Read Red Ink for Free Online

promises during his campaign for president: cut taxes, rebuild the nation’s defenses, and balance the budget. He delivered on the first two, but not on the third.
    Later, the notion that cutting taxes would lead to compensating cuts in government spending became known as the “starve the beast” strategy, a phrase made famous by Daniel Patrick Moynihan, the late, erudite Democratic senator from New York. In his usual folksy style, Reagan lent credence to this theory in a February 1981 televised speech: “Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”
    But insider accounts of the Reagan years describe a haphazard, almost chaotic process inside the White House. Some Reagan aides were committed to cutting spending, notably David Stockman, the Paul Ryan of his day. Elected to Congress at age thirty, Stockman left the House of Representatives after four years to become Reagan’s budget director, determined to dismantle vast segments of the welfare state. “If you insisted on a balanced budget but accepted all the illicit welfare-statespending commitments that have been accumulated over the years … you became the tax collector for the welfare state,” Stockman wrote in his memoir. He did not want that role.
    Another group around Reagan, known as the supply-siders, argued that cutting tax rates would unleash a surge of economic activity from the producers in the economy. Within the White House, they derided Stockman and his allies as “root canal” Republicans determined to inflict the pain of spending cuts to pursue a misguided antipathy toward deficits.
    One of the supply-siders, Jude Wanniski, a
Wall Street Journal
editorial writer, had popularized what he called the “Two Santa Claus Theory” in 1976: “The Democrats, the party of income redistribution, are best suited for the role of Spending Santa Claus. The Republicans, traditionally the party of income growth, should be the Santa Claus of Tax Reduction. It has been the failure of the GOP to stick to this traditional role that has caused much of the nation’s economic misery.… It isn’t that Republicans don’t enjoy cutting taxes. They love it. But there is something in the Republican chemistry that causes the GOP to become hypnotized by the prospect of an imbalanced budget.… [T]hey embrace the role of Scrooge, playing into the hands of the Democrats, who know the first rule of successful politics is Never Shoot Santa Claus.”
    On spending, much of the Reagan cabinet and a good chunk of the Republican congressional leadership labored to shield their favorite programs from Stockman’s knife. And they succeeded.
    Even without the spending cuts, the Reagan tax cut passed in 1981. More than half the Democrats in the House voted for the bill, Panetta among them, despite his later criticism of it. He already had voted for a smaller tax cut, a compromise offered by Representative Dan Rostenkowski of Illinois, then the chairman of the tax-writing committee. But that bill had failed. “At that point,” Panetta said in a recent interview, “I thought I’d been fighting [Reagan] on every front, and he was very popular in my district, and I said, you know, having voted for the Rostenkowski tax cut, I just find it very difficult to now turn around and suddenly vote against [the Reagan] tax cut. That’s the scenario.”
    The Reagan tax cut was gigantic: its provisions, the Treasury estimated later, would have slashed federal revenues by 18 percent in the first two years. “If the American political system had acted the way it normally does, it would have lopped off the extremes and forced a compromise within moderate bounds,” Richard Darman, a Reagan White House aide and later George H. W. Bush’s budget director, recalled in his memoir. “But in this case, even as it became absolutely clear that necessary spending control would