The real start of the Reagan Era was 1983, not 1981. It’s just not right to blame Reagan’s tax cuts for all of Carter’s policies still in place in the beginning of Reagan’s term.
Look at the charts above and see if you don’t think this is a period of outstanding economic growth. The charts are the broadest measures of economic performance and are available to anyone. They paint the correct picture of the effects of the Reagan tax rate cuts.
The chart on top shows quarterly real economic growth rates that rocketed as soon as the tax cuts went into effect. Average annual real GDP growth for the years 1983 through 1989 was 4.4%. The chart on the bottom shows the same story with employment, with the employment-to-population ratio cratering as the tax cuts went in effect before beginning a six percentage point climb through 1990.
I think these two charts say it all.
Honestly, what do you think the U.S. economy would look like today if, for the whole period of 1980 through 2015, we had kept the highest marginal income tax rate at 70% starting at $108,300 of income, a capital gains tax rate on nominal capital gains at 45% and an income tax that started out at $2,300 with a rate of 14%?
• Laffer is founder and chairman of Laffer Associates and was a member of President Reagan’s Economic Policy Advisory Board.