REAGAN LEGACY WILL DEPEND ON WHETHER BUSH CAN RESTORE SANITY TO THE BUDGET
KINGSLEY GUY, Editorial Page EditorSUN-SENTINEL
True to the cowboy in him, Ronald Reagan last week told an attentive audience, "Come January, when I saddle up and ride off into the sunset, it will be with the knowledge that we've done great things."
The outgoing president made his remarks during a testimonial dinner for retiring U.S. Rep. Jack Kemp, a conservative Republican from Buffalo who a colleague of mine says was the best third-and-33 quarterback he ever saw play professional football.
Kemp has been one of Congress' foremost advocates of tax-cutting and a staunch ally of Reagan's. It is in the realm of tax cutting that Reagan sees perhaps the greatest legacy of his administration.
At the Kemp dinner, the president said: "What we have done here in America, the economic model we have created, truly has become what Jude Wanniski described as 'The Way the World Works.' "
Wanniski, if you recall, is the former Wall Street Journal editorial writer who, as a supply-side guru, helped popularize tax cutting and the Laffer Curve. As legend has it, economist Arthur Laffer first drew his famous curve more than a decade ago on a napkin, during dinner with Wanniski.
According to the Laffer theory, demonstrated by the curve, by cutting tax rates and allowing people to keep more of the fruits of their labor, economic activity is stimulated and tax revenues to the national treasury actually increase.
Reagan liked the idea so much that he parlayed the curve on that napkin into victory in the 1980 presidential race. He promised massive tax cuts, a massive military buildup and, last but not least, a balanced budget by the end of his first term made possible by his self-financing tax cuts.
Things didn't quite work out the way Reagan promised. With Reagan's second term about to end, the federal budget deficit now stands at about $150 billion, having peaked at $220 billion in 1986. During the last eight years, more red ink has been added to the nation's ledgers than during the previous 200 years of United States history.
America has gone from the world's largest creditor to the world's largest debtor, in part because some guy doodled on a napkin during dinner with an editorial writer.
Now, the fact that the United States has added more than a trillion dollars to the national debt since the Reagan tax cuts were implemented should not automatically be considered a vote against tax cutting. Permitting people to keep more of what they earn can pay enormous dividends for a nation.
President John F. Kennedy, a supply-sider from the word go, cut taxes and launched the United States on the economic boom of the 1960s. Even the welfarist Swedes cut tax rates a few years ago to boost their economy. The highest rates had exceeded 100 percent when it finally dawned on the Swedes that people don't have much incentive to work when they lose money in the process.
Kennedy and the Swedes, however, didn't cut taxes simultaneously with launching the largest peacetime arms buildups in their respective nations' histories.
During the 1980 campaign, George Bush had a name for Reagan's contention that he could cut taxes, pay for a vastly expanded military and balance the budget all at the same time. He called it "voodoo economics," a term he quickly took out of service after he was tabbed to be Reagan's vice president.
A certain irony has become apparent now that Bush is about to take over Reagan's job. Eight years ago, Bush succinctly warned that Reagan's plans would result in massive budget deficits, but he kept his mouth shut after joining the Reagan team. Today, Bush is the man who must lead the nation toward a balanced budget and rescue it from the insanity of massive deficit spending. And Bush will have to come to grips with the deficit after winning the presidency, like Reagan, with an anti-tax campaign.
Could this be the Law of Karma at work?
Reagan is boasting about his legacy as he bows out and George Bush is praising the president to the hilt. With the economy reasonably robust, the boasts and praise seem justified. Incentives to work hard have been restored and the Reagan administration has, indeed, altered the way the nation and the world work, seemingly for the better.
Whether Americans in the future continue to praise the Reagan administration, however, will depend on how well Bush is able to address the problem of the red ink created during the Reagan years. The federal deficits are putting the nation deeper and deeper in hock, and unless something is done about them, they eventually will rob the United States of so much of its wealth that it will be less and less able to compete economically with the rest of the world.
The word voodoo hasn't been uttered by George Bush for a while, but if the economy collapses as a result of massive deficits, the final irony could find George Bush poking pins in a Ronald Reagan doll.