By Alan W. Dowd – ASCF Senior Fellow
May 2018 –
As Washington spends without consideration for the real costs of its spending sprees, as high-ranking elected officials openly advocate a lurch toward socialism, as China tries to muscle the U.S. out of the Western Pacific and Russia redraws the map of Europe by force, as North Korea builds a nuclear arsenal and Iran seeks to dominate the Middle East, as America balkanizes into warring tribes of protesters and political blocs and interest groups, as the country reverts to a kind of isolationism not seen since the interwar years, we would do well to consider the timeless guidance of President Ronald Reagan. A good place to start is Reagan’s first speech and last speech as president.
Reagan understood that America’s diplomatic, military and cultural influence abroad was (and still is) dependent on its economic strength at home.
To unleash “a healthy, vigorous, growing economy that provides equal opportunities for all Americans,” Reagan committed his administration to “removing the roadblocks that have slowed our economy and reduced productivity.”
He did this through tax reform and deregulation. Reagan wanted and got a tax system that was “fairer, simpler for most people, one that encourages growth and that is pro-family.” He lowered the top marginal tax rate from 70 percent to 28 percent. Sen. Bill Bradley called Reagan’s tax reforms “the most significant tax bill since 1954 and maybe since 1913.”
To forge those reforms, Reagan worked with partners on the other side of the aisle. It pays to recall that 33 Senate Democrats voted for Reagan’s 1986 tax-reform bill. The reason: Reagan didn’t see compromise as a dirty word. “I have always figured that a half-a-loaf is better than none,” he said, “and I know that in the democratic process you’re not going to always get everything you want.” Both sides of the aisle could learn from that today.
“Government can and must provide opportunity, not smother it; foster productivity, not stifle it,” Reagan argued. So, he also cut burdensome regulations. As the Competitive Enterprise Institute (CEI) details, Reagan pared back the Federal Register (the collection of all federal rules and regulations) by 38 percent in his first five years.
Reagan’s tax reforms and his efforts to restrain federal regulators unleashed a 92-month period of uninterrupted economic expansion, triggered an 18-percent increase in disposable income, halved unemployment, created 19 million new jobs and tripled the value of the stock market.
As Reagan explained in his farewell address, “The economy bloomed like a plant that had been cut back and could now grow quicker and stronger. Our economic program brought about the longest peacetime expansion in our history: real family income up, the poverty rate down, entrepreneurship booming, and an explosion in research and new technology. ”
Following Reagan’s lead, President Donald Trump signed a tax-reform bill that lowers most individual income tax rates as well as the corporate tax rate, and he has slashed the size of the Federal Register by 32 percent. That’s ahead of Reagan’s pace. But there’s much more work to do on the tax and regulatory front. CEI notes that the federal regulatory burden today is nearly $2 trillion annually—“a hidden tax of nearly $15,000 per household in a given year.” Plus, more than 45 percent of households will not pay federal income taxes this year; that’s up from 40 percent in 2013. For the good of a society built on shared commitment, the tax burden must also be shared and the tax base broadened.
Government and Spending
As he entered office, Reagan observed that “great as our tax burden is, it has not kept pace with public spending”—an implicit acknowledgment that Washington has enough of the taxpayers’ wealth to serve the basic functions of government. It simply spends too much.
“For decades we have piled deficit upon deficit, mortgaging our future and our children’s future for the temporary convenience of the present,” he explained. “To continue this long trend is to guarantee tremendous social, cultural, political and economic upheavals.”
To be sure, the national debt as a percentage of GDP grew under Reagan, but modestly—hitting 49 percent of GDP by the end of his presidency. The budget deficit was $153 billion in Reagan’s last year. “I’ve been asked if I have any regrets,” he sighed. “Well, I do. The deficit is one.”
Of course, Reagan added to the debt in order to win the Cold War—not a bad tradeoff. And in his eight years, he also found a way to work with Democratic leaders to extend the life of America’s key entitlement programs by decades.
Contrast that record with recent years: Under President Barack Obama, the national debt exploded from 77 percent of GDP to 104 percent of GDP. The budget deficit averaged $910 billion during the Obama presidency, topping $1 trillion in four different years. And what does Washington have to show for this deficit-spending binge? The War on Terror has not been won. America’s military is smaller and weaker, just as Russia and China have grown stronger. And with the shortsighted addition of nationalized healthcare to America’s smorgasbord of entitlements, entitlement spending has become a runaway freight train.
That brings us to another issue near and dear to Reagan: the size and growth of government.
“It is time to check and reverse the growth of government,” Reagan declared in 1981. “It is my intention to curb the size and influence of the federal establishment…it’s not my intention to do away with government. It is rather to make it work—work with us, not over us; to stand by our side, not ride on our back.”
Reagan was true to his word. Taxes fell and regulations were erased, as detailed above. And as the Heritage Foundation’s Index of Government Dependence illustrates, the Reagan presidency boasts some of the biggest and most numerous declines in government dependence; the rate of growth of government dependence was far slower under Reagan than it was under his predecessors and successors (see Chart 3). Owing to Reagan’s roaring economy, food stamp costs fell, welfare and public housing flatlined, and Medicaid rose only marginally between 1981 and 1989. All of these programs were growing rapidly before Reagan—and have exploded in the past decade.
“To those neighbors and allies who share our freedom, we will strengthen our historic ties and assure them of our support and firm commitment,” Reagan pledged at his first inaugural. And he put “the enemies of freedom” on notice that “We will maintain sufficient strength to prevail if need be, knowing that if we do so we have the best chance of never having to use that strength.”
Thus, “after years of weakness and confusion,” Reagan rebuilt America’s defenses and put a halt to the moral relativism that had set in after a decade of détente. By the end of Reagan’s presidency, the Cold War had melted away. Nine months later, the Berlin Wall was gone, the Soviet Empire was in full retreat and America had been transformed from a nation in decline into an economic-military-cultural colossus without historical parallel or geopolitical peer.
Reagan matched his military rebuild with a recommitment to freedom. He ardently and unapologetically believed it was America’s mission to “be the exemplar of freedom and a beacon of hope for those who do not now have freedom.”
During his last speech from the Oval Office, Reagan told a story that captured this American renewal: A sailor “hard at work on the carrier Midway” spotted “a leaky little boat” on rough waters of the South China Sea. “Crammed inside were refugees from Indochina hoping to get to America,” Reagan recounted. “The Midway sent a small launch to bring them to the ship and safety. As the refugees made their way through the choppy seas, one spied the sailor on deck, and stood up, and called out to him…‘Hello, American sailor. Hello, freedom man.’” As Reagan explained, “That’s what it was to be an American in the 1980s. We stood, again, for freedom.”
In that same speech, Reagan also described what his oft-cited “shining city on a hill” looked like in his mind’s eye: “a tall, proud city built on rocks stronger than oceans, windswept, God-blessed, and teeming with people of all kinds living in harmony and peace; a city with free ports that hummed with commerce and creativity. And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.”
That was Reagan’s America—a great and good nation open to people of goodwill, a nation with the will and the ability to defend freedom, a nation whose very name stood for freedom.
Sadly, it seems “freedom man” has sailed away. Just 18 percent of Americans say the United States should promote democracy to the rest of the world (down from 70 percent in 2002). And 57 percent of Americans say the U.S. should “deal with its own problems, while letting other countries get along as best they can.”
Reflecting the national mood, Obama focused on “nation-building here at home,” left proto-democracies in Iraq, Libya and Ukraine to fend for themselves, and shrank the reach, role and resources of democracy’s greatest defender—the U.S. military. (Recent defense budgets have ended sequestration’s maiming of the military, but they’re not enough to repair the damage. “It took us years to get into this situation,” Defense Secretary James Mattis concludes. “It will require years of stable budgets and increased funding to get out of it.”) In a surprising echo of Obama, Trump argues, “We have to build our own nation,” endorses an “America First” foreign policy evoking pre-World War II isolationism, and describes “trying to topple various people”—we can infer he was talking about dictators in Iraq and Libya—as “a tremendous disservice to humanity.”
This bipartisan turn inward has contributed to the ebbing of free government around the world. But don’t take my word for it. “After eight years as president,” Freedom House concludes, “Obama left office with America’s global presence reduced and its role as a beacon of world freedom less certain.” Trump, Freedom House worries, could prolong democracy’s doldrums by pursuing “a foreign policy divorced from America’s traditional strategic commitments to democracy, human rights and the rules-based international order that it helped to construct beginning in 1945.”
Trump has embraced Reagan’s Peace through Strength doctrine to defend America’s interests; to promote America’s ideals and values, he should embrace Reagan’s language of freedom.
As he left office in January 1989, Reagan saw all across America “a rediscovery of our values and our common sense…the resurgence of national pride.”
Regrettably, one strains to find examples of that today. Consider the college campuses that are muzzling free speech, the assaults on law enforcement and outright contempt for law, the disrespect for our flag, the rise of a fatherless generation, the degeneration of our republic into a land of marches and mobs (see here, here, here and here).
Reagan, who remembered earlier times marked by “the erosion of the American spirit,” would not despair or allow us to shrink from these challenges. “Because we’re a great nation, our challenges seem complex,” he explained. “But as long as we remember our first principles and believe in ourselves, the future will always be ours.”
Photo: (via ReaganFoundation.org)