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August 16, 2006

Reagan's Winds Still at Our Backs

By Thomas Bray

Last weekend was the 25th anniversary of a turning point in Western civilization: the Reagan tax cut of 1981. Aside from an approving editorial in the Wall Street Journal, however, there was hardly a peep in the mainstream media.

That's not surprising: Ronald Reagan and his tax cuts remain highly suspect in the highly statist world of the national press corps. Among the chattering classes, and even among many tax-cutting enthusiasts, there is still little appreciation of the broader significance of the tax-cutting movement that swept Reagan into office in 1981.

It was far more than a revolt of hard-pressed taxpayers, who, acting out of base self-interest, greedily wished to keep more of their paycheck (or in the left's view, the dividend check). It was far more than a matter of making the economy more "efficient." It was an outward manifestation of a sea change in public attitudes about the proper role of government itself.

Reagan gave voice to that sea change, sometimes coarsely - "the most feared words in the English language are 'the government is here to help you'" - and sometimes eloquently, as when he lectured students at Moscow State University about what my late colleague Warren Brookes called "the economy in mind" - the good things that happen when government power is limited.

Yes, it has proved exceedingly difficult to actually place limits on government. Reagan had to give up a significant amount of his tax cuts because of deficit-phobia. Mechanistic spending controls, like those on the ballot this fall in Michigan, have had only limited effectiveness. Politicians in Colorado last fall persuaded voters to set aside - "temporarily," of course -- a similar voter-approved cap on spending when it began to bite.

And when the politicians can't spend, they regulate: the Competitive Enterprise Institute estimates federal regulations alone cost more than $1 trillion a year, an amount equal to nearly half of direct federal spending.

But the welfare state wasn't built in a day. It was two decades after the income tax was made constitutional, a signal of the primacy of government, that we got the New Deal, and half a century before we got the so-called Great Society. It took 15 years after the Reagan tax cuts to get welfare reform. It's clear that reform of the major middle class entitlements, Social Security and Medicare, will take much longer, but in private industry the "defined benefits" era is coming to a rapid close.

And lovers of liberty still have the Reagan winds at their back. America's sharp downward revision of tax rates is being mimicked in much of the rest of the developed and developing world. A majority of Americans in a Tax Foundation poll earlier this year thought taxes - state as well as federal - should take less than 20 percent of income, well below even the Reagan levels. And almost nobody thinks the government does a great job at almost anything.

There has been much disgust on the right at George W. Bush's spending record. But critics should keep in mind that much of that spending was the result of trying to bait Democrats into voting for reforms with long-term benefits. It hasn't worked very well, but it's unfair to see the overall Bush record as a turning back rather than a premature effort to move forward. Reagan's optimistic message that freedom and markets can do a better job of delivering the goods than government still has no serious opponent.

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