Wed Dec 5, 2012, 11:15 AM
DonViejo (17,336 posts)
Reaganís Deal With Democrats for Tax Increases Paired With Spending Cuts Is a Myth
Dec 5, 2012 4:45 AM EST
Republicans routinely repeat Reaganís claim that Democrats reneged on a 1982 promise to cut spending in exchange for raising taxes. Itís a myth.
The White House has now proposed a plan to raise taxes immediately and work out spending cuts in the near future. Republicans are rejecting this, calling it insulting and, in Mitch McConnellís words, ďa step backward.Ē In defense of their position they cite Ronald Reaganís experience, claiming that he once made a deal with Democrats for $3 in spending cuts in return for $1 in tax increases. The Democrats got the taxes, they say, but Reagan never got the cuts. Republicansóand Grover Norquist in particularóhave repeated this so often and so insistently that even Democrats seem to have accepted it as truth. The only problem? Itís a myth.
Here are the facts, complete with context:
In August 1981 Republicans controlled the Senate and had enough power in the nominally Democratic House to pass Reagan's enormous tax cuts. (Southern Democrats occupying soon-to-become Republican seats gave Reagan working control of the House and voted for the cuts. In fact, Phil Gramm was the then-Democratic sponsor of the tax-cut bill in the House. He switched parties soon thereafter and became one of the most conservative Republicans in Congress.) Despite the tax cuts, a recession started in July 1981. Reagan did inherit the so-called stagflation of high inflation and slow growth, and there was a brief recession in the first half of 1980. But the economy was growing when he came into office.
The deficit promptly soaredóindeed, the national debt would ultimately triple in Reaganís eight years in office But the economy tanked and unemployment headed toward double digits. In early 1982, concerned by this exploding deficit and convinced that the tax cuts had gone too far, Congress on a bipartisan basis moved to limit the damage. Despite outcries on the right that one could not raise taxes in a recession, advocates said that bringing down the deficit was more important.
In August 1982, the unemployment rate hit 10.1 percent, while mortgage rates hovered near their all-time high at 15 percent. Reagan's tax cuts had had a year to stimulate the economy, but they had not done so.
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