The Real De­bate? It’s Eisen­hower vs. Rea­gan

Forward Magazine - - Letters - Contact J.J. Gold­berg at gold­berg@for­

For all the fran­tic de­bate-watch­ing that’s swept the na­tion this fall, one of the most im­por­tant de­bates of the cur­rent elec­tion sea­son has gone largely un­heard. It’s a whis­pered de­bate be­tween the two most cel­e­brated Repub­li­can pres­i­dents of the last cen­tury, Dwight Eisen­hower and Ron­ald Rea­gan, over how to achieve eco­nomic growth.

Eisen­hower, serv­ing from 1953 to 1961, presided over a top mar­ginal in­come tax rate of 91%. Rea­gan, in of­fice from 1981 to 1989, in­her­ited a 70% tax rate and low­ered it steadily to 28%. Eisen­hower’s pres­i­dency saw steady growth, low un­em­ploy­ment, a ris­ing mid­dle-class stan­dard of liv­ing and largely bal­anced bud­gets. The Rea­gan years saw growth es­sen­tially no bet­ter than Eisen­hower’s, cou­pled with high un­em­ploy­ment, stag­nant mid­dle­class in­comes and a sky­rock­et­ing na­tional debt. And yet, some­how, the les­son we’ve come away with is that low taxes cre­ate jobs, boost growth and gen­er­ate pros­per­ity. Eisen­hower’s side — which is to say, the fac­tual case — has made barely a peep.

In cer­tain re­spects Eisen­hower and Rea­gan are very sim­i­lar his­tor­i­cal fig­ures. Both are re­mem­bered as af­fa­ble, avun­cu­lar se­nior states­men, born and raised in the Mid­west­ern Corn Belt. Eisen­hower was one of Amer­ica’s great­est war heroes, and Rea­gan played one in the movies. Eisen­hower ar­guably won World War II, and Rea­gan is widely re­garded as hav­ing won the Cold War. They were among Amer­ica’s old­est chief ex­ec­u­tives, both en­ter­ing of­fice in their 60s and leav­ing in their 70s. Both are pop­u­larly ranked among the great or near-great pres­i­dents.

As it hap­pens, they’re also sim­i­lar in their pop­u­lar­ity with Jewish vot­ers. Rea­gan cap­tured 39% of Jewish votes in 1980, drop­ping to a more mod­est 33% in 1984. Eisen­hower did even bet­ter: He won 36% of Jewish votes in 1952 and rose to 40% in his re­elec­tion in 1956, the high­est share of any Repub­li­can be­fore or since, go­ing back to War­ren Ga­maliel Hard­ing’s 43% in 1920. Eisen­hower’s 1956 score is par­tic­u­larly note­wor­thy be­cause it came just a month af­ter the joint Is­raeli-British-French in­va­sion of Si­nai in Oc­to­ber 1956, which en­raged Eisen­hower and caused the most se­ri­ous cri­sis in the en­tire his­tory of U.S.-Is­raeli re­la­tions. Back then, it seems, a pres­i­den­tial squeeze on Is­rael was no bar­rier to pop­u­lar­ity with Jewish vot­ers. Mem­ory can play funny tricks on us.

What’s most crit­i­cal, though, is that both Repub­li­can icons presided over economies that grew at an av­er­age rate of about 3% per year over the course of their ad­min­is­tra­tions. And this brings us to the de­bate be­tween them — that is, be­tween their lega­cies and what they mean. The cen­tral ques­tion: How best to achieve steady eco­nomic growth.

Eisen­hower in­her­ited a top mar­ginal in­come tax rate of 92% from his pre­de­ces­sor Harry Tru­man when he en­tered the White House in 1953. He quickly low­ered it to 91%, where it stayed un­til Lyn­don John­son low­ered it again to 77% in 1964 and then 70% in 1965.

Dur­ing his eight years in the White House, Eisen­hower man­aged to re­duce the fed­eral deficit by 75% — down to a quar­ter of the size he in­her­ited — while build­ing the In­ter­state High­way Sys­tem and launch­ing Amer­ica’s space pro­gram. GDP growth av­er­aged 3% per year. Un­em­ploy­ment av­er­aged just un­der 5.5%.

Rea­gan, en­ter­ing of­fice in 1981, in­her­ited John­son’s 70% top mar­ginal in­come tax rate and im­me­di­ately low­ered it to 50%, then to

Both pres­i­dents grew the econ­omy at the same rate — but at what cost?

38.5% and fi­nally to 28%. His the­ory was that high taxes sti­fle eco­nomic growth, while low­er­ing taxes un­leashes growth and cre­ates jobs.

It was a great na­tional ex­per­i­ment, and the re­sult was con­clu­sive: It didn’t work. Growth av­er­aged 3.4% per year dur­ing Rea­gan’s pres­i­dency, hardly bet­ter than Eisen­hower’s, while un­em­ploy­ment av­er­aged a shock­ing 7.43%, far worse than Eisen­hower’s and hardly bet­ter than the much-ma­ligned Obama record.

That’s not to say that Rea­gan’s top-tier tax cut had no eco­nomic im­pact. The ef­fect was pro­found. Com­bined with sev­eral other fac­tors, in­clud­ing his slash­ing anti-union poli­cies, it al­lowed a near-dou­bling of the share of to­tal na­tional in­come go­ing to the wealth­i­est 1% of the pop­u­la­tion, from 8.3% of ev­ery dol­lar earned in 1981 to 15.2% in 1988. It also launched the na­tional debt into its un­end­ing up­ward spi­ral, grow­ing from $998 bil­lion when Rea­gan en­tered of­fice to nearly $2.9 tril­lion when he left.

As for great na­tional projects, the big­gest was prob­a­bly his covert war in Cen­tral Amer­ica (in vi­o­la­tion of an ex­plicit con­gres­sional ban), the first Amer­i­can war to be fi­nanced not from tax rev­enues but by sell­ing arms il­le­gally to Iran.

The debt has con­tin­ued to grow, of course, an en­dur­ing mon­u­ment to Rea­gan’s eco­nomic the­o­ries. Bill Clin­ton slowed its growth in the 1990s, rais­ing the top tax rate to 39.6% and clos­ing the an­nual deficit for four years run­ning. But Ge­orge W. Bush fa­mously took his foot off the brakes again, low­er­ing the top rate to 35% and boost­ing the debt from $5.8 tril­lion when he en­tered of­fice to $11.9 tril­lion when he left. Fur­ther in­flat­ing Bush’s debt were his un­funded Medi­care drug ben­e­fit and his two un­funded wars. Un­like Rea­gan, he didn’t even try to close the gap through il­le­gal weapons sales to an en­emy. Mean­while, the share of na­tional in­come go­ing to the top 1% had risen by 2007 to 23%, nearly triple the level be­fore Rea­gan took of­fice.

So the next time you lis­ten to a pres­i­den­tial de­bate, re­mem­ber that no­body up there is tak­ing the Demo­cratic side. The de­bate we’re hav­ing to­day is be­tween a ro­bust Rea­gan­ism and a faint, timid echo of Eisen­hower Repub­li­can­ism. In fact, when you get down to it, the Democrats can’t even bring them­selves to take Eisen­hower’s side with any con­vic­tion. We’re all tout­ing vari­a­tions on a flim­flam the­ory that’s been tried and proven a colos­sal fail­ure.

J. J. Gold­berg

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