The Budget: Biden v. Reagan

President Biden’s tax-and-spend budget brings us back to 1980 when President Reagan rode the inflation issue to the White House. Back then, Reagan promised to lower taxes, and offered relief from “bracket creep” — caused by inflation artificially pushing Americans into higher income tax brackets. “An insidious tax,” Reagan called it. Mr. Biden, though, is ignoring the lessons of the 1970s and pushing a budget that will worsen inflation.“High tax rates don’t lower prices, they raise them,” a Reagan campaign ad warned in 1980. This was a time when, as today, inflation was soaring unabated, averaging just under 10 percent a year under President Carter. “High tax rates discourage work and production,” the ad said. “They add to the cost of living.” Cutting taxes, the Gipper pledged, would spur “lower prices, an increase in production, and a lot more peace of mind.”The high rate of taxation wasn’t the worst of it, though. While inflation was slashing the purchasing power of Americans’ salaries, it was also pushing them into higher tax brackets. As Reagan noted, “If you earned $10,000 a year in 1972, by 1980 you had to earn $19,700 just to stay even with inflation.” Yet that was before taxes factored in. When the tax bill came due, “you’ll find your tax rates have increased 30 percent.” Reagan saw that the government was getting “an automatic tax increase without having to vote on it” and vowed: “we intend to stop that.” While the IRS now adjusts its tax brackets for inflation, millions of taxpayers in 13 states, including New York, New Jersey, and Connecticut, still face bracket creep in their state tax bill. Mr. Biden, unlike Reagan, appears to be oblivious to the inflationary impact of the tax and spending increases in his budget. “You can’t do that in a period of high inflation,” Congressman Mike Johnson of Louisiana says of Mr. Biden’s plans to cover his ambitious spending, to the tune of $6.8 trillion. The plan includes the biggest raise for federal workers since the Carter administration. The budget proposes $5 trillion in tax increases. That prompted Speaker McCarthy’s rejoinder: “Washington has a spending problem, NOT a revenue problem.” That goes double for the runaway inflation spiral over which Mr. Biden has presided and which the Fed seems unable to tame. Our Larry Kudlow has noted the “growing evidence by economists” that “huge federal overspending” is a root cause of “sky-rocketing inflation.” Feature the “the Biden Covid relief bill of March 2021,” which showered $1.9 trillion in stimulus dollars on an economy that was already recovering from the pandemic. Meanwhile, the Fed has pushed interest rates up to levels not seen since the financial crisis of 2008, yet inflation rages at a pace not seen since Reagan and his Fed chairman, Paul Volcker, quashed the stagflation of the 1970s. While Chairman Jerome Powell threatens more rate increases to cool the economy — and suppress job and wage growth — Mr. Biden’s budget proposal is poised to add more fuel to the inflationary fire.No wonder Mr. Biden is losing the inflation fight that the Gipper won. In 1981, Reagan spoke of a farmer who had queried his Congressman about his tax cut plan. The solon “replied at some length with a discussion of the technical points involved,” Reagan noted. The farmer “listened politely,” then said: “Don’t give me an essay. What I want to know is are you for ’im or agin’ ’im?” When it comes to the Biden budget, the Sun’s view is: “agin’ ’im.”

The Budget: Biden v. Reagan

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