Krauthammer paints incomplete picture of Reagan's tax and spending cuts


In his Washington Post column, Charles Krauthammer compared Presidents Reagan and Obama by claiming that Reagan, "cut taxes to starve the federal government and prevent massive growth in spending," whereas, "Obama's wild spending... will necessitate huge tax increases." In fact, after 1981, Reagan repeatedly increased both taxes and spending.

Krauthammer contrasts Reagan and Obama by claiming Reagan "cut taxes" to "prevent...spending"

Krauthammer: "Obama's wild spending" will "necessitate huge tax increases - as opposed to Reagan's policies which "cut taxes" to "prevent...spending." In a July 15 article in the Washington Post, Charles Krauthammer falsely claimed that President Reagan "cut taxes to starve the federal government and prevent massive growth in spending," whereas, "Obama's wild spending...will necessitate huge tax increases." From the article:

But Obama's most far-reaching accomplishment is his structural alteration of the U.S. budget. The stimulus, the vast expansion of domestic spending, the creation of ruinous deficits as far as the eye can see are not easily reversed.

These are not mere temporary countercyclical measures. They are structural deficits because, as everyone from Obama on down admits, the real money is in entitlements, most specifically Medicare and Medicaid. But Obamacare freezes these out as a source of debt reduction. Obamacare's $500 billion in Medicare cuts and $600 billion in tax increases are siphoned away for a new entitlement -- and no longer available for deficit reduction.

The result? There just isn't enough to cut elsewhere to prevent national insolvency. That will require massive tax increases -- most likely a European-style value-added tax. Just as President Ronald Reagan cut taxes to starve the federal government and prevent massive growth in spending, Obama's wild spending -- and quarantining health-care costs from providing possible relief -- will necessitate huge tax increases.

The net effect of 18 months of Obamaism will be to undo much of Reaganism. Both presidencies were highly ideological, grandly ambitious and often underappreciated by their own side. In his early years, Reagan was bitterly attacked from his right. (Typical Washington Post headline: "For Reagan and the New Right, the Honeymoon Is Over" -- and that was six months into his presidency!) Obama is attacked from his left for insufficient zeal on gay rights, immigration reform, closing Guantanamo -- the list is long. The critics don't understand the big picture. Obama's transformational agenda is a play in two acts.

But Reagan repeatedly increased taxes and spending increased during his term

Reagan raised taxes repeatedly after 1981, including "the largest tax increase in U.S. history" at the time. In a July 9 article titled "What Would Reagan Really Do?" Newsweek reported that, in 1982, Reagan was responsible for "the largest tax increase in U.S. history," and he repeatedly increased taxes in the years following:

It's doubtful, for example, that a contemporary Reagan figure would seek to solve every problem by cutting taxes. In 1981, the former California governor swept into office promising to slash taxes to their lowest-ever levels--and with the Economic Recovery Tax Act, that's exactly what he did. When Reagan arrived in the White House, the top marginal tax rate was 70 percent; by 1987 it was 38.5 percent (roughly the same as the rate under Bill Clinton). But while today's conservatives continue to call for lower taxes in the name of the Gipper--Grover Norquist's Americans for Tax Reform, for example, pressures Republicans to sign a "no new tax" pledge every election cycle--there's simply no evidence in Reagan's record to suggest that he would've followed his signature achievement by pushing for ever lower rates.

In fact, much the opposite. In 1982, Reagan agreed to restore a third of the previous year's massive cut. It was the largest tax increase in U.S. history. In 1983, he raised the gasoline tax by five cents a gallon and instituted a payroll-tax hike that helped fund Medicare and Social Security. In 1984, he eliminated loopholes worth $50 billion over three years. And in 1986, he supported the progressive Tax Reform Act, which hit businesses with a record-breaking $420 billion in new fees. When it came to taxation, there were two Reagans: the pre-1982 version, who did more than any other president to lighten America's tax burden, and his post-1982 doppelgänger, who was willing (if not always happy) to compensate for gaps in the government's revenue stream by raising rates. Today, a truly Reaganesque leader would recognize (like Reagan) that the heavy lifting was finished long ago; last year, for instance, taxes fell to their lowest level as a percentage of personal income since 1950. And he would dial back the antitax dogma as a result. [emphasis added]

Krugman: "[N]o peacetime president has raised taxes so much on so many people" as Reagan. In a 2004 New York Times column, Nobel Laureate Paul Krugman wrote:

But Ronald Reagan does hold a special place in the annals of tax policy, and not just as the patron saint of tax cuts. To his credit, he was more pragmatic and responsible than that; he followed his huge 1981 tax cut with two large tax increases. In fact, no peacetime president has raised taxes so much on so many people. This is not a criticism: the tale of those increases tells you a lot about what was right with President Reagan's leadership, and what's wrong with the leadership of George W. Bush.


For many middle- and low-income families, this tax increase more than undid any gains from Mr. Reagan's income tax cuts. In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent; but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down.

Federal outlays increased during Reagan's term. According to the Office of Management and Budget's (OMB) historical data, total federal government outlays (in constant 2005 dollars) increased 22 percent under Reagan.

Federal employment also grew under Reagan: Newsweek also reported that the "federal employment grew by more than 60,000" under Reagan, noting that "in contrast, government payrolls shrank by 373,000."

In doing so, a 21st-century Reagan would free himself up to finish a bit of business that his predecessor never got around to: reducing the federal deficit. In the 1980 campaign, Reagan pledged to do three things if elected: lower taxes, win the Cold War, and curb government spending. But in his haste to achieve the first two goals, he abandoned the third. On his watch, federal employment grew by more than 60,000 (in contrast, government payrolls shrank by 373,000 during Clinton's presidency). The gap between the amount of money the federal government took in and the amount it spent nearly tripled. The national debt soared from $700 billion to $3 trillion. And the United States was transformed from the world's largest international creditor to its largest debtor. [emphasis added]

Posted In
Economy, Budget, Taxes
The Washington Post
Charles Krauthammer
We've changed our commenting system to Disqus.
Instructions for signing up and claiming your comment history are located here.
Updated rules for commenting are here.