Larry Kudlow, now chief economic policy adviser to President Trump, wrote the definitive book on the economic policies of Presidents Reagan and Kennedy: “JFK and the Reagan Revolution: The Untold Story of American Prosperity.” The core of the economic policies of Republican Reagan and Democrat Kennedy were quite similar.
When Kennedy entered office, the top income tax rate was 91 percent. Kennedy proposed to cut income tax rates by about 23 percent across the board, reducing that top rate to 70 percent.
Reagan entered office in 1981 proposing a 25 percent income tax rate cut across the board, reducing the top rate to 50 percent. In 1986, he led a bipartisan tax reform effort that reduced rates further, leaving just two rates: a top rate of 28 percent and 15 percent for the middle class, abolishing income taxes for the poor entirely.
For all eight years of his presidency, Reagan also pursued consistent deregulation, sharp restraint of domestic discretionary spending, and restrained monetary policy maintaining a strong dollar.
The Reagan recovery started officially in November 1982, lasting 92 months without a recession, until July 1990, when the tax increases of the 1990 budget deal killed it. That set a new record for the longest ever peacetime expansion.
During this seven-year recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, third largest in the world at the time, to the U.S. economy. In 1984 alone, real economic growth boomed by 6.8 percent, the highest in 50 years. Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20 percent.
With real per-capita disposable income increased by 18 percent from 1982 to 1989, the American standard of living grew by almost 20 percent. The poverty rate, which increased during the Carter years, declined every year from 1984 to 1989, dropping by one-sixth from its peak.
The double-digit inflation of the 1970s was also reversed, dropping from 13.5 percent in 1980 by more than half to 6.2 percent by 1982. It was cut in half again by 1983 to 3.2 percent, never to be heard from again to this day.
The prime rate was cut by two-thirds to 8.2 percent by 1987, on its way down to 6.25 percent by 1992, even while Reagan’s critics insisted the tax cuts would cause rising interest rates. Because of booming economic growth, federal revenues doubled during the 1980s. The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade.
The Reagan boom continued actually for 25 years, from late 1982 to late 2007. Economists refer to it in economic journals as “The Long Boom.” Art Laffer and Steve Moore wrote, “We call this period, 1982-2007, the twenty-five-year boom — the greatest period of wealth creation in the history of the planet.”
Kennedy got similar results from his tax cuts, adopted in 1964. The next year, economic growth soared by 50 percent, and income tax revenues increased by 41 percent! By 1966, unemployment had fallen to its lowest peacetime level in almost 40 years. U.S. News and World Report exclaimed, “The unusual budget spectacle of sharply rising revenues following the biggest tax cut in history is beginning to astonish even those who pushed hardest for tax cuts in the first place.”
Trump’s tax reform followed the mold of Reagan and Kennedy, cutting taxes for every taxpayer, from the poorest to the richest. Trump has also implemented sweeping deregulation, particularly liberating American energy producers to lead the world now in energy production, from oil to natural gas to coal. Trump has also supported stable dollar monetary policy.
But the hysterical claims of the left that bedeviled Reagan and Kennedy are still repeated today in response to Trump’s Republican tax reform. The tax cuts will explode the deficit and debt. That will raise interest rates, and short circuit booming growth and the stock market. The dollar will collapse.
This is coming from the same “fake” news sources who tried to cover for Obama’s puny recovery with less than 2-percent growth, saying it is no longer possible for America to grow faster than that, as it did under both Kennedy and Reagan. Trump’s deregulation and tax reform expectations, however, got the economy growing 3 percent in his very first year. Now the economy is booming at more than 4-percent growth and is likely to grow even faster, to 5 percent and beyond, for a couple of years.
That is because the American historical record is “the deeper the recession, the stronger the recovery.” The economy grows faster than normal for a while to catch up to where it would have been on the normal economic growth trendline.
The steep, scary 2008-09 recession should have resulted in a compensating, historic, booming economic recovery. While the recession supposedly ended in the summer of 2009, that booming recovery never happened under Obama’s failed, neo-socialist economic policies, which only produced long term, less than 2-percent stagnation. When Trump entered office, America’s economy was still $3 trillion behind where it would have been under Reagan’s recovery.
But America’s long overdue, booming recovery from the 2008-09 recession will come now, under Trump’s pro-growth, capitalist policies, pushing growth ultimately to 5 percent, Obama apologists to the contrary notwithstanding. Indeed, Trump’s Republican tax reform, with its business tax cuts and same year expensing of capital investment, is arguably even more powerful than either Kennedy’s or Reagan’s.
We will hear soon that the economic recovery is getting long in the tooth, and renewed recession looms. That fallacy stems from dating the recovery from summer, 2009, but the recovery actually dates from Election Day, 2016, when America was liberated from Obama’s economic repression. Obama has lamented that maybe he arose 10 to 20 years too soon for the American people. But he was actually 80 years or more too late, dating from the socialist 1930s, if not the 1870s when Marx was still writing.
Voters going to the polls this November should remember: Democrats who cannot learn from history are condemned to repeat it.
Uhler is Founder and Chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with both Ronald Reagan and Milton Friedman.
Peter Ferrara is a Senior Fellow with the Heartland Institute and NTLF and teaches economics at Kings College in New York. He served in the White House Office of Policy Development under Reagan, and as Associate Deputy Attorney General of the U.S. under H.W. Bush.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.