It's a shame that Buffet ignores the obvious.
GUEST OPINION: The stimulators: Reagan vs. Obama
By Dr. Paul Kengor
Posted Aug 15, 2011 @ 11:53 PM
How ironic that as America debated its debt ceiling all summer and faced a stunning credit downgrade, the nation approached a most timely anniversary: It was Aug. 13, 1981, that President Reagan signed the Economic Recovery Act. Understanding Reagan’s thinking 30 years ago is critical to discerning where we are now. Reagan’s initiative was the antithesis of President Obama’s $800-billion “stimulus” that didn’t stimulate. The 2009 version was the single greatest contributor to our record $1.5-trillion deficit. It was, plain and simple, what Reagan didn’t do.
When Reagan signed the Economic Recovery Act at his ranch near Santa Barbara, it was the largest tax cut in American history. He also revealed leadership that Democrats and Republicans alike agree we are not seeing currently from the White House. Even the Washington Post called Reagan’s action “one of the most remarkable demonstrations of presidential leadership in modern history.”
The enemy that day was America’s progressive federal income-tax system, birthed in 1913 by Congress and President Woodrow Wilson. It was revolutionary, requiring a constitutional amendment. That tax, which began as a 1 percent levy on the wealthy, would rocket up to a top rate of 94 percent by the 1940s.
Ronald Reagan personally felt the toll. In the 1940s, the so-called “B”-movie actor was one of the top box-office draws at Warner Bros. Then a Democrat, Reagan saw no incentive in continuing to work — that is, make more movies — once his income hit the top rate. He also realized who suffered from that choice. It wasn’t Reagan; he was wealthy. It was the custodians, cafeteria ladies, camera crew, and working folks on the studio lot. They lost work....
Yet it is clear today that we have refused the proper lessons of history. For one, our problem remains excessive spending. Obama must bear this in mind if he’s considering tax increases (which hamper growth) as part of his “balanced” approach to deficit reduction. More than that, the best “stimulus” relies on the tried-and-true American way: Let free individuals stimulate the economy through their earnings and activity.
Ignoring such realities explains the mess we face in August 2011 — a millennium removed from the wisdom of August 1981.
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