As President Reagan famously said, "The problem is not that people are taxed too little, the problem is that government spends too much."
Reagan, as a true conservative, would have supported "starving the beast" by passing the "
Reagan rode to victory in his 1980 presidential campaign on the back of the 1978 California voter-approved Proposition 13. The initiative permanently cut the state's property tax rate and required a two-thirds majority approval from both houses of the Legislature for any future tax increase. The popular sentiment that drove Proposition 13 was that older Californians should not be priced out of their homes through higher taxes. The proposition's popularity quickly became the "third rail" of California politics, an "untouchable subject" for politicians to try to rescind.
"There is an important point that needs to be stressed to those who regard themselves as fiscal conservatives. By concentrating on the wrong thing, the deficit, instead of the right thing, total government spending, fiscal conservatives have been the unwitting handmaidens of the big spenders. The typical historical process is that the spenders put through laws which increase government spending. A deficit emerges. The fiscal conservatives scratch their heads and say, "My God, that's terrible; we have got to do something about that deficit." So they cooperate with the big spenders in getting taxes imposed. As soon as the new taxes are imposed and passed, the big spenders are off again, and there is another burst in government spending and another deficit."
True fiscal conservatives should have been viscerally afraid of "falling off the fiscal cliff" because expiration of the 2001 and 2003 Bush Tax Cuts would have essentially allowed liberals to bring back
When Reagan entered office, interest rates were at 20%, unemployment was headed to almost 11% and effective tax rates were headed higher as the AMT wiped out middle-class tax payers' mortgage deduction and child exemptions as their wages rose due to inflation. When Reagan fought for his huge income tax cut, he was opposed by liberals and many conservative deficit hawks. But when he ran for reelection in 1984, the economy had added 5.7 million jobs and the new prosperity was actually shrinking deficits by generating more private sector profits and wages.
The "fiscal cliff deal" makes permanent $350 billion per year, or 82%, of the Bush tax cuts. More importantly for the future, Nixon's AMT and other tax rates also now permanently indexed against any rise in inflation. There is a $60-billion increase on the top 1% highest earning taxpayers, but it is the other 99% of taxpayers who are going to be hammered with $165 billion of new payroll and
Reagan was known as the "Great Communicator," but his real nickname should have been the "Great Negotiator." Whether it was movie moguls in Hollywood, liberals in Congress or communists in the Soviet Union, Reagan negotiated spectacularly favorable permanent deals. Reagan would have backed Speaker