Fighting Inflation With Fake Spending Cuts and Budget Cuts

In a piece reprinted from Inquiry Magazine, the author concludes the Reagan administration's tax cuts and spending cuts are a hoax and will accomplish little toward fighting inflation.

| September/October 1981

071 tax cuts - John Takai - Fotolia

The Reagan administration's vaunted tax cuts were more hype than reality, according to one analyst.


This article is reprinted by permission from Inquiry Magazine.   

P.T. Barnum Was Right

The senators on the Budget Committee were feeling testy—or exultant, depending on their party preference—after three days of grappling with President Reagan's budget. Said a depressed Daniel Moynihan: "We have undone 30 years of social legislation in three days."

The Republicans, too, were impressed with the magnitude of the endeavor. "Extraordinary times demand extraordinary efforts," said Pete Domenici of New Mexico. Added Robert Kasten of Wisconsin: "We simply must break from the policies of the past." All around the country the newspapers said the same thing. Whether you were for it or against it, the editorial pages agreed, the Reagan budget was revolutionary, the most sweeping change in American policy since the New Deal.

But if we look closely at the Reagan budget, what we can see is that it's really the most sweeping success in American public relations since William McKinley persuaded the country that the Holy Bible ordained American control of the Philippines.

There are two aspects of this supposed revolution ...deep and startling budget cuts (which reverse the seemingly inexorable trend of the last several decades toward bigger government) and a deep cut in taxes for business and upper-income groups, as prescribed by supply-side economics. These tax cuts are supposed to stimulate large increases in saving, investment, and productivity.

[EDITOR'S NOTE: Put very simply, supply-side theory holds that by reducing taxes, the government can cause more people to save money which — in turn — will make more capital available to businesses, which can borrow the cash to upgrade equipment and so forth ...raising our national level of productivity and resulting in more money for the government and for the rest of us as well.] 

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