Twenty-five years ago today was a critical turning point in our nation’s history. On that day, Ronald Reagan was inaugurated president of the United States. He inherited an economy that was in shambles. Inflation was running rampant, penalizing work, savings, and investment. The top marginal income tax rate stood at 70 percent, punishing our most productive Americans and discouraging them from working. Our confidence as a nation was fragile.
In Reagan’s first inaugural address he said: "The economic ills we suffer will go away because we, as Americans, have the capacity now, as we have had in the past, to do whatever needs to be done to preserve this last and greatest bastion of freedom."
I admired his words at the time, but I was skeptical. Politicians always make grandiose speeches, but true policy changes are difficult to accomplish. Reagan cut through all of the rhetoric and actually did something. He succeeded in restoring economic growth, prosperity, and American greatness, and he did so spectacularly.
Reagan’s core policy agenda has been implemented fairly consistently for the past 25 years. With a few notable setbacks, he created a foundation for prosperity based on sound money, low marginal tax rates, and efficient, minimal regulation that has remained in place to this day.
The results have been stunning. When Reagan took office, payroll employment stood at below 90 million; it’s now over 135 million — that’s 45 million more working Americans. Gross domestic product, the size of the U.S. economy, stood at about $5.2 trillion (in chained 2000 dollars); it has since more than doubled, after adjusting for inflation, to well over $10 trillion. The stock market in 1981 has been stagnant for decades, the Dow Jones was under 1000 and still buried on the business pages; the market has since skyrocketed, with the Dow topping 11,000 last week, as stock ownership has become an engine of prosperity for well more than 50 percent of American families.
I could go on all day trying to quantify the economic miracle of the Reagan Revolution, but it really goes beyond numbers. At its root was the restoration of the American dream, the belief that, given the economic freedom created by sound money and limited government, each of us has boundless potential to achieve based on hard work, ingenuity, and entrepreneurial risk-taking.
In 1981 I was in the process of growing my business as many Americans were. Ronald Reagan gave the business community confidence that we could grow our businesses in a prospering economy. He created the environment of lower taxes, smaller government, and less regulation in which we could excel.
We sometimes have a tendency to take our prosperity for granted. We have a sense that because we’re America, any economic setback is temporary and we’ll always come out on top. This optimism comes from Reagan himself, but sometimes I worry that since he’s left office it may no longer be valid. It’s important to remember that things could have been otherwise. We must not take the continuation of Reagan’s legacy for granted.
Government is once again growing, encroaching on the private sphere and limiting economic freedom and opportunity. Our anachronistic corporate tax system combines with a thicket of regulations to drive some of our best businesses offshore. The personal income tax has grown nearly as convoluted as it was before Reagan’s landmark tax reform, and the top rate still stands 25 percent higher than his top rate. Worse yet, there is a now a series of large tax hikes scheduled to occur automatically over the next several as the temporary provisions of recent laws expire. As Reagan himself said, the American people have the capacity to meet all of the economic challenges in front of us — I hope that our political leaders have the will to put and keep in place policies that will let them.