Tax and Spend by Molly C. Michelmore

Author:Molly C. Michelmore [Michelmore, Molly C.]
Language: eng
Format: epub
Tags: History, United States, 20th Century, Political Science, Public Policy, Economic Policy
ISBN: 9780812206746
Google: cMwWrVr0MDUC
Publisher: University of Pennsylvania Press
Published: 2011-12-30T22:17:23+00:00

Liberalism and the Reagan Revolution

In August 1981, President Reagan signed into law two landmark bills that marked both the beginning and the end of the Reagan revolution in domestic policy. The first, the Omnibus Budget Reconciliation Act (OBRA), promised to “restrain the size and cost of government” by slashing federal budget expenditures by $130 billion over three years.92 The second, the Economic Recovery and Tax Act (ERTA), made major changes to the nation's corporate income tax, provided for a 25 percent three-year, across-the-board reduction in marginal individual income tax rates, and, perhaps most importantly, required that individual tax brackets be annually adjusted—or indexed—for inflation.93 Introduced as a comprehensive economic recovery package in February, and passed with significant Democratic support, the tax and spending bills marked a major victory for the White House. According to Richard Darman, Reagan's deputy chief of staff, together OBRA and ERTA made up the “largest single spending control bill and the largest single tax bill in the history of the Republic.”94 For the president, the tax and spending bills signaled nothing less than a domestic revolution, “a turnaround of almost a half-century of a course this country has been on…an end to the excessive growth in government bureaucracy and government spending and government taxing.”95

Tax and budget cuts emerged as politically meaningful issues in the context of a stagnant economy plagued by spiraling inflation and a widely perceived crisis of political and economic leadership. The overwhelming popularity of California's Proposition 13 alerted policymakers to the political value of tax cuts. Enterprising politicians, convinced that the New Deal coalition had all but shattered, turned to tax cuts to bind together a new political majority. The federal income tax, in particular, had grown increasingly unpopular over the course of the 1970s. According to a May 1980 study by the Advisory Council on Intergovernmental Relations, the number of Americans who believed the federal income tax was the “worst” or “least fair” tax rose from 19 percent in 1972 to 36 percent in 1980, an increase of almost 90 percent.96 This general dissatisfaction, however, did not necessarily translate into political action. Although most Americans surveyed agreed that their taxes “were too high,” few believed that high taxes were among the “most important” problems facing the nation. In other words, tax cuts aroused sufficient public enthusiasm once offered, but the public did not take a leading role in demanding them. Indeed, despite the Reagan administration's repeated claims to the contrary, its tax and spending cuts did not simply answer the transparent demands of the people.97 Rather, they were designed and sold to the general public by political entrepreneurs within the Republican Party and the larger conservative counterestablishment of the 1970s. Richard Nixon had first recognized the potential of tax cut politics in the wake of the debate over the FAP, but it was not until the late 1970s, in the midst of a severe economic crisis, that tax cuts moved decisively to the front of the Republican agenda.

The widely noted, if overstated,

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