A review of Reagan’s REAL fiscal record


Many liberals, and even some conservatives, wrongly claim that Reagan’s tax cuts reduced government revenues. They’re wrong. His tax reductions not only reinvigorated the economy, thus allowing it to grow by 3.5% per year, they also increased federal revenue, as data from the Heritage Foundation shows. (Not that this is any surprise to anyone who knows that federal revenue GROWS when the economy itself GROWS.)

As the HF’s data clearly indicates:

  • Total federal revenues doubled from just over $517 billion in 1980 to more than $1 trillion in 1990. In constant inflation-adjusted dollars, this was a 28 percent increase in revenue.3
  • As a percentage of the gross domestic product (GDP), federal revenues declined only slightly from 18.9 percent in 1980 to 18 percent in 1990.4
  • Revenues from individual income taxes climbed from just over $244 billion in 1980 to nearly $467 billion in 1990.5 In inflation-adjusted dollars, this amounts to a 25 percent increase.
  • HOW DID REAGAN’S POLICIES AFFECT ECONOMIC GROWTH?Despite the steep recession in 1982–brought on by tight money policies that were instituted to squeeze out the historic inflation level of the late 1970s–by 1983, the Reagan policies of reducing taxes, spending, regulation, and inflation were in place. The result was unprecedented economic growth:
    • This economic boom lasted 92 months without a recession, from November 1982 to July 1990, the longest period of sustained growth during peacetime and the second-longest period of sustained growth in U.S. history. The growth in the economy lasted more than twice as long as the average period of expansions since World War II.10
    • The American economy grew by about one-third in real inflation-adjusted terms. This was the equivalent of adding the entire economy of East and West Germany or two-thirds of Japan’s economy to the U.S. economy.11
    • From 1950 to 1973, real economic growth in the U.S. economy averaged 3.6 percent per year. From 1973 to 1982, it averaged only 1.6 percent. The Reagan economic boom restored the more usual growth rate as the economy averaged 3.5 percent in real growth from the beginning of 1983 to the end of 1990.12

    Also, as AT pointed out in 2006, and as HF pointed out in 2001 in the forementioned research paper, the tax burden on rich Americans increased as a result of Reagan’s tax policies, while the burden shouldered by poor Americans shrank. (http://www.heritage.org/research/reports/2001/03/the-real-reagan-economic-record)

    As for Reagan’s record on spending: even with his defense budget hikes, which allowed America to win the Cold War, total government spending shrank during his term as a share of the economy, from 23.5% of GDP in 1981 to 21.5% of GDP in 1989, although it did increase in raw dollar numbers. Reagan also halved the budget deficit as a percentage of GDP, from 6% of GDP in 1981 to 3% of GDP in 1989. Did he try to reduce federal spending in raw dollar numbers? Yes, by trying to abolish the Education Department, the DOE, and many useless federal programs. However, the Congress did not allow him to do so.

    Nonetheless, it should be nomted that so far, Obama has added more debt than Reagan during his 8 years as President and, indeed, more than America’s first 41 presidents combined, from George Washington to William Jefferson Clinton (Grover Cleveland served twice as president).

    http://www.heritage.org/research/reports/2001/03/the-real-reagan-economic-record

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