Senate Majority Leader Harry Reid (D-NV) is reportedly working on a plan that would raise the federal debt ceiling while pairing $2.7 trillion in spending cuts with no new revenue in an attempt to break the impasse that has settled over the debt ceiling negotiations. Republicans have (for the most part) been adamant that revenue not be a part of any deal to raise the debt ceiling.
One of the main thrusts of the GOP’s argument is that the economy is still to weak to handle a tax increase, even on the richest Americans or corporations making record profits. “Tax hikes would only hurt job growth,” according to Speaker of the House John Boehner (R-OH). “It is counter-intuitive to think you impose taxes on people right now and businesses if you want to get Americans back to work,” added House Majority Leader Eric Cantor. “There’s a rule that even Obama abided by in 2009 that you don’t increase taxes during a recession,” quipped Sen. Chuck Grassley (R-IA).
However, these Republicans might want to check the record of the conservative icon, former President Ronald Reagan. As Reagan’s first budget director, David Stockman, told Bloomberg News that Reagan did exactly what the Republicans are campaigning against:
“That put the lie to the current arguments of Republicans that the economy is too weak to bear a tax increase” because “the next year 3.5 million jobs were created,” said Stockman, who says tax increases are now needed to help reduce the deficit. “When the Republicans rhetorically say now, ‘Who would raise taxes in a recession?’ the answer is Ronald Reagan.”
Reagan signed his 1982 tax increase into law in September 1982, even though the early 1980s recession didn’t end until November 1982. Following that tax increase, as former Reagan economic official Bruce Bartlett has pointed out, gross domestic product “grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983…The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.”
According to the Treasury Department, “Reagan’s tax increases now would bring in about $300 billion a year, if the increases were measured against today’s economy.” But today’s Republicans have gone to the mat over preserving tax cuts for millionaires, tax loopholes for corporate jet owners, and tax subsidies for hugely profitable companies.