In the wake of Ronald Reagan’s death, there has been an outpouring of grief. There has also been an outpouring of bad economic analysis. What was Ronald Reagan’s economic legacy?
Everyone says he lowered taxes and ran big deficits. And the two parts seem connected. Surely lower taxes mean higher deficits. But Reagan did not lower taxes. He lowered tax RATES. Tax revenues were dramatically higher when Reagan left office relative to revenues when he came in, even after accounting for inflation. The reason we ran federal budget deficits in the 1980s is because spending increased even faster than those revenues.