It Was Reagan, Not Congress

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It Was Reagan, Not Congress

Some say Reagan had nothing to do with the debt's U turn
They say it was Congressional Democrats. Not true. Had things worked out just as Reagan proposed and predicted, the debt still would have gone up 85% as much. But even this is deceptive. The reason his predicted savings did not materialize was not Congress. The reason was that he predicted much more economic growth from supply-side magic than actually happened. So he counted on taxes that were never collected to help his budgets. In fact a study by the House found that Reagan asked for $29.4 billion more in spending than Congress passed.

From the White House: The Reagan-Bush Debt Explained
"The traditional pattern of running large deficits only in times of war or economic downturns was broken during much of the 1980s. In 1982 [Reagan's first budget year], partly in response to a recession, large tax cuts were enacted. However, these were accompanied by substantial increases in defense spending. Although reductions were made to nondefense spending, they were not sufficient to offset the impact on the deficit. As a result, deficits averaging $206 billion were incurred between 1983 and 1992. These unprecedented peacetime deficits increased debt held by the public from $789 billion in 1981 to $3.0 trillion (48.1% of GDP) in 1992." [emphasis added]

From "Historical Tables, Budget of the U.S. Government, Fiscal Year 2006." Downloaded from www.whitehouse.gov/omb/budget/fy2006/pdf/hist.pdf. Page 5.

High inflation allowed Reagan to misstate an inflated-dollar debt as a real growth in debt. On February 5, 1981, two weeks after taking office, in his "Address to the Nation on the Economy," Reagan said:

"By 1960 our national debt stood at $284 billion. ... Today the debt is $934 billion. ... We can leave our children with an unrepayable massive debt and a shattered economy."

But the 1960 debt he indicates was "smaller" was in fact a much larger fraction of our national income — 56.1% of national income in 1960 compared to the 32.5% fraction in 1981.


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