Reagan Created No Miracles

The  whining by the Republican candidates regarding the last debate on the generally conservative CNBC has a lot to do with the fact that the moderators didn’t accept the basic assumption on taxes the candidates make.   Tax cuts will lead to rapid growth, enough to compensate for the lost revenues, they argue. The deficit may rise temporarily, but then will disappear magically. It is supply-side economics.   But it doesn’t work.

Taxes came up 80 times in the debate, according to ABC. The next closest was Medicare and Medicaid, which came up 25 times. No wonder the candidates were upset. They were promising to recreate the Ronald Reagan miracle, and why didn’t the moderators get this basic truth.  The fact is that the Reagan miracle didn’t work for him and won’t work for us.

A sharp hike in the budget deficit was supposed to result in budget balancing in a few years. Reagan left office with a deficit of 3 percent of GDP, more than it was in Jimmy Carter’s last year. Income inequality started to climb and hasn’t stopped. George H.W.Bush took office promising no new taxes but then ran into a sharp rise in the deficit as the economy slowed.

By the way, Reagan did raise taxes in the 1980s, rather regressive payroll taxes. In the 1990s when Clinton raised taxes the economy grew rapidly and by the end of the decade the deficit disappeared, partly also due to the speculative boom in stocks.

Marco Rubio, who got so many points by analysts after the debate, claims his tax plan would boost growth significantly. Almost all is due to cuts on business taxes. This is simply Reaganesque pie in the sky. He should be asked about this next time around.

The Republicans were upset about tax questions, as they should be. Let’s hope they are asked about their tax programs next time around.  Reagan hovers over the Republicans like the good angel. But his policies failed.