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November 27, 2012 11:32 AM Reagan’s Second Term and the Bizarre Reputation of Tax Reform

By Jonathan Bernstein

Politico has a pretty weak item about second terms and what Barack Obama should do to secure a good one. I’m no expert on Teddy Roosevelt, so I’ll pass on that part of it (and remind myself that I should really learn more about that era; suggested reading?), but calling Ronald Reagan’s second term a success is, well, odd.

In particular, calling Reagan’s second term a success compared to Bill Clinton’s is odd. Politico’s Edward-Isaac Dovere acknowledges the Iran-Contra scandal, but seems to vastly underappreciate it. In several ways. First, it was pretty obviously a bigger deal in policy terms than the Lewinsky scandal. Second, the effect on personnel was large, beginning with a White House Chief of Staff and a National Security Advisor. And, third, the effect on presidential popularity was entirely different. The Lewinsky scandal coincided with a Clinton surge in popularity, with Clinton consistently over 60% approval throughout 1998. Reagan, however, was hit hard by Iran-Contra; he fell about 15 points right away, and stayed at his new level of just around or below 50% throughout 1987 and into the summer of 1988 before finally recovering.

(As Brendan Nyhan notes, the article generally buys into myths about Reagan’s popularity and his communications skills).

Anyway, what redeems Reagan’s second term for Dovere is…tax reform. Well, some foreign policy triumphs too, but I’d put those aside, given that it was about 90% Gorbachev, and Reagan’s main accomplishment was not messing it up (and he almost did, in Iceland).

But: tax reform? Really? I’ve been seeing a lot of this lately, and I don’t get it, really. Oh, I’d say it was an accomplishment; as policy, it was probably just fine, and it didn’t unravel all the way, even now. But it was only somewhat Reagan’s, as opposed to Congress’s, achievement. It had nothing at all to do with Reagan’s real goals. And…it just wasn’t all that big an accomplishment, was it? It certainly didn’t seem so at the time, and I don’t see how subsequent events have proven it to be.

I guess my general feeling about tax reform is that it’s a mixed bag. First of all, I’m with those who don’t understand why reducing the number of tax brackets is even remotely a good thing (or a significant bad thing; it’s just sort of change-for-change-sake). So that leaves the benefits of reducing special tax treatments and lowering rates. I’ll trust the economists who say that the benefits of that are real, if not especially large. But I’ll also note that the inevitable next step is that the various favorable treatments creep right back in after reform.

Now, perhaps the benefits of cleaning the whole thing out once a generation or so are still worth it (even given that there are presumably costs of change, too). Maybe not. But it’s just hard for me to take the 1986 tax reform as any sort of big deal.

Is it good advise for Barack Obama to point to Reagan’s tax reform “achievement”? I’m not really convinced. Consider one of Bill Clinton’s second term achievements: children’s health care (S-CHIP, 1997). Isn’t that something far better for Obama to emulate? Not in health care, of course, but the analogous issue area for Obama — one where his legislative initiated failed during his first two years — is climate. The idea would be for Obama to find some relatively small, but still meaningful, climate program, and find some way to get it through a divided Congress (for Clinton is was a thoroughly Republican Congress, so Obama may have a slightly easier task).

I do think that revenue-neutral tax reform is probably something that Obama could get done over the next four years, and if House Republicans want it I don’t really see why he should oppose it. I just don’t see why Obama should consider that an important goal.

And, really, I don’t see why any president should seek to emulate Reagan’s second term. His first term? Yes, Reagan does have solid lessons for any president, conservative or liberal. But his second term? It’s full of examples to avoid, not ideas to use.

[Cross-posted at A plain blog about politics]

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Jonathan Bernstein is a political scientist who writes about American politics, especially the presidency, Congress, parties, and elections.

Comments

  • Michael on November 28, 2012 11:32 AM:

    The mythology surrounding Reagan is just that, a myth. It is a narrative created and sold by his handlers and bought lock, stock and barrel by a MSM that tends to have a very short memory and no capacity for critical thinking/analysis(heck, I was a pre-teen and I know that he wasn't a particularly good President). From his economic plan, to his foreign policy to the Iran Contra scandal, Reagan was a more of a joke than a thoughful leader.

  • Neil B. on November 28, 2012 11:53 AM:

    Well, let's give Reagan credit for at least supporting the idea of capital gains etc being taxed at the same rate as earned income. [I could go with allowing indexing, though.] The buzz about "top rates" obscures the more important issue of there being no real excuse for investment style income being tax at a much lower rate than whatever the top rate is for earned income. Reagan said it wasn't fair for surgeons (whatever exact wording he may he used here and there - his most quoted statement is below) to pay more than an investor, he effectively supported the Buffet Rule:

    '"He wrote me in support of the tax plan, because he said, 'I am legally able to take advantage of the present tax code, nothing dishonest, doing what the law prescribes, and wind up paying a smaller […] tax than my secretary pays.' And he wrote me the letter to tell me he'd like to come to Washington and testify before Congress as to how that's possible for him to do and why it is wrong."'

    [quoted at Daily Kos]


    Furthermore, this needs to be the showcase of any new tax reform, not just "raising the rates" on the wealthy. The worst thing of all might be to raise taxes on high earned income (at least probably doing real, advanced "work") and not on the speculators and drawers of passive income.

    "Fine minds make fine distinctions."