IT’S LIKE DEJA VU ALL OVER AGAIN…. I’d mentioned earlier that Ronald Reagan raised taxes, repeatedly, as part of his economic agenda. Bruce Bartlett recently took a closer look at those policies, and what the president’s conservative allies were saying about the increases at the time.
According to a recent Treasury Department study, Ronald Reagan proposed the largest peacetime tax increase in American history as part of a budget deal to get the federal deficit under control. The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 was signed into law on Sept. 3, and most of its provisions took effect on Jan. 1, 1983.
During debate on TEFRA, many conservatives predicted economic disaster. They argued that raising taxes in the midst of a severe recession was exactly the wrong thing to do. “Every school child knows you don’t raise taxes in a recession unless you want to make it worse,” The Wall Street Journal’s editorial page warned. Said Rep. Newt Gingrich, “I think it will make the economy sicker.” The Chamber of Commerce of the U.S. said it had “no doubt that it will curb the economic recovery everyone wants.”
Looking at the data, however, it is very hard to see any evidence that TEFRA had a negative effect on growth. Indeed, one could easily make a case that its enactment stimulated growth.
It’s a reminder of just how wrong the exact same cast of characters has been for quite a long while. When Reagan raised taxes, Gingrich, the WSJ editorial page, and conservative activists thought it would produce awful results. It didn’t. When Clinton raised taxes, the same motley crew raised the same dire warnings about recessions and unemployment. They were wrong again. When Bush cut taxes, these same observers predicted robust economic growth and balanced budgets for years to come. That … how do I put this gently … didn’t quite work out.
And now, here we are again, with Obama presenting an ambitious economic plan, some of which includes targeted tax increases. And wouldn’t you know it, Gingrich, the WSJ editorial page, conservative activists everywhere, and a handful of useless Democrats are complaining about the dire consequences of modest tax increases.
One would like to think that being wrong, over and over again, about the exact same issue, might lead some of these characters to back off. Likewise, one might also like to think that major news outlets, recognizing how wrong these folks have been for the last few decades, might stop taking their prognostications seriously. Alas, this is not the case.
Bartlett concluded, “[W]hen Republicans claim that higher taxes will destroy the economy, they should be reminded that they made the same argument in 1982 and 1993 and that the actual economic results were the opposite of what they predicted. And when they denounce Obama’s health plan for expanding the size of government, they should be asked how they voted on the Medicare bill in 2003.”