To solve a problem one must agree on facts and reality. Ramesh Ponnuru’s piece “Reaganism After Reagan” attempts to implore Republicans to be like Reagan.
Ponnuru believes Reagan did the initial lift that brought back prosperity by reducing the top tax rate that at the time was 70%. He softy scolds Republicans for living in the past.
When Reagan cut rates for everyone, the top tax rate was 70 percent and the income tax was the biggest tax most people paid. Now neither of those things is true: For most of the last decade the top rate has been 35 percent, and the payroll tax is larger than the income tax for most people. Yet Republicans have treated the income tax as the same impediment to economic growth and middle-class millstone that it was in Reagan’s day. House Republicans have repeatedly voted to bring the top rate down still further, to 25 percent.
His implication is that somehow Reagan’s economic policies were already a resounding success and it is time for the GOP to come up with new ideas. Ironically, the policies he suggests for their comeback are decidedly Democratic.
A Republican Party attentive to today’s problems rather than yesterday’s would work to lighten the burden of the payroll tax, not just the income tax. An expanded child tax credit that offset the burden of both taxes would be the kind of broad-based middle-class tax relief that Reagan delivered. Republicans should make room for this idea in their budgets, even if it means giving up on the idea of a 25 percent top tax rate.
Economist Paul Krugman did not let Ponnuru get away with implicitly claiming a past success where there was none of consequence. He answered with the blog post “The Myth of Reagan’s Miracle”. Krugman presents graphs that cannot be refuted.
The chart shows the real median growth in family income over time. Note that in the aggregate median income was minimal at best during Reagan’s reign.
Bush1 & Clinton who actually raised taxes show a more robust median income performance. President Bush who instituted supply side economics (Reaganomics) on steroids shows an even worse performance for median income than Reagan did.
Krugman’s closing paragraph in his blog post is epic.
Ponnuru hopes to get Republicans to accept policies they’ll never accept, and the only way he knows to make his case is to invoke the memories of a politician from the quite distant past whose policies weren’t all that successful in the first place.
Current policies are still biased towards supply side economics even after four years of President Obama because of a timid Democratic Congress in 2009-2010 that feared raising taxes on the wealthy. Instead of using their filibuster proof power to create a stimulus that dismantled supply side economics, they attempted a band aid solution. Ironically they lost the House and filibuster proof Senate anyway.
With an intransigent myth based Republican Party in the House and an obstructionist minority in the Senate, Reaganomics will live on till middle class and poor America clean house. One hopes the time is near.