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By Ed Driscoll · June 10, 2004 01:00 PM · Capitalism, the Unknown Ideal

Stephen Moore writes:

In 1982 the Dow Jones industrial average hit a low of 800. After the final pieces of the Reagan tax cuts were installed, the market rocketed upward for 18 consecutive years. From 800, the Dow rose to 10,000 — creating between $15 trillion and $20 trillion in new wealth and industries. The Dow would have to climb to 100,000 by 2020 to match this Herculean performance. By clearing away the wealth destroyers of high tax rates and high inflation, U.S. companies became far more productive, profitable, and valuable.

The economy also created 15 million new jobs under Reagan and grew in real terms by 40 percent. Some have likened this to adding a new California to the U.S. economy.

By the end of the 1980s, in what was a fitting tribute to the Reagan program, almost all industrialized nations had sharply lowered tax rates to regain a competitive position lost to the U.S. in the decade. Reagan would note that "Imitation is the sincerest form of flattery." In this way, Reaganomics saved not just the U.S. economy from worldwide depression, but the entire global economy as well.

The Reagan way was spurned throughout the 1980s as "voodoo economics" (one of George Bush Sr.'s few memorable comments.) Many college textbooks to this day even argue that Reagan's economic policies were flawed because they created record budget deficits. But the textbooks don't mention that as the national debt rose by $2 trillion, national wealth rose by $8 trillion. They also don't mention that the Laffer curve worked: Lower tax rates did generate more tax revenues at the federal, state, and local levels. Federal tax collections rose from $500 billion in 1980 to $1 trillion in 1990.

Moore quotes Arthur Laffer, who says that at Reagan's first cabinet meeting as president, "Reagan, the seasoned actor, waited for silence in the Cabinet Room. He then stood and said, 'Gentlemen and ladies, I hate inflation, I hate taxes, and I hate Communism. Do something about it.'"

They did.

UPDATE: Get a load of this quote by Tom Brokaw, from a 1983 interview with far-left magazine Mother Jones:

“I thought from the outset that his ‘supply side’ [theory] was just a disaster. I knew of no one who felt that it was going to work, outside of a small collection of zealots in Washington and at USC – Arthur Laffer, Jack Kemp. What I thought quite outrageous was the business community, which for years carped and complained that it could never get a President sympathetic to its needs, finally got its champion, Ronald Reagan. Then, to its horror, it discovered that he was actually going to press ahead with supply side – a theory whose disastrous consequences businesspeople began desperately to prepare for, but did not publicly warn the rest of the country about. They knew it simply could not work. But what they did was look to their own little life raft and not to anyone else’s.”
Lots more quotes in a similar vein via that same link.


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