If there was a date when Americans stopped seeing government as a source of solutions for big problems and instead saw it as a force to be restrained, it may have been 30 years ago this week. That’s the view of historian Douglas Brinkley, who points to the American Recovery Tax Act signed by President Ronald Reagan on Aug. 14, 1981.
The law aimed to cut federal taxes by $750 billion over five years. “And this is only the beginning,” Mr. Reagan pledged at the signing ceremony.
Mr. Brinkley asserted in an NPR interview that from 1932 until Mr. Reagan’s election in 1980, most Americans saw the federal government favorably. Government’s record through those 50 years made the case.
New Deal programs eased the pain of the Great Depression of the 1930s. Armed forces and material were marshaled to defeat Germany and Japan in World War II in the 1940s. An interstate highway system was built in the 1950s. A health care safety net was created for the elderly and poor, and inner-city and rural poverty was targeted for eradication in the 1960s. Better environmental management — air, land and water — was a government focus in the 1970s.
“It was bipartisan,” Mr. Brinkley said. “There was a national belief that the federal government can make your life better.”
But when inflation and double-digit interest rates ruled in the late 1970s, it was easy to make the case that government wasn’t the solution, as Mr. Reagan famously said, it was the problem. The growth in the scope and cost of assistance programs that began with the New Deal and multiplied with the Great Society also were an easy target for Mr. Reagan.
The American Recovery Tax Act put the Reagan doctrine of supply-side economics — the idea that making it easier for employers to make a profit would help all — into the books. Among its key components were cutting the top income tax rate from 70 percent to 50 percent and cutting individual income tax rates by 23 percent over three years. It also instituted a 10 percent cut for two-earner married couples, a hike in the estate tax exemption and a cut in the windfall profit tax.
Government should “stand by our side, not ride on our back,” Mr. Reagan said 30 years ago.
Mr. Brinkley argues that current Republican presidential candidates have inherited the values enshrined in this first major Reagan tax bill. All have pledged to not raise taxes. Yet Mr. Reagan’s tax cuts and military spending launched the rise of deficits and debt that continue to plague the nation. From 1981 to 1995, the federal debt as a percentage of gross domestic product grew from about 32 percent to about 67 percent.
Mr. Reagan’s trickle-down economic theory is widely discredited now, but he made tax cuts “part of the DNA of the Grand Old Party,” Mr. Brinkley said. In the 30 years since the landmark tax act, middle-income earners have seen flat growth, the wealthy have gotten wealthier and government debt has grown. It’s time for GOP candidates to adapt, not replicate.