January 20, 2006
That day represented the high-water mark of Democrat control in Washington, D.C. For Democrats, it all went down hill from there. It was a gradual process, granted. And power shifted back and forth for a while, ebbing and flowing until 1994 when the GOP firmly took over both chambers of Congress.
During those twenty-five years, a shift occurred among the American electorate. Conservative ideas were listened to and, in many cases, accepted. The editors of OpinionJournal.com take a look this morning at the lasting effect of the ideas once derided as "Reaganomics" that have since been vindicated by a quarter century of evidence.
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).It's time for Republicans in Congress to celebrate this anniversary by embracing reform and turning the tide on the growing Leviathan that is the Federal Government.
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. By 1998, growth and fiscal restraint delivered a budget surplus for the first time in nearly 30 years. In 1997 President Clinton signed a further reduction in the capital gains tax, which propelled investment and the stock market to even greater heights.
The latest chapter of this story is the 2003 income and investment tax cuts enacted by the current President Bush. As in 1981, opponents insisted those tax cuts would harm the economy by increasing the deficit and driving up interest rates. But in the two and a half years since those tax cuts passed, the economy and tax revenues have both surged.
Where Republicans have most strayed from the Reagan vision has been on controlling federal spending. But most still adhere to his tax-cutting lessons, with a few prominent exceptions (notably Senator John McCain). They should all recall the Gipper's words in his inauguration speech 25 years ago: "It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government."
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