In this weekís issue, U.S. News and World Report owner and
editor-in-chief Mort Zuckerman advises Republicans to drop their
advocacy of tax cuts and embrace Clintonomics. He says the recent
New Hampshire primary showed that "people may like tax cuts, but by
2 to 1, they tell pollsters, they prefer [Sen. John] McCainís
approach, and, for that matter, President Clintonís."
Thatís not an argument likely to persuade GOP tax-cutters to
change their minds, nor is Zuckermanís assertion that the Republican
Partyís problem is its "convenient mythology." The party, says
Zuckerman, "is still hooked on nostalgia for Ronald Reagan and the
sense that he won in 1980 by promising tax cuts...But it wasnít
quite like that."
"He won because the country was fed up with Jimmy Carter,"
Zuckerman explains. "Nor were Reaganís cuts good economics. They
didnít trigger an economic recovery. In 1982 and 1983, recall, we
were sunk in the deepest recession since 1929, weighed down by the
Federal Reserveís sky-high interest rates. They were necessary to
crush the inflation Reagan inherited from Carter.... His marginal
rate cuts had some good effects. But what Reagan deserves lasting
credit for is not tax cuts but the way he stood by Fed Chairman Paul
Volcker when everyone was hurting. Indeed, the tax cuts cannot be
mentioned without looking at the effect of the consequent disastrous
budget deficit. The federal government took a huge proportion of
national net savings and competed with private business for the
available pool of capital."
Part of that is true -- President Reagan deserves great credit
for supporting Volckerís war on inflation. But Reaganís tax cuts rid
the nation of cripplingly high rates (itís easy to forget today that
the top federal income tax rate was 70% when Reagan took office in
1980) and set the stage for the robust non-inflationary economic
growth of the 1980s and 1990s. For more, see the Cato Instituteís
Policy Analysis, "Supply-Side
Tax Cuts and the Truth About the Reagan Economic Record."
Itís also hard to say that Reaganís tax cuts werenít a source of
political strength. Reagan made those cuts a centerpiece of his 1980
campaign, and their popularity forced Jimmy Carter to counter with a
smaller tax-cut package of his own. The difference between 1980 and
2000 is that Ronald Reagan ardently advocated tax reductions as good
economic policy, while some of the current Republican candidates
seem to prefer targeted tax cuts that could be interpreted as a form
of constituency politics.