On August 13, 1981, President Ronald Reagan signed the Economic Recovery Tax Act — a major turning point in modern American economic history.
The bill cut the rate of the highest tax bracket from 70% to 50% while reducing the lowest rate from 14% to 11%. In addition to hawkish monetary policy from the Federal Reserve that ended two decades of unpredictable inflation, Reagan’s tax cuts laid the foundation for a prolonged economic boom in the United States.
In one of the most famous speeches from his presidency, Reagan explained to the American people that his tax plan was designed to foster innovation, growth, and freedom:
In a few days the Congress will stand at the fork of two roads. One road is all too familiar to us. It leads ultimately to higher taxes. It merely brings us full circle back to the source of our economic problems, where the government decides that it knows better than you what should be done with your earnings and, in fact, how you should conduct your life. The other road promises to renew the American spirit. It’s a road of hope and opportunity. It places the direction of your life back in your hands where it belongs.
Indeed, the Reagan era saw a drop in unemployment from 7.6% to 5.5%, a 27% increase in net worth for middle-class families, and a 26% increase in economic output.
Fast forward to August 13, 2021 — exactly four decades later — and we have a Commander-in-Chief with the exact opposite philosophy.
On the campaign trail, President Biden’s economic plan hinged upon forcing wealthy Americans to “pay their fair share” — primarily, by raising the top individual income rate from 37% to 39.6% and raising the corporate tax from 21% to 28%.
Though President Reagan focused on cutting taxes for all Americans, President Biden focuses on cutting taxes for some — and raising them for others. Like other Democrats, he believes that Americans are less entitled to their property when they are wealthy — whether that wealth was inherited or earned.
As he asserted while laying out his American Families Plan:
The choice is about who the economy serves. And so, I plan on giving tax breaks to the working-class folks and making everybody pay their fair share.
Again, it’s a choice. It’s more important to shield millionaires from paying their fair share? Or is it more important that every child gets a real opportunity to succeed from an early age and ease the burden on working families?
Without a doubt, President Reagan could have offered a more serious effort to cut government deficits and could have made the federal tax system less progressive. But to President Biden and his Democratic colleagues, government exists to redistribute wealth — not stand back as much as possible so that more of it is created.
What has been the fruit of President Biden’s economic philosophy? Rampant inflation causing lower real wages for the typical American family. Millions of able-bodied Americans staying home and receiving checks from the government. Both are unnecessary bottlenecks shaped by bad policy — a reality that has somehow managed to dampen an incredibly rapid post-recession economic rebound.
Reagan believed that “government is not the solution to our problem, government is the problem.” Biden insists that “our government still works and can deliver for our people.”
The two could not be more different — and the same is true of the economies borne from their policies.
The views expressed in this opinion piece are the author’s own and do not necessarily represent those of The Daily Wire.