In addition to being the 25th anniversary of the release of the Iranian hostages, today is also the 25th anniversary of the inauguration of Ronald Reagan as President of the United States. To deny that there is a connection between the two events, which happened on the same day within hours of each other, is to deny the reality of the way the world was on that cold January day.
From Election Day 1980 forward, the Iranians knew that they would no longer be dealing with the ineffectual Jimmy Carter, but with a man who made it clear that he intended on rebuilding America’s defenses and at least left the implication that he had no reservations about using force to protect America’s interest. Faced with the choice in front of them, the Iranians made a deal and twisted the knife even further into Carter by making sure that the hostages did not leave Iranian air space until his successor had been sworn into office.
Today’s Wall Street Journal has a lead editorial about another aspect of the Reagan Presidency, Reaganomics and looks at where it stands 25 years later.
Twenty-five years ago today, Ronald Reagan was inaugurated as the 40th President of the United States promising less intrusive government, lower tax rates and victory over communism. On that same day, the American hostages in Iran were freed after 444 days of captivity. If the story of history is one long and arduous march toward freedom, this was a momentous day well worth commemorating.
All the more so because over this 25-year period prosperity has been the rule, not the exception, for America–in stark contrast to the stagflationary 1970s. Perhaps the greatest tribute to the success of Reaganomics is that, over the course of the past 276 months, the U.S. economy has been in recession for only 15. That is to say, 94% of the time the U.S. economy has been creating jobs (43 million in all) and wealth ($30 trillion). More wealth has been created in the U.S. in the last quarter-century than in the previous 200 years. The policy lessons of this supply-side prosperity need to be constantly relearned, lest we return to the errors that produced the 1970s.
And the differences between America in 1981 and America in 2006 could not be more apparent. In January 1981, the unemployment rate was 7.5%. Today it is under 5%. The Prime Rate peaked at 21.5% in December 1980. Today, it is 7.25%, representing a savings of thousands of dollars for ordinary Americans on car loans, credit card payments, and mortgages. And the legacy of Reganomics, once used as a derisive term, continues:
The heart and soul of Reagan’s economic agenda were sound money (making the dollar “as good as gold,” as Reagan used to put it) and lower tax rates. On monetary policy, Reagan has won a resounding victory. Today, nearly all economists agree with Reagan’s then-controversial belief that the sole purpose of monetary policy should be to keep prices stable. Double-digit inflation is a distant memory unlikely to recur anytime soon.
Reagan was lucky, to some degree, in that when he entered office he had an ally in this belief in the person of Paul Volcker. The resulting changes to monetary policy were painful at first, but have inured to the benefit of all Americans.
And monetary policy wasn’t the only area where things changed for the better:
On tax policy, Reaganomics has also carried the day, if somewhat less completely. Tax rates in the U.S. are on average half as high now as they were in the 1970s, and almost every nation has followed the Reagan model of lower tax rates. Even Bill Clinton only dared to raise the top marginal income tax rate back to 39.5%, not 50% or 70%.
Of course, the media doesn’t give Reagan or his ideas credit for the economic boom that has brought us to present-day America, but they do so only be ignoring history:
The Gipper’s critics have written an economic history of the 1990s that they portray as a repudiation of Reaganomics. In this telling–known as Rubinomics–the Clinton tax hikes of 1993 ended the budget deficit, which caused interest rates to fall, which produced the boom of the mid- to late-1990s. In fact, the budget deficit hardly fell at all in the immediate aftermath of the tax hike, and while long-term interest rates fell in 1993, they shot back up again in 1994 almost precisely through Election Day (rising by some 230 basis points from October 1993 to November 1994).
On that day, voters repudiated the Clinton tax hikes and the specter of HillaryCare and gave Republicans control of Capitol Hill to govern on the Reaganite agenda of lowering taxes and shrinking runaway government. Both the stock and bond markets turned upward precisely on Election Day in 1994, beginning a whirlwind six-year rally.
In other words, it was a return to Reaganomics, not its repudiation that is responsible for the largest peacetime expansion in American history.
Ronald Reagan was not perfect, but there is much to admire in what he did from the perspective of this libertarian Republican. This is especially true when you read passages like these from his inaugural address:
From time to time, we have been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. But if no one among us is capable of governing himself, then who among us has the capacity to govern someone else?
Or:
So, as we begin, let us take inventory. We are a nation that has a government?not the other way around. And this makes us special among the nations of the Earth. Our Government has no power except that granted it by the people. It is time to check and reverse the growth of government which shows signs of having grown beyond the consent of the governed.
It is my intention to curb the size and influence of the Federal establishment and to demand recognition of the distinction between the powers granted to the Federal Government and those reserved to the States or to the people. All of us need to be reminded that the Federal Government did not create the States; the States created the Federal Government.
Reagan may not have achieved everything that he set out to do, but he did achieve something and he did show it was possible to actually reduce the size and scope of government. Now, we just need to find more Republicans who want to take up his banner.
Via Michelle Malkin, Mark Tapscott has the text of and an audio link to Reagan’s first inaugural address. And Outside The Beltway’s James Joyner has a piece at TCS Daily on the Twin Anniversaries being celebrated today.
Related Post: January 20, 1981
Technorati Tag: Ronald Reagan
