Taxes

Taxes: What Would Reagan Do?


President Reagan answering questions at press conference at the White House in 1987

Photograph by Dirck Halstead/Time Life Pictures/Getty Images

President Reagan answering questions at press conference at the White House in 1987

Were he still alive, Ronald Reagan would be 101 this year. I asked four experts—Reagan’s budget director, James Miller; Reagan’s chief economic adviser, Murray Weidenbaum; and Reagan biographers Lou Cannon and Craig Shirley—what the Gipper would say about taxes if he were again a young man of 69, accepting the Republican nomination for president.

Would Reagan lead the crusade for low taxes and small government? Or would he be so alarmed by the flood of red ink that he would consider some tax increases as part of a deficit reduction package? After all, Reagan did sign several tax increases to shrink budget deficits while in office.

The question is very much alive. President Barack Obama said in April that the Republican Party has moved so far to the right on taxes and other issues that Reagan “could not get through a Republican primary today.” Mitt Romney, his Republican opponent, responded, “I actually think Ronald Reagan would win handily in a primary and frankly in all the primaries.”

Here are edited remarks from Miller, Weidenbaum, Cannon, and Shirley:

James Miller III, who served as Reagan’s budget director from 1985 to 1988. He is a senior fellow at the Hoover Institution at Stanford University and a senior adviser at Husch Blackwell, an international law firm.

The parallel with 1980 is fairly close. You have an economy that’s in the doldrums. It’s not releasing pent-up entrepreneurship. Government is accounting for far too much of the nation’s output. You have regulatory restraints. The major difference is you do not have inflation.

Reagan would be advocating to take the government regulators off the throats of entrepreneurs, take the taxman out of the public’s pocket, and constrain the government’s avarice for spending the people’s money.

I think President Reagan would be very comfortable in today’s Republican Party. He would be an advocate of tax cuts, just as he was then. Keep in mind that the tax rates we have today are higher than after the tax reform of 1986. He would lament where we are today.

There was only one Ronald Reagan. He was able to sell his points in a way that no one else could. Governor Romney has not as yet been able to do that. We’ll see later this week. He may surprise a lot of people and articulate a vision that’s simple and memorable.

Murray Weidenbaum, chairman of Reagan’s Council of Economic Advisers in 1981 and 1982. Now a professor at Washington University in St. Louis.

Reagan was a tax cutter. Sure, he was a spending cutter, too, but he responded to the appeals that the key members of the cabinet made to the initial budget cuts that [Budget Director David] Stockman, [chief domestic policy adviser] Marty Anderson, and I put together. The individual members of Cabinet would object. More often than not, after listening to them and our counter-arguments, he would say something like, ‘Mac Baldrige [Jr., the Commerce Secretary] is a nice man. I have to show him my support.’ He would cut back our proposed cuts.

Clearly his heart was more in the tax cuts. He understood the need to cut spending. But he didn’t feel it the way he did on the tax side. We experienced a rise in the budget deficit and he was concerned, but not enough to hold off on the tax cuts or really cut spending more deeply.

When you get down to it, it may not be terribly different [with Romney]. Large spending cuts are hard to carry through. Tax cuts are sort of easy to do. There aren’t that many people opposed to extending the Bush tax cuts.

That [1982 tax increase] was a big battle inside the administration. He reluctantly went along. It ran counter to his whole economic policy approach. But a number of us, from [Chief of Staff] Jim Baker on down, were concerned about the big deficits’ inflationary effects. In retrospect, I’d be more concerned with getting out of the sharp recession. That was not the time to increase taxes.

We were pushing for big spending cuts. We needed to do something on the tax side to show we weren’t just picking on your spending program; we really were trying to cut the deficit.

Lou Cannon, author of President Reagan: The Role of a Lifetime and several other books on Reagan.

Of course the Republican Party has moved to the right on a lot of issues since Reagan was there.

First of all, it’s impossible to know [what Reagan would do today]. I never liked hypothetical questions like what Grover Cleveland would have thought about the Holocaust. Circumstances are different.

Reagan never liked taxes. He always opposed taxes, tax increases. I discuss the reasons why in my book. He started making money for the first time when the marginal rate was 90 percent.

His rhetoric was always anti-tax. If he were around today, I’m sure he would be calling to preserve all the tax cuts. He believed very strongly that if you reduce taxes, you unleash productivity.

The practice was different, though. As governor of California in the 1960s, when taxes were not a dirty word for Republicans, he supported the largest tax increase for any state. After he became president, it’s safe to say four to six times he agreed to tax increases. It’s not what his rhetoric would have been, but he was extremely practical.

Reagan wouldn’t be calling for tax increases, but if he were president he would strike the bargain, the deal. He was a very good politician.

Neither side really wants to say that. The liberals still don’t want to say how effective a leader he was. The conservatives want to portray him as ideologically consistent. It’s not that he was inconsistent. It’s that he got the job done.

Craig Shirley, author of two books on Reagan, Rendezvous With Destiny and Reagan’s Revolution. Also president of Shirley & Banister Public Affairs and a Republican fund-raiser.

Reagan would recast the debate. This is not about taxes. This is about power and where power resides. Reagan explained that his tax cuts were about reordering man’s relationship to the state. He’d make it about the people vs. the government.

Romney and the Republicans have gotten themselves into a defensive posture, arguing over whose money it is.

Reagan was ambivalent [about the 1982 tax increase he signed]. He’d only done the deal because he’d been promised by [House Speaker Tip] O’Neill that there would be $3 in cuts for every $1 raised. He never did it again because the cuts never came forth.

He did support increasing Social Security taxes. He considered that to be sacrosanct. He was pragmatic when he had to be.

Romney is definitely to the left of Reagan. Reagan was the head of the national government for eight years, but nobody would ever say he was a part of the system. Reagan was a populist. The Bushes, Romney, the others, are not populists.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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