February 6 marked the 99th birthday of one of our most successful and beloved former presidents, Ronald Reagan.
At this time of economic uncertainty and global tension, it’s worth recalling the challenges Reagan faced when he took office and what he did to conquer them.
Reagan’s legacy rests on two central achievements: First, he rejuvenated a stagnant economy, setting the stage for a lengthy period of economic expansion. Second, he helped win the Cold War — peacefully.
When Reagan came into office, the country was suffering from stagflation, the simultaneous occurrence of high unemployment and soaring inflation. He championed tax cuts, spending discipline, deregulation, free trade, and sound money as the foundation of an economic recovery.
In 1980, the highest marginal income-tax rate was 70 percent. In 1981, Reagan insisted on slashing it to 50 percent, and successfully pushed lowered tax rates across the board. In 1986, he got Congress to trim marginal income-tax rates again, bringing the highest rate down to 28 percent.
Here’s how economics writer Steve Moore has described the impact of Reagan’s policies: “After Reagan’s tax-rate cuts, real median family incomes, which had fallen sharply during the stagflationary period from 1977-82, rose by nearly 10 percent. From 1981 to 1989, every income quintile — from the richest to the poorest — gained income, according to the Census Bureau economic data. When Reagan left office the market had more than tripled in value…. The economy grew by more than one third.”
Reagan understood that marginal tax-rate reductions serve as a catalyst for economic growth. Such tax cuts are broad-based and lower rates for as many taxpayers as possible. They provide incentives to work, invest, save, and take entrepreneurial risks.
That’s what differentiates Reagan’s tax strategy from President Obama’s. Rather than marginal tax-rate reductions, the current administration favors tax credits to reward actions of which it approves, such as buying a hybrid car or weatherizing your home. It proposes to pay for these tax credits by raising tax rates on other Americans.
A better way to bolster the economy is to follow President Reagan’s example of pro-growth across the board tax cuts.
Reagan’s second great accomplishment was ending the Cold War, as the saying goes, “without firing a shot.” An achievement of this magnitude is rare.
As the late historian John Patrick Diggins emphasized: “American history has seen nothing like Reagan’s achievement over two centuries of unrelenting conflict. . . . Since the era of Washington and Adams, Reagan was the only president to have resolved a sustained, deadly conflict without going to war.”
Reagan’s predecessors believed that relations between America and the Soviet Union could be stabilized, and that communism could be contained, but not defeated. Reagan refused to accept that. He believed that Soviet communism was an evil ideology, inferior to democracy in every way, and that America could win the Cold War.
He reminded the world what the Soviet Union was: a totalitarian state that enslaved its own people. By calling it an “evil empire” and declaring that it would one day land on the “ash heap of history,” Reagan rattled Soviet leaders and electrified dissidents and pro-democracy activists throughout the Communist bloc.
He also refused to placate the Soviet Union, famously walking away from the Reykjavik arms talks after Mikhail Gorbachev demanded that the United States give up its missile-defense program. The Soviets learned not to underestimate him.
President Ronald Reagan knew that democracies and dictatorships do not stand on equal footing. Moral clarity, steely resolve, and a willingness to make tough decisions helped Reagan peacefully end the Cold War. The lessons of his leadership can help us confront the conflicts of today.