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Spending Reaper
Reagan's record goes beyond tax cuts.


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Veronique de Rugy

Everyone talks about the Reagan tax cuts, yet there is more to President Reagan’s legacy than tax cuts. There is also his courageous and largely unappreciated willingness to fight for reductions in domestic spending. At the end of the day, for all the missed opportunities of the Reagan administration to restrain spending, his accomplishments–presented in tables below–on the spending side of the budget constitute a true revolution.

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Ronald Reagan sought–and won–more spending cuts than any other modern president. He is the only president in the last 40y years to cut inflation-adjusted nondefense outlays, which fell by 9.7 percent during his first term (see table 1). Sadly, during his second term, President Reagan did not manage to cut nondefense discretionary spending, and it grew by 0.2 percent. But his record is still quite remarkable if compared to other administrations. Every other president since Lyndon Johnson serving a full four-year term did not even do as well as Reagan in his less-impressive second term.

President Reagan understood economics, and he knew an unjustified economic subsidy when he saw one. He believed that the federal government had usurped private, state, and local responsibilities, and consequently he thought that most department’s budgets should be cut. Table 2 shows how many agencies’ budgets were cut (in real terms) during each presidential term going back to the one full term President Johnson served. These interesting facts are revealing of the president’s philosophy.

President Reagan cut the budget of eight agencies out of fifteen during his first term, and ten out of fifteen during his second term.

President Clinton cut the budget of nine out of fifteen agencies during his first term but cut none during his second term.

President George W. Bush has cut none of the agencies’ budgets during his first term.

It is also interesting to see which president cut what and how much. Table 3 shows the change in real spending for each agency during each full presidential term served since President Johnson. Here are some other interesting facts about President Reagan:

President Reagan is the only president to have cut the budget of the Department of Housing and Urban Development in one of his terms (a total of 40.1 percent during his second term).

President Reagan is the only president to have cut the budget of the Department of Transportation. He cut it by 10.5 percent during his first term and by 7.5 percent during his second term.

During his first term in office, President Reagan cut the real budget of the Department of Education by 18.6 percent, while President Nixon increased it (that is the education part of what was then the Department of Health, Education, and Welfare) by 19.1 percent. That budget increased by 22.2 percent under Bush 41 and by 38.5 percent under Carter. Our current president has increased it by a whooping 67.6 percent.

Reagan managed to cut the budget of the Department of Commerce by 29 percent in constant dollars during his first term and by 3 percent during his second one. President Clinton by contrast increased the department’s budget by 24 percent in his first term and then by 96.7 percent in his second term.

President Reagan cut the real budget of the Department of Agriculture by 24 percent during his second term in office.

President Reagan never cut the budgets of the departments of Defense, Health and Human Services, Justice, or State.

To achieve his dream of a limited and constitutional government, Ronald Reagan understood that government should be smaller. This had very little to do with balancing the budget and a lot to do with expanding freedom. He used his veto power and he used the bully pulpit. As a result of his leadership, the burden of government in America is much smaller than it otherwise would have been. He deserves credit for this accomplishment, just as he deserves credit for lower tax rates.

Table 1: Change in Real Spending for Each Presidential Term since LBJ

SOURCE: Author’s calculations based on the Budget of the United States FY2005, the Budget Historical Tables, and the CBO outlook and review January 2004.

NOTE: Partial terms of Johnson, Nixon, and Ford are not included. Figures for Bush 43 are estimates. These qualifications apply to tables 2 and 3 as well.

Table 2: How Many Departments’ and Agencies’ Budgets Have They Cut?

SOURCE: Author’s calculations based on the Budget of the United States FY2005 and the Budget Historical Tables.
NOTE: The fifteen departments and agencies are those listed in table 3.

Table 3: Change in Real Spending for Selected Departments and Agencies in Each Presidential Term since LBJ

SOURCE: Author’s calculations based on the Budget of the United States FY2005 and the Budget Historical Tables.
* Department of Education or education portion of the old Department of Health, Education, and Welfare (HEW)
** Health and Human Services (and noneducation portion of HEW)
*** Housing and Urban Development
**** Environmental Protection Agency
***** International assistance programs

–Veronique de Rugy is a visiting scholar at the American Enterprise Institute.



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