The Reagan restoration

July 31, 2012

Free Market Foundation

Ronald Reagan was the most consequential President since FDR because of his ideas. His Presidency was at root about returning a country that was heading toward decline back to its founding principles of individual liberty and responsibility. At the time it was called a “revolution” but his era is better understood as a restoration, says the Wall Street Journal.

Among the high points:

The Reagan tax cuts saved America from following Western Europe into welfare-state decline; in addition to igniting growth, his tax cuts put a brake on the expansion of government that had seemed unstoppable.

Their success also sent a lesson to the world about the utility of free-market policies: Leaders everywhere, especially in China and now even India, have had to confront the example of American growth and free-market vitality.

But Reagan did far more than monkey with the level of taxes:

When he took office, the top marginal U.S. tax rate was 70 percent.

When he left the top rate was 28 percent; it is now 35 percent, and even John Kerry has conceded with his proposal to cut some corporate taxes that the marginal rate of tax matters.

Today Americans may disagree about what tax cuts are needed, how deep they should go, and what they ought to target. But the debate itself reflects Reagan’s central premise: that people respond to incentives, and that high taxes interfere with natural human creativity and drive.

Source: Editorial, The Reagan Restoration, Wall Street Journal, June 7, 2004.

For WSJ text (subscription required) http://online.wsj.com/article/0,,SB108656150745830130,00.html

For more on Economic Issues http://www.ncpa.org/iss/eco/

FMF Policy Bulletin\8 June 2004