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Ronald Reagan on Tax Cutting Legislation (The “whole controversy”)

“This whole controversy: Are you entitled to the fruits of your own labor or does government have some presumptive right to spend and spend and spend?” 

by Scott L. Vanatter

Ronald Reagan is well known for his multi-decade devotion America’s purpose and promise. By returning to these lofty ideas America would fulfill its destiny.

His July 27, 1981 speech was President Reagan’s main public effort to educate the nation on the benefits of a bipartisan bill to cut taxes and spending. He taught America, once again, how and why cutting taxes and spending (cutting the rate of growth of government spending) would make for a stronger economy — and help restore America’s latent greatness.

It was Reagan’s habit to speak on large themes. In this particular case he used a two-letter word to illustrate one of the largest of political themes. He stated that the people in electing him wanted to make a change from ‘by’ to ‘of.’ Succinctly put, “It doesn’t sound like much, but it sure can make a difference changing by government,’ ‘control by government’ to ‘control of government.’”

An aside: Reagan pointed out that the nation’s debt in 1981 was “almost $1 trillion” and that it “hangs over the future of our children.” It wasn’t that long ago that we described our financial problems in terms of billions. Everett Dirksen was reported to have said, “A billion here, a billion there, and pretty soon you’re talking real money.” Will we “pretty soon” be discussing our “quadrillion” dollar problem?

After being in office just over one year, Reagan said that the simple “fact that Democrats and Republicans could work together as they have, proving the strength of our system, has created an optimism in our land.” That inflation, the dollar, investors, etc, have all improved, “based on anticipation of our program being adopted and put into operation.”

Then, as now, the world watches what happens here in America. Not only as the prime example of what is good and right to do, but also as the prime source of strength with respect to economic, military, and cultural rights and freedoms. That night he said, “Let us not forget that the rest of the world is watching America carefully to see how we’ll act at this critical moment.”

Circling back to the genius of America, Reagan again emphasized the value of providing incentive — “incentive for the individual, incentives for business to encourage production and hiring of the unemployed, and to free up money for investment.”

In our day, one of the main topics of debate is the permanence of the Bush tax cuts. Reagan assumed the tax cut itself would stand; he went further seeking to make them ‘permanent’ even compared to inflation. “To ensure the tax cut is permanent, we call for indexing the tax rates in 1985, which means adjusting them for inflation.” He put an exclamation point on the issue by saying that “bracket creep is an insidious tax.”

Reagan not only proposed tax cuts, but also that tax “credits will help spark the high technology breakthroughs that are so critical to America’s economic leadership in the world.”

When he first arrived in Washington DC, many critics assumed it would be impossible to achieve consensus, to get a deal. Not only was it possible he put together, through the force of his obvious electoral mandate, through the power of his ideas and words, and through his work ethic of meeting with members of Congress. Said he, “When I first proposed this…the Democratic leadership said a tax cut was out of the question.” But he was ultimately successful.

Reagan fought for his tax and spending plan by pointing out how the Democrats habit of “holding the people’s tax reduction hostage to future economic events . . . will eliminate the people’s ability to plan ahead.” Further, that, “Shopkeepers, farmers, and individuals will be denied the certainty they must have to begin saving or investing more of their money.” How is it that statist-oriented politicians and others cannot lean this obvious economic fact? Worse, how is it that free enterprise-oriented politicians and others also fail to re-sell the public on this, essentially, eternal fact?

Humorously, Reagan paraphrased “a well-known statement by Will Rogers that he had never met a man he didn’t like.” Reagan accurately described his Democrat opponents, “I’m afraid we have some people around here who never met a tax they didn’t hike.” He may as well have quoted, not paraphrased, George Harrison, “Taxman.”

If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet. . . .

‘Cause I’m the taxman.
Yeah, I’m the taxman,
And you’re working for no one but me.

Reagan became known as the Great Communicator. In this speech, he not only used well-crafted words, but also two charts to illustrate visually what he had been speaking about verbally.

He said his “secret weapon” in getting this and other bills passed was “putting the people first” by working toward a “bipartisan coalition,” one that wanted “to give this economy and the future of this Nation back to the people.”

Returning to the important idea of “predictability and certainty” he said that “the financial segments of our society need [this stability] to make investment decisions that stimulate productivity and make our economy grow.”

“Even more important,” he said, “in my view, [this] is what this whole controversy comes down to. Are you entitled to the fruits of your own labor or does government have some presumptive right to spend and spend and spend?”

He personalized his appeal by asking his listeners to “put aside any feelings of frustration or helplessness about our political institutions and join me in this dramatic but responsible plan to reduce the enormous burden of Federal taxation on you and your family.”

He suggested that what ‘we can do’ is to “contact your Senators and Congressmen. . . . Tell them you believe this is an unequalled opportunity to help return America to prosperity and make government again the servant of the people.” This idea was a set up for an important principle, perhaps one which encapsulates the Reagan Philosophy.

He pointedly described two situations one “where the government decides that it knows better than you what should be done with your earnings and, in fact, how you should conduct your life.

The other situation was “a road of hope and opportunity. It places the direction of your life back in your hands where it belongs.”

In conclusion, he said he was not there to ask us to trust him, but, “Instead, I ask you to trust yourselves. That’s what America is all about. Our struggle for nationhood, our unrelenting fight for freedom, our very existence — these have all rested on the assurance that you must be free to shape your life as you are best able to, that no one can stop you from reaching higher or take from you the creativity that has made America the envy of mankind.”

Reagan’s Philosophy now speaks to us from history. What America hears and believes and acts on between presidential elections largely determines the kind of leaders – and country — we get.

Click here to see the full transcript of this important speech.

Please see below for key excerpts.

CHANGE “CONTROL BY GOVERNMENT” TO “CONTROL OF GOVERNMENT”

You sent a message that you wanted a new beginning. You wanted to change a two letter word. . . . It doesn’t sound like much, but it sure can make a difference changing “by government,” “control by government” to “control of government.” . . .

DEFICITS WILL GET SMALLER: $1 TRILLION DEBT

And we hope we can begin whittling at that almost $1 trillion debt that hangs over the future of our children. . . .

ONE PART: BUDGET-CUTTING

Just the fact that Democrats and Republicans could work together as they have, proving the strength of our system, has created an optimism in our land. The rate of inflation is no longer in double-digit figures. The dollar has regained strength in the international money markets, and businessmen and investors are making decisions with regard to industrial development, modernization and expansion — all of this based on anticipation of our program being adopted and put into operation. . . .

ECONOMIC PACKAGE IS CLOSELY KNIT, CAREFULLY CONSTRUCTED PLAN

Our economic package is a closely knit, carefully constructed plan to restore America’s economic strength and put our nation back on the road to prosperity.

EACH PART OF PACKAGE IS VITAL

Each part of this package is vital. It cannot be considered piecemeal. It was proposed as a package, and it has been supported as such by the American people. Only if the Congress passes all of its major components does it have any real chance of success. . . .

THE WORLD IS WATCHING

And let us not forget that the rest of the world is watching America carefully to see how we’ll act at this critical moment. . . .

INCENTIVES TO ENCOURAGE PRODUCTION, HIRING, INVESTMENT

Again, our purpose was to provide incentive for the individual, incentives for business to encourage production and hiring of the unemployed, and to free up money for investment. . . .

TAX CUTS PERMANENT

But then to ensure the tax cut is permanent, we call for indexing the tax rates in 1985, which means adjusting them for inflation. . . .

BRACKET CREEP IS INSIDIOUS

Bracket creep is an insidious tax. . . .

CREDITS TO SPARK BREAKTHROUGHS

These credits will help spark the high technology breakthroughs that are so critical to America’s economic leadership in the world. . . .

BIPARTISAN MEASURE, AT FIRST, “OUT OF THE QUESTION”

Now, when I first proposed this — incidentally, it has now become a bipartisan measure coauthored by Republican Barber Conable and Democrat Kent Hance — the Democratic leadership said a tax cut was out of the question. . . .

ABILITY TO PLAN AHEAD

But by holding the people’s tax reduction hostage to future economic events, they will eliminate the people’s ability to plan ahead. Shopkeepers, farmers, and individuals will be denied the certainty they must have to begin saving or investing more of their money. . . .

A LITTLE SLIGHT-OF-HAND

There’s also a little slight-of-hand in that trigger mechanism. . . . As it stands now, the design of their own bill will not meet the trigger they’ve put in; therefore, the third year tax cut will automatically never take place.

SOME NEVER MET A TAX HIKE THEY DIDN’T LIKE

If I could paraphrase a well-known statement by Will Rogers that he had never met a man he didn’t like, I’m afraid we have some people around here who never met a tax they didn’t hike. . . .

THIS CHART ILLUSTRATES

Now, here is another chart which illustrates what I said about their giving a better break if you only intend to live for 2 more years. . . .

BIPARTISAN COALITION: SECRET WEAPON

Those of us in the bipartisan coalition want to give this economy and the future of this Nation back to the people, because putting people first has always been America’s secret weapon. . . .

THE WHOLE CONTROVERSY: DOES GOVERNMENT HAVE A PREEMPTIVE RIGHT TO SPEND AND SPEND

Because our bipartisan bill is so clearly drawn and broadly based, it provides the kind of predictability and certainty that the financial segments of our society need to make investment decisions that stimulate productivity and make our economy grow. Even more important, if the tax cut goes to you, the American people, in the third year, that money returned to you won’t be available to the Congress to spend, and that, in my view, is what this whole controversy comes down to. Are you entitled to the fruits of your own labor or does government have some presumptive right to spend and spend and spend? . . .

DRAMATIC BUT RESPONSIBLE PLAN

This is the time for a new beginning. I ask you now to put aside any feelings of frustration or helplessness about our political institutions and join me in this dramatic but responsible plan to reduce the enormous burden of Federal taxation on you and your family. . . .

WHAT YOU CAN DO

I urge you again to contact your Senators and Congressmen. . . . Tell them you believe this is an unequalled opportunity to help return America to prosperity and make government again the servant of the people.

GOVERNMENT DECIDES THAT IT KNOWS BETTER THAN YOU HOW YOU SHOULD CONDUCT YOUR LIFE

In a few days the Congress will stand at the fork of two roads. One road is all too familiar to us. It leads ultimately to higher taxes. It merely brings us full circle back to the source of our economic problems, where the government decides that it knows better than you what should be done with your earnings and, in fact, how you should conduct your life.

The other road promises to renew the American spirit. It’s a road of hope and opportunity. It places the direction of your life back in your hands where it belongs.

TRUST YOURSELVES: NO ONE CAN STOP YOU FROM REACHING HIGHER

I’ve not taken your time this evening merely to ask you to trust me. Instead, I ask you to trust yourselves. That’s what America is all about. Our struggle for nationhood, our unrelenting fight for freedom, our very existence — these have all rested on the assurance that you must be free to shape your life as you are best able to, that no one can stop you from reaching higher or take from you the creativity that has made America the envy of mankind.

One road is timid and fearful; the other bold and hopeful.