What Would Reagan Say If He Were Giving the State of the Union Speech Next Week?

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 non-defense 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 lowering the cost of higher learning.

What do you think Reagan would say? What would Reagan do?

  1. Matthew

    Mr. Obama, Tear down this pall!

  2. Copperfield

    “Government is not the solution to our problems, government is the problem.” 

    Just off the top of my head, I’d think something like that (read with cheek). 

    Really though, he and Volker engineered the ’82 recession to slay inflation, but his administration was busy reducing taxes and regulation so that the economy would recover quicker and the growth phase would be more robust and sustained.  Today he would advocate reducing spending and senseless regulation, but (without saying so) would have to engineer another “on paper” recession.  Simply because G is included in the equation: GDP = C + I + G + NX, top line GDP would appear weaker with massive cuts to the G in the short term.  But, with sensible regulatory reform and perhaps a supply side tax cut (especially to the corporate rate) combined with simplification, the private economy would come roaring back. 

    He would also have more social survey information now and I would imagine would use some of the work cited by Arthur Brooks about how earned success is the best path to happiness and how the dependence fostered by entitlements robs the citizen of his chance to be productive.  It fits well with timeless conservative principles. 

  3. John Walker

    I’ll bet he wouldn’t have changed a word.

    It almost makes you shiver to realise how relevant these words are today.

    “Why shouldn’t we believe that?  We are Americans.”

    And he did it all in twenty minutes.

  4. Douglas

    “What in God’s name have you people done to my country?”

  5. Sisyphus

    He would talk to us of the Constitutional mechanism for the impeachment and conviction of any federal officer for high crimes and misdemeanors and then proceed to lay out a handful of brief articles of impeachments, each with a compelling anecdote, because he always remembered to leave them wanting more.

    He would work up the speech with that whippersnapper Robinson, always good at turning a phrase, just ask Gorbachev. They would hide the real speech from the rest of the staff and cabinet because it just would not be worth the hassle.

    He would step up to the podium, ignore the teleprompter, and deliver the real speech to the gasps and thrill of his own people.

  6. Irene F. Starkehaus

    Run you fools.

  7. Joseph Eagar

    I propose a new Code of Conduct rule: never write a post like this again.  Asking what Reagan would or wouldn’t do is pointless; the man was not an ideological saint.  Remember Dick Cheney’s phrase?  “Reagan proved deficits don’t matter”?

  8. Joseph Eagar
    Copperfield:  “on paper” recession.  Simply because G is included in the equation:  GDP = C + I + G + NX, 

    That’s not “on paper.”  GDP measures everything the economy produces, which is the same as measuring (short-term, backwards-looking) final demand.  Government spending, in other words, purchases real goods, which are produced as part of GDP.

    The only effective way to cut government spending is to freeze it (in nominal terms), while instituting economic reforms that accelerate economic growth.  With spending constant and the economy growing, the deficit shrinks (as in the 90s), with inflation reducing spending in real terms.

  9. Lenny Analias

    God help me!  We have a lot to do!

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