration,Â the federal government spent $591 billion. By the end of Reagan’s second term, the federal government spent $990 billion, an increase of more than two-thirds.Â And while Republicans will blame the Democratic Congress for budgets, the reality is there was little difference between budgets submitted by the president and ones by the Congress.Â Reagan never proposed a single cut to the total budget.
Author Will Bunch’s excellent book on Reagan, “Tear Down This Myth” provides considerably more detail on the subject of the Reagan tax cuts and tax increases.Â But for Mr. Calle, calling on the current resident of the White House to cut taxes when he already has just means Calle is not paying attention.