The Good Old days of Ronald Reagan

Looking over some old “poll” questions – one of them asked why you liked Ronald Reagan (if you did).   The poll had several answers to see just how selective people’s memories are.

The Poll

One “wrong” answer was “He shrunk the size of the Federal Government”.   Let’s review that. 

Ronald Reagan was in office from January 1981 to January 1989.    An incoming president inherits a budget already in place since the Government “year” starts in October.   That’s probably a good thing, since an incoming President likely has very little staff in place for the first 6 months.

Those are absolute dollars, not inflation adjusted.   You will note that in 1983, the income to the U.S. Treasury actually fell – even in real dollars – following the Reagan tax cuts in 1981 – not increased as Sean Hannity and the Heritage Foundation insist.   “Nearly Doubled” just reflected that inflation was out of control when President Reagan took office from Jimmy Carter.  From January 1981 to January 1989, inflation rose a total of 39.2%.   So applying that to the $517 billion in 1980 revenue gives an inflation adjusted baseline of $832 billion for 1988 if Reagan hadn’t changed anything.  $909 is nowhere near “twice the size of ” $832.  

The $590 billion in spending in 1980 would have been $832 billion in 1988.   In real dollars, Federal Government spending during the Reagan years went up 29%. In no year did the spending decrease from the prior year.  

So no matter how you slice it, Ronald Reagan did not “reduce the size of government”.   The most you might say is he reduced the “size of the growth” that would have happened if a Democrat had been President.

Another answer was that “He didn’t propose any new government programs”.

In addition to granting amnesty to illegal immigrants, President Reagan proposed the Strategic Defense initiative and increased spending and the Federal role on the “War on Drugs” in 1987.  ERTA (the [Jack] Kemp / Roth Act) passed in 1981 laid the foundation for Savings and Loans to be deregulated and enabled the process of local Mom & Pop S&L’s to bundle mortgages for resale to Wall Street Bankers.   That “deregulation” resulted in the implosion of the S&L industry following the passage of TEFRA in 1986 at an ultimate cost to clean up of about $120 billion that came due during the early years of the George H.W. Bush administration.

Dereguation + Government Guarantees = Moral Hazard