When Ronald Reagan was elected president in 1980, the top income tax rate was 70%. Inflation had averaged nearly 9% over the previous eight years. The unemployment rate was over 7%. China’s GDP, in nominal terms, was 3% of America’s. US publicly held debt was 26% of GDP. Discretionary spending was about the same as mandatory spending, about $300 billion a year. The Federal Register of regulations had 73,000 pages. Intel could fit 100,000 transistors per square inch on an integrated circuit. The Dow Jones industrial average was under 1,000 and at roughly the same level as in 1966. The four biggest US banks held 15% of total bank assets. The top 1% of households had an average annual income, adjusted for inflation, of $800,000 a year. Health care spending was 10% of GDP. Apple Computer was about to go public in a month, achieving a market capitalization of $2 billion. More than 19 million Americans worked in manufacturing.
Reagan lowered tax rates, slashed nondefense discretionary spending, supported the Volcker Fed’s war on inflation, and cut the Federal Register by a third.
Today, the top income tax rate is 40%. Inflation is less than 2%. The unemployment rate is nearly 8%. China’s GDP is half of America’s (three-fourths based on purchasing power parity). US publicly held debt is 76% of GDP. Mandatory spending is now 70% larger than discretionary spending (which is 20% lower than where it was in 1980), around $2.2 trillion a year. The Federal Register of regulations has 80,000 pages. Intel can fit 2.5 billion transistors per square inch on an integrated circuit. The Dow is at 14,000. The four biggest US banks hold more than 50% of all total bank assets. The top 1% of households have an average annual income, adjusted for inflation, of $1.3 million a year. Health care spending is 18% of GDP. Apple has a market cap of more than $400 billion. Just under 12 million Americans work in manufacturing.
So what would pro-growth, pro-market, pro-free enterprise Reagan — who would have been 102 today — talk about if he was the guy giving the State of the Union address next week? Would across-the-board tax cuts be his top priority? Would fighting inflation? Deregulation? Ending the Fed?
What would Reagan say?
I would like to think he would advocate new ideas based on timeless principles such as ending the tax code’s bias against investment and parents, eliminating crony capitalist subsidies for banks, health care reform built around competition and choice, using technology to create a world-class K-12 education system, and lower the cost of higher learning.
What do you think Reagan would say? What would Reagan do?