President Biden has been traveling the country, touting the benefits of Bidenomics, claiming his tax and spending policies have been an economic success.
The President says his approach is a better alternative to Reaganomics, which he constantly refers to as trickle down economics, or tax cuts for the rich.
He argues that the Reagan approach has never worked, and that his tax and spend policies will produce stronger economic growth.
But history shows that free market policies of low tax rates and limited spending have consistently led to stronger economic growth.
In the early 1980s, with the economy facing double digit inflation and a recession, President Reagan’s economic recovery program was enacted by Congress with bipartisan support. The Reagan tax cuts were not tax cuts for the rich.
His tax cuts reduced tax rates across the board in every tax bracket. Every taxpayer received tax relief, and everyone benefited from the subsequent higher economic growth.
According to the Joint Tax Committee, two-thirds of the tax cuts went to middle-income taxpayers. Only six percent went to the top income level.
More importantly, the Reagan tax cuts worked, producing the longest peacetime economic expansion since World War II. The tax cuts ignited an economic boom, with real GDP increasing 7.9% in 1983 and more than 8% in the first half of 1984. All told, economic growth averaged nearly 5% a year through 1988.
By comparison, real GDP has averaged only 2% a year since 2007, and an anemic 1.3% over the last year and a half. CBO is projecting the economy to grow at only 1.7% a year for the next decade.
Under Reagan, inflation dropped from double digit levels to 4%. The unemployment rate was cut in half, and 20 million new jobs were created. Business investment soared, and real income grew at every level. By the end of Reagan’s second term, the U.S. economy was one-third larger than when he took office.
Biden used to appreciate the benefits of pro-growth economic policies.
Then-Senator Biden voted for the Reagan tax cuts, saying in a Senate speech that he has “long advocated a reduction in the tax burden for individuals and businesses,” and that the tax cuts would “give a boost to the sluggish economy and encourage businesses to invest to achieve greater productivity.”
That is exactly what happened. Thanks to the corporate tax cuts, manufacturing productivity grew at an average annual rate of more than 4%, nearly 50% faster than during the period 1948-1973, leading to higher wages, better jobs, and greater growth.
Biden was right then, and he is wrong now.
We need to move away from Bidenomics and put in place the Reagan pro-growth policies of low tax rates and spending restraint to unleash stronger economic growth.
