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Commentary: Reagan taxes and the need for activist government

In 1982, Ronald Reagan signed into law both the Highway Revenue Act and the Tax Equity and Fiscal Responsibility Act (TERFA). The Highway Act raised gasoline and trucking industry taxes. And with a yield of about 1 percent of the gross domestic product, TERFA is commonly viewed as the largest tax increase in peace time American history.

But 1982 was just a start in that Reagan initialed new tax increases every year from 1982-87. His 1983 social security tax hikes are still being implemented today.

As large as they were, Reagan’s tax increases and his emasculation of many domestic programs did not pay for his 1981 tax cut and his vast expansion of the military. As a result, a presidency that is lauded by ritual acclamation for its small government restraint saw a tripling of the national debt.

I am not interested here in the wisdom of Reagan policies that are heresy to political heirs who ooze idolatry at the fictional father figure they perpetuate. Instead, my purpose is to highlight the damage that can accrue when myth triumphs over reality at the center of national debate.

In the decades since Reagan, government has become a rhetorical pariah. Republicans pretend to despise it while Democrats are too fearful to acknowledge their support without cautious obfuscation. Honest discussion of taxation is impossible and there is no meaningful counterweight to the drumbeat of government demonization.

But rhetoric notwithstanding and aside from a handful of anarchists and libertarian purists, we are all acolytes of active government. The befuddled woman who sought famously to keep government away from her Medicare may be an amusing poster child for our disconnect, but she has armies of compatriots in her Twilight Zone world.

Indeed, whether you are the Republican governor of Louisiana or a Democrat with an idle fishing boat, who among us actually believes BP should pursue unregulated drilling or that government should stay out of the clean-up? What corporation opposes regulations that benefit them or constrain a competitor? Who would prefer an airplane inspected optionally by profit oriented owners or would deny a decent education to poor children because local resources are inadequate?

Once upon a time we all acknowledged governments’ benefits. In the 1950s, a Republican president pursued massive government programs because interstate highways and world class science education were essential national imperatives. In the 1970s, a Republican presidency yielded the Environmental Protection Agency and the clean air and water acts because ecological well-being and public health required bold federal regulation.

And in the 1980s, the apostle of small government raised taxes seven times while accepting that national concerns transcended ideological purity.

Not any more. Not in our fantasyland world where myth trumps reality and national interests are subservient to political gain. On a globe where higher education is central to economic prosperity, we have regressed from first to twelfth place in the percentage of young adults with a college degree. But small government fictions allow Washington to eek through some Pell Grants but mostly do nothing.

The same can’t-do defeatism makes us idle spectators as competitor governments orchestrate 21st century infrastructures and the new energy sources that will redefine the global economy. But we can’t raise taxes and we can barely legislate stimulus and we won’t offend the coal companies and we can’t develop an energy policy. So mostly, we watch.

Reagan’s most visible legacy has become godfather to paralysis. It’s less because of what he did than how his persona has been manipulated. The true villains are callous Republican radicals who genuflect before Reagan’s image even as they might drive him from their party because he raised taxes and negotiated with communists.

The villains include a subservient media that give equal time to the bankrupt shibboleth that government is the enemy, with the equal time being bequeathed to fearful Democrats who dance meekly around what they know is an urgent need for an active public sector. So it’s decades since deceived voters have heard an unabashed argument for a central government role.

But as plodding and overbearing as it can be, only government can pave roads and fund quality education for needy and disabled children. The pre-Medicare/Medicaid free market never did and never would have provided health insurance for the impoverished young and non-wealthy elderly, and without federal mandates, emergency room care might also be denied. Government alone supports police and national parks, and no public transportation system can survive without subsidies. And only targeted subsidies, regulation and a thoughtful mix of taxes and tax breaks can render the profit motive of private enterprise consistent with the national good.

If we refuse to assimilate these realities, we will become a third rate economic power consisting cruelly of the haves and a burgeoning class of have-nots. The current down turn will be child’s play by comparison.

Ken Schechtman is a freelance writer and a professor at the Washington University School of Medicine.

This article originally appeared in the St. Louis Beacon.