Published: April 16, 2008 02:32 pm            

Other Side of the Coin

Dear Editor:

Being a casual reader of your newspaper, I find myself drawn to the comments of your columnist, Pete Ferrara, in his weekly column, Write On. Although he does present interesting insights into a wide variety of subjects, I find myself often at-odds with his political take on things.

In his recent article, “The Reagan Recession,” he issued the challenge that anyone who disagreed with him “have the courage to speak up and sign your name to what you think.”

Mr. Ferrara may consider his challenge accepted. I am speaking up and you will find my name signed at the end of this correspondence.

I had the distinct blessing of being raised by Christian parents who instilled their strong conservative values in me. My dad specifically modeled before me the value of hard work, a strong work ethic, good moral character and integrity. As a young man growing up under his guidance, he sowed in me powerful conservative principles that have guided me throughout my life. I am deeply indebted to both of my parents for all that they did for me.

As a young man who had just reached the age of 18, I decided to leave home and join the American military. While serving in our United States Army, I had the distinct pleasure of serving under President Ronald Reagan as Commander-in Chief.

During my term of service, I matured in many ways. In the Army, I learned what it meant to be a man, be responsible and value the concepts of democracy and liberty. However, under the leadership of President Reagan, the conservative principles that were instilled in me by my parents took on a new level of meaning. Seeing the foundation of Reagan conservatism unfold before me, with the application of conservative principles to economic, social and national defense issues, I gained a new appreciation and understanding of what it meant to be truly conservative.

I identify myself as a Reagan Conservative today as a result of those “learning years” and am truly grateful to President Reagan for what he instilled in me.

In contrast to Mr. Ferrara, I have a distinctly different take on the state of economic affairs in America, both today and during the Reagan presidency. Mr. Ferrara made the statement at the beginning of his column that “we are facing times as hard as The Great Depression which followed the stock market collapse of 1929.” I would submit that perhaps for everyone reading this letter times are tight financially right now. However, the America that President Reagan inherited when he took office on Jan. 20, 1981, was in a much deeper economics crisis than we are in today. Mr. Ferrara and many of you may remember the 14 percent inflation rate and 21 percent interest rates that plagued the latter half of the 1970s and were a result of the failed policies of the Carter administration.

Mr. Ferrara, and many of you, may remember the twin aggra-vations of the late 1970s – high inflation and stagnant growth in America’s productivity – again the results of the failed policies of the Carter administration.

Mr. Ferrara, and many of you, may remember the image problem that America was facing on the global scene as the nation of Iran held some of our citizens hostage. We were a nation in the midst of deep crisis then and the landslide election of President Reagan brought a renewed sense of hope to our people.

Faced with a dreadful state of economic affairs, President Reagan went on the offensive to try and turn things around through the application of principles related to supply-side economic theory. His proposal included a three-year plan to reduce income tax coupled with tight monetary control. The hope was that these moves would signal investors that a new era was dawning, that the growth of government would be displaced by the robust growth of the private sector. If economic behavior in climate of high inflation is primarily based on expectations about the future value of money, then swift and dramatic action by the president could reverse the gloomy assumptions in the then-disordered financial markets. The ideal scenario would be that as inflation abated, interest rates would drop and productive employment would grow.

If one goes back and looks at the numbers, I think you will find that President Reagan’s strategy was highly successful. An interest rate that had peaked at 21.5 percent on Dec. 19, 1979, was at 11 percent when Reagan left office in 1989. An inflation rate that had peaked at 14.76 percent in March 1980 was at 4.67 percent when Reagan left office in 1989. An unemployment rate that was at 7.5 percent when Reagan took office in January 1981 was at 5.4 percent when he left office in January 1989. I could go on but I think you get the picture. “Reaganomics” worked in leading the country out of deep recession and into recovery.

Now, in anticipation of Mr. Ferrara doing his homework about the Reagan administration, I would expect that he might come back and say, “Well, Reagan did masterfully win the Cold War, but what about those dam budget deficits?” or “Well, America needed Reagan’s infectious optimism, but what about those dam budget deficits?” Good questions that need to be asked and will be better addressed if we understand the concept of debt.

Not all debt is bad (unless it directly affects the budget that my wife has outlined for our household.) Mortgage debt and student loan debt are worthy investments that lead to accomplishments that significantly impact our lives. From a business standpoint, the small business entrepreneur and cor-porate executives alike knows that debt can be used effectively to raise needed capital for certain expen-ditures. In a similar sense, Pres-ident Reagan incurred some significant debt (in the form of budget deficits) in order to ac-complish some significant mile-stones in his administration. No one criticizes President Franklin Roosevelt for the massive debt that financed World War II. Yet those criticizing President Reagan for the $2.1 trillion in added debt (all numbers are in today’s dollars) ignore how that debt won the Cold War, lowered the tax burden and ignited the largest economic boom in American history.

Those who are critical of the Reagan deficit should answer the following questions:

• Would you bring back the Soviet Empire? President Reagan spent $3 trillion on defense, well above the $2.2 trillion baseline. What did that extra $800 billion buy? The end of the Cold War – saving, perhaps, a billion lives from nuclear extinction. No less than former Soviet Union Foreign Minister Alexander Bessmertnykh has been quoted crediting President Reagan’s defense buildup for the accelerated collapse of the Soviet Union. The fragile communist economy, already stretched thin by substantial defenses pending, could not keep up with America’s defense buildup. The possibility of American missile defense, and President Reagan’s powerful rhetoric further persuaded the Soviets they could not win the Cold War, and induced the reforms that culminated in the collapse of the Soviet empire – without America firing a single shot. It was the best $800 billion investment America ever made.

• Would you raise the top income tax rate back to 70 percent? Critics also blame the 1980’s deficits on President Reagan’s insistence on reducing taxes in 1981. Yet President Reagan inherited the worst economy since the Great Depression. Excessively high tax rates were discouraging work and investment and, therefore, damaging the economy while raising little revenue. President Reagan removed barriers to entrepreneurship by reducing tax rates, cutting red tape and stabilizing the economy, thereby encouraging risk takers. The centerpiece of this policy was a radical series of across-the-board tax cuts that lowered the top income tax rate from 70 to 50 percent, and eventually to 28 percent. This tax relief unleashed a 20-year surge of entrepreneurship, as the U.S. economy tripled in size. The lasting impact of these policies can be seen in successive presidents, who ratified Reaganomics by refusing to even consider raising taxes back to their 1970’s levels. Thus, America continues to benefit from lower tax rates.

• Would you trade 2.8 million jobs? Before the Reagan tax relief, the unemployment rate averaged 7.7 percent. Since the tax cuts, it has average 5.8 percent – a difference that translates into 2.8 million jobs per year.

• Would you trade $15,000 of your annual income? In the two decades before the Reagan tax relief, the average household’s annual disposable income increased $13,000. In the 20 years following Reagan’s tax cuts, these incomes surged $28,000.

• Would you trade the stock market boom? In the two decades before the Reagan tax relief, the S&P 500 increased 120 percent. In the 20 years following Reagan tax cuts, the market jumped 575 percent.

In short, the Reagan tax cuts replaced the deepest recession since the Great Depression with the largest 20-year boom in American history. Tax revenues actually grew faster in the low-tax 1980s than in the high-tax 1970s and rising incomes meant the share of taxes paid by the wealthy actually increased throughout the 1980s. Millions of people who had entered the 1980s in the lowest income quintile surged to the highest income quintile by 1990.

Now, I’m sure that President Reagan would have preferred to minimize the deficits by eliminating wasteful spending. However, the only way to persuade a Democratic Congress to accept a defense buildup and pro-growth tax cuts was to agree to their domestic spending demands. Ironically, the 1980s budget deficits made the 1990’s surpluses possible. The budget was balanced by surging tax revenues from a booming, low-tax economy and defense savings brought on by the end of the Cold War.

In conclusion, I would assert that Mr. Ferrara’s label of a “Reagan Recession” should actually be called a “Reagan Resurgence” based on the data presented in this argument. The points made above effectively dismantle Mr. Ferrara’s claims that responsibility for the present state of our economy rests with out late great president. I would assert that the perceived state of our present economy is nothing more than an election year scare tactic fueled by the liberal media in order to further their agenda. In any event, history and the data behind it show that America once again rose to prominence as a result of conservatism.

Now, to Mr. Ferrara I would say this: The ball is in your court now. I invite you to come back with any rebuttal that you may have regarding what is presented above. However, I would ask that you not come back with DNC talking points, liberal rhetoric or conjecture. What I do ask is that you come back with a solid argument substantiated wit evidence that proves your point. For instance, you state at the end of your column that “it is my opinion that the conservative movement ... has sold America a bill of goods.” It would be real good if you could explain to us what that “bill of goods” was. You go on to state that “We are reaping the whirlwind of this boondoggle today.” Maybe you can come back and substantiate that statement as well. You go on to state that President Reagan’s “self-delusion is at the heart of the mess we are in.” I disagree and assert that liberalism is at the heart of the mess we are in and only a return to the conservative principles that this nation was founded upon will make things right. And regarding the shot that you took at the late president with your “Hellcats of the Navy” statement – that was pretty unprofessional for someone of your intellect and expression.

For those who have taken the time to read my side of the argument, I will leave you with his paraphrase of the classic Reagan line, “Are you better off today than you were in 1980?”

Sincerely,

Mike Gregory

Pine Knot, KY 42635

        

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