by Bruce Fenton

Opponents to of tax cuts cite numerous reasons why tax cuts won’t work. Too much, benefits the rich over the poor, will lead to deficit spending, will waste the surplus… all concerns expressed by the doubters. However, they are ignoring history.

Somehow they forgot the legacy of the Reagan presidency. So, on the anniversary of his 95th birthday, it seems fitting to comment on his legacy and vision.

Described by economist Art Laffer as the last “real President,” Reagan brought to the office a strong, singular focus to build a better country and to shut down world communism. Without a doubt, he did both.

Upon assuming office, he immediately embraced the supply side economic policies advanced by his economic advisor, Laffer. The Laffer Curve theory held that if taxes were cut, the resulting money left in the hands of the people and not the government, would stimulate the economy and the resulting growth would actually generate more tax revenue.

The broad-based income tax cuts that Reagan pushed through did exactly that, setting off an entrepreneurial boom that has propelled the growth of the economy for the past 20 years. Certainly the Clinton Presidency benefited from the tax cuts, and to Clinton’s credit, he even added his own cut by reducing the capital gains tax.

Reagan added to the economic well being of the country by facing down communism, and for all intents, shutting down its socialistic economic system around the world. This has opened up vast parts of the world as a marketplace for our goods and services. Today, one form or another of capitalism propels the economic environment of the world.

Reagan’s detractors, and to be sure there are many, point to his lack of sensitivity for social issues and the legacy of his deficit spending on defense and the infrastructure throughout the land.

In the case of the latter, we can draw a corollary by comparing his spending with what all of us do with our homes. We buy homes, and when home values and/or our income goes up, we remodel. By remodeling, we add value to our homes and increase the livability, or quality of life that comes with having a nicer home. The money for this remodeling usually comes from refinancing… adding to our family debt with additional long-term mortgage borrowing.

But, we do so with the mindset that we will have the income in future years to pay off this debt. Reagan envisioned leaving money in the hands of the people rather than the government, where it could be put to more productive uses than government spending would provide. He was right—our economy grew, and government income increased, eventually providing cash flow capability to pay for the “remodeling” that his Presidency did over his eight years in office.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.