President Bush is reeling around the ring, groggy from a devastating flurry of hooks to his solar plexus and uppercuts to his chin, punches thrown by himself. But before concluding that he is ripe for a knockout in 1992, remember what made him president.
In one word, it was: Dukakis. In nine words: the Democrats' combination of moral smugness and intellectual felonies. This combination is on display today.Unaccustomed to success, and inebriated by it, and construing Bush's pratfalls as proof of their cleverness, Democrats are trumpeting three ideas that do not stand scrutiny.
The Democrats' first idea is that the huge deficits are the results of the 1981 Reagan tax cuts. Actually, revenues were $1.1 trillion more in the 1980s (in constant 1990 dollars) than they would have been if the 1980 federal tax collections had been changed only to reflect inflation. Federal revenues in 1990 are more than one-third higher in real terms than in 1980.
Revenues in 1990 will be more than 19 percent of gross national product for the fourth consecutive year. This is the first time in history, including the "garrison state" years of 1942-45, that the tax take has been so high for so long. (Federal receipts for 1941-46 as a percentage of GNP were 7.7, 10.3, 13.7, 21.7, 21.3, 18.5.)
The Democrats' second idea is that federal spending, especially for social programs, was slashed in the 1980s. Actually, there was dramatic spending growth, including spending for social programs.
If spending had not increased over 1980 levels, it would have been $1.9 trillion less than it actually was. Spending increased one-third in real terms. Of the $1.9 trillion, about 46 percent went to Social Security, Medicare, income security and health programs.
The Democrats' third idea is that rich families got extraordinary breaks while poor and middle-class families were saddled with a heavier burden of the nation's taxes. It is true that effective tax rates for the rich were cut (from 27.3 percent to 25.8) while rates for the bottom fifth rose (from 8.4 to 9.7 percent) and the rates of the next two-fifths also rose (from 15.7 to 16.7 percent and 20 to 20.3 percent respectively). But the rich (the top fifth) today pay 58.1 percent of all federal tax revenues, up from 55.7 percent in 1980. And every income group other than the top fifth pays a smaller or equal share.
In 1980, the top fifth paid 35 times the total paid by the lowest fifth. Today they pay 36 times. Today, as in 1980, the lowest fifth pay just 1.6 percent of the federal revenues.
After the Reagan cuts of income-tax rates in 1981, there were eight other significant tax measures in the 1980s. The most important was the Tax Reform Act of 1986. By cutting rates, it radically compressed the tax code's progressivity. But by the compensatory closing of loopholes, it caused the wealthy to pay more income taxes. (It also increased the tax bill of the wealthy by increasing corporate taxes.)
Ten years ago, the top fifth paid 66 percent of federal income taxes; today they pay 72 percent. The top 5 percent pay less of their income in income taxes (down from 22.2 percent to 18.9), but pay a larger share of the federal income-tax take (up from 36 percent to 44.1). The share of the top one percent is up from 18.2 percent to 25.4.
If only the income tax is considered, the federal share paid by the top 10 percent rose 16 percent in the decade, the share by the middle class and poor fell 19 percent. Today the top 10 percent pay significantly more than half of all federal income taxes; the bottom 50 percent pay only 6 percent.