Steve Forbes: Reagan's Legacy and the Current Malaise
[Mr. Forbes, chairman and editor in chief of Forbes Media, is co-author of "How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today's Economy" (Crown Business, 2009). He is also a trustee of the Ronald Reagan Presidential Foundation.]
Today, the Ronald Reagan Presidential Foundation, the Manhattan Institute and The Wall Street Journal will host a morning seminar concerning the economic legacy of Ronald Reagan. The get-together couldn't be timelier.
Reagan came into the White House facing an economy as troubled as ours—one that had even higher unemployment, catastrophic interest rates (18% for mortgages) and a stock market that in real terms had fallen 60% from its mid-1960s levels. When he left office eight years later, the U.S. had become an economic miracle: 18 million new jobs had been created; Silicon Valley had blossomed, becoming a global symbol for innovation; and the stock market was experiencing a bull run that, despite dramatic ups and downs, didn't end until the turn of the 21st century, after the Dow had expanded 15-fold. The expansion of the U.S. economy exceeded the entire size of West Germany's economy, then the world's third-largest.
How did this happen? You could make the case that Reagan's economic miracle had its origins at a Washington, D.C., restaurant in 1974. That December night, 34-year-old University of Chicago professor, Art Laffer, scribbled a single—and now legendary—curve on a cocktail napkin to illustrate to a group of President Ford's advisers why a proposed plan to raise taxes would not increase government revenues. Mr. Laffer posited that deep cuts in existing tax rates would stimulate the economy and ultimately lead to far higher government revenues. Conversely, increase the tax burden and government receipts would fall below expectations because of a weaker economy....
Unfortunately, Reagan was unable to permanently rein in domestic spending and many of his reforms were undone by his successors. Washington politicians slid back into their bad habits, cluttering the tax code with new brackets, exemptions, deductions, phase-ins, carve-outs and special breaks for special interests. And the crucial importance of a strong dollar has been forgotten during the last decade, with terrible results. Today we are once again beset by a Carter-esque malaise, wherein we must accept abnormally high unemployment and the notion that printing more dollars is the way to recovery.
Yet Barack Obama's 2011 State of the Union address was sprinkled with Reagan-like phrases, full of the 40th president's trademark confidence. "The future is ours to win," Mr. Obama said. "But to go there, we can't just stand still." He pledged to "knock down barriers that stand in the way of [American companies'] success." We were told that the president had held meetings with Reagan administration officials, and that he'd even read Lou Cannon's biography of Reagan during his winter vacation....
Read entire article at WSJ
Today, the Ronald Reagan Presidential Foundation, the Manhattan Institute and The Wall Street Journal will host a morning seminar concerning the economic legacy of Ronald Reagan. The get-together couldn't be timelier.
Reagan came into the White House facing an economy as troubled as ours—one that had even higher unemployment, catastrophic interest rates (18% for mortgages) and a stock market that in real terms had fallen 60% from its mid-1960s levels. When he left office eight years later, the U.S. had become an economic miracle: 18 million new jobs had been created; Silicon Valley had blossomed, becoming a global symbol for innovation; and the stock market was experiencing a bull run that, despite dramatic ups and downs, didn't end until the turn of the 21st century, after the Dow had expanded 15-fold. The expansion of the U.S. economy exceeded the entire size of West Germany's economy, then the world's third-largest.
How did this happen? You could make the case that Reagan's economic miracle had its origins at a Washington, D.C., restaurant in 1974. That December night, 34-year-old University of Chicago professor, Art Laffer, scribbled a single—and now legendary—curve on a cocktail napkin to illustrate to a group of President Ford's advisers why a proposed plan to raise taxes would not increase government revenues. Mr. Laffer posited that deep cuts in existing tax rates would stimulate the economy and ultimately lead to far higher government revenues. Conversely, increase the tax burden and government receipts would fall below expectations because of a weaker economy....
Unfortunately, Reagan was unable to permanently rein in domestic spending and many of his reforms were undone by his successors. Washington politicians slid back into their bad habits, cluttering the tax code with new brackets, exemptions, deductions, phase-ins, carve-outs and special breaks for special interests. And the crucial importance of a strong dollar has been forgotten during the last decade, with terrible results. Today we are once again beset by a Carter-esque malaise, wherein we must accept abnormally high unemployment and the notion that printing more dollars is the way to recovery.
Yet Barack Obama's 2011 State of the Union address was sprinkled with Reagan-like phrases, full of the 40th president's trademark confidence. "The future is ours to win," Mr. Obama said. "But to go there, we can't just stand still." He pledged to "knock down barriers that stand in the way of [American companies'] success." We were told that the president had held meetings with Reagan administration officials, and that he'd even read Lou Cannon's biography of Reagan during his winter vacation....