America's Fiscal Constitution (75 page)

59
. Zelizer,
Taxing America
, 312.

60
. Tax Policy Center, “Historical Social Security Tax Rates.”

61
. Zelizer,
Taxing America
, 324. See also Hacker,
The Divided Welfare State
, 142.

62
. Moon,
Medicare
, 55.

63
. Ibid.

64
. Shaviro,
Do Deficits Matter?
, 80.

65
. Tax Policy Center, “Historical Social Security Tax Rates.”

66
. Robert Ball quoted in Hacker,
The Divided Welfare State
, 143.

67
. Nixon, “Annual Budget Message.”

68
. Nixon, “Radio Address.”

69
. Stein,
The Fiscal Revolution
, 573–575.

70
. Gould,
Grand Old Party
, 400.

71
. See Greene,
Gerald Ford
, and Reichley,
Conservatives in an Age of Change
.

72
. Greene,
Gerald Ford
, 75–76.

73
. Ibid., 79, and Reichley,
Conservatives in an Age of Change
, 392–393.

74
. Cannon,
Governor Reagan
, 408. For background on the speech, see also Shirley,
Reagan’s Revolution
, 80–85.

75
. Ronald Reagan quoted in Cannon,
Governor Reagan
, 408.

76
. Gould,
Grand Old Party
, 410.

77
. Jimmy Carter quoted in Stabile and Cantor,
Public Debt
, 151.

C
HAPTER
14

1
. Carter, “The President’s News Conference.”

2
. Carter,
Keeping Faith
, 82.

3
. Homer and Sylla,
Interest Rates
, 383.

4
. See Appendix C and “Consumer Price Index: All Urban Consumers,” United States, Bureau of Labor Statistics,
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
.

5
. Biven,
Jimmy Carter’s Economy
, 204.

6
. See Appendix C.

7
. Peterson, “The New Politics of Deficits.”

8
. Morgan,
The Age of Deficits
, 67.

9
. Homer and Sylla,
Interest Rates
, Table 51 at 376.

10
. Volcker and Gyohten,
Changing Fortunes
, 172.

11
. OMB, Historical Tables, Table 3.2, Account 901.

12
. Peterson, “The New Politics of Deficits,” 594.

13
. The program, which offered competitive grants to nonprofits and state and local governments, replaced a variety of federal job training programs. CETA combined job training, including subsidies paid to employers for “work experience,” and funding for public service jobs for those with lower skills who had experienced chronic unemployment. See Baumer and Van Horn,
The Politics of Unemployment
, for an excellent analysis of CETA programs.

14
. Ibid., 103, 91.

15
. Ibid., 89.

16
. White and Wildavsky,
The Deficit and Public Interest
, 37.

17
. Kaufman,
Henry M. Jackson
, 389.

18
. Ibid.

19
. OMB, Historical Tables, “Table 3.1–Outlays by Superfunction and Function: 1940–2018.”

20
. OMB, Historical Tables, “Table 2.3–Receipts by Source as Percentages of GDP: 1934–2018.”

21
. See OMB, Historical Tables, “Table 2.2–Percentage Composition of Receipts by Source: 1934–2018.”

22
. One study attributed about half of the decline in corporate income tax revenues from 1960 to 1985 to falling profits and the other half to various new incentives in tax law. See Alan Auerbach and James Polerba, “Why Have Corporate Tax Rates Declined,” NBER working paper 2118 (January 1987).

23
. Carter quoted in Mears, “Tax Code Overhaul.”

24
. Hollenbeck and Kahr, “Ninety Years of Individual Income and Tax Statistics,” Table 1 at 144–145.

25
. Ibid.

26
. “U.S. Federal Individual Income Tax Rates History.”

27
. OMB, Historical Tables, “Table 2.3–Receipts by Source as Percentages of GDP: 1934–2018.”

28
. See Appendix H.

29
. Tax Policy Center, “Historical Social Security Tax Rates.”

30
. Herbert Stein, “The Fiscal Revolution in America, Part II,” in Brownlee,
Funding the Modern American State
, 256.

31
. Cannon,
Governor Reagan
, 194.

32
. Ibid., 199.

33
. George H. W. Bush quoted in Bannon, “Bush Tax Cuts Turn 10.”

34
. Phillips-Fein,
Invisible Hands
, 252.

35
. Anderson,
Revolution
, 122–129.

36
. Ibid., Table 1 at 135.

37
. Ibid., 134.

38
. The actual federal budget Reagan would inherit, for the federal fiscal year 1981 beginning October 1, 1980, can be best understood if broken into four major parts: spending financed with dedicated taxes, spending on interest on the debt, spending on defense, and everything else. Anderson’s hasty calculations for Reagan’s budget plan assumed that the budget for fiscal year 1981 had revenues of $610 billion and outlays of $633 million. In reality, however, Reagan’s proposals to increase defense spending and cut taxes affected only the federal funds budget, exclusive of trust fund spending and revenues. The actual federal funds revenues for fiscal 1981 would be $410 billion, and spending would be $496 billion.
Subtract from both receipts and spending $251 billion devoted to defense, veterans, and interest payments in that fiscal year, and you are left with $161 billion in receipts, and $245 billion in outlays.

39
. Darman,
Who’s in Control?
, 77.

40
. Reagan, “Inaugural Address.”

41
. Feldstein,
American Economic Policy
, 287.

42
. Howard Baker quoted in Stockman,
The Triumph of Politics
, 166.

43
. Reagan, “Address on the Program for Economic Recovery.”

44
. Jim Wright quoted in Hayward,
The Age of Reagan
, 150.

45
. Jack Kemp quoted in Stabile and Cantor,
Public Debt
, 178.

46
. “Reagan’s Tax Cut Proposal Called All But Dead.”

47
. Stockman,
The Triumph of Politics
, 213.

48
. Kent Hance quoted in ibid.

49
. Reagan, “Address on Federal Tax Reduction Legislation.”

50
. Dick Cheney quoted in Stockman,
The Triumph of Politics
, 311.

51
. Savage,
Balanced Budgets
, Table 20 at 248.

52
. Peterson,
Running on Empty
, 591.

53
. OMB, Historical Tables, “Table 3.1–Outlays by Superfunction and Function: 1940–2018.”

54
. Pete Domenici quoted in Stockman,
The Triumph of Politics
, 351.

55
. Ibid.

56
. Ibid., 343.

57
. Stockman,
The Triumph of Politics
, 557.

58
. Reagan, “The President’s News Conference.”

59
. Reagan,
The Reagan Diaries
, vol. 1, 90.

C
HAPTER
15

1
. Reagan, “Address Before a Joint Session.”

2
. Reagan, “Remarks at the Annual Convention.”

3
. Feldstein,
American Economic Policy
, 278.

4
. Schick,
The Federal Budget
, 145.

5
. Reagan, “Address to the Nation.”

6
. Newport, Jones, and Saad, “Ronald Reagan from the People’s Perspective.”

7
. Newt Gingrich quoted in Gillon,
The Pact
, 52.

8
. Hormats,
The Price of Liberty
, 238.

9
. Stockman,
The Triumph of Politics
, 356–357.

10
. Ronald Reagan quoted in Savage,
Balanced Budgets
, 268.

11
. Savage,
Balanced Budgets
, 269–271.

12
. Niskanen,
Reaganomics
, 106.

13
. Shuman,
Politics and the Budget
, 155.

14
. Martin Feldstein quoted in Reeves,
President Reagan
, 211.

15
. For simplicity the text refers to a trust fund, though there are two for the system: one paying old-age and survivors’ benefits and another for disability payments.

16
. Reagan quoted in Grant,
The New American Social Compact
, 42.

17
. In the remaining five years of Reagan’s presidency, payroll tax revenues rose from $209 billion to $359 billion and transformed an $8 billion deficit in 1982 to an annual Social Security trust fund surplus of $52 billion by 1989. The tax remained at 15.3 percent of payroll until 2010. Most went to the Social Security old-age pension and disability trust funds; a tax of 2.9 percent of payroll funded the Hospitalization Insurance Trust Fund, supporting Medicare Part A.

18
. The Gramm-Rudman-Hollings Act, officially entitled the Balanced Budget and Emergency Deficit Control Act of 1985, eliminated the planned removal of the Hospitalization Fund from the unified budget. As reported by the General Accounting Office (GAO) in 1988, “most public reporting” included the various trust funds in budget totals. The GAO also reported on a deliberate slowdown of spending in the Highway and Airport Trust Funds, financed with user fees, to reduce the reported level of the deficit. See GAO,
Budget Issues
.

19
. Bivens, “Social Security’s Fixable Financing Issues.”

20
. Ibid.

21
. “Monthly Statistical Snapshot, June 2013: Table 2,” US Social Security Administration,
http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
.

22
. OMB, Historical Tables, “Table 1.4–Outlays by Agency: 1962–2018.”

23
. See Appendix B.

24
. Volcker and Gyohten,
Changing Fortunes
, 178.

25
. Reagan, “State of the Union Address.”

26
. Anderson,
Revolution
, 179.

27
. Cuts in these programs accounted for most of the reduction in domestic spending during the eight years of the Reagan administration. The cuts amounted to just over 1 percent of national income. See Charles Schultze, in Martin Feldstein,
American Economic Policy
, 284, especially Table 4.16. Reagan’s domestic budgets did, however, devote far more to agricultural programs than did President Carter’s. For a detailed comparison of Carter’s actual and proposed budgets and Reagan’s actual and proposed budgets in his first years, see Savage,
Balanced Budgets
, 270.

28
. See Appendix B.

29
. Walter Mondale quoted in Savage,
Balanced Budgets
, 229.

30
. Rudman,
Combat
, 79–89.

31
. Ibid.

32
. The law set targets for reducing the deficit from an estimated $171.9 billion in fiscal 1986 to zero in 1991. These targets referred to the deficit in the unified budget, which included Social Security surpluses. An amendment to the law in 1987 stretched out the reduction, from $154 billion in fiscal year 1988 to zero in fiscal 1993.

33
. After the Supreme Court ruled that the Gramm-Rudman-Hollings Act gave unconstitutional power over budgets to the controller, Congress passed an altered version of the bill that extended the deadline for a balanced budget by two years and assigned sequestration authority to the White House. Both the 1985 and 1987 versions of the act raised the statutory debt ceilings to allow additional borrowing.

34
. This interest rate is calculated by dividing the gross interest on debt paid each fiscal year by the beginning and ending balance of outstanding interest-bearing debt. For gross interest, see OMB, Historical Tables, Table 3.2, Account 901. For interest-bearing debt, Appendix A and note 3.

35
. Compare Table 2.2 with OMB, Historical Tables, Table 1.4.

36
. See Appendix H.

37
. Birnbaum and Murray,
Showdown at Gucci Gulch
, 31.

38
. Bob Packwood quoted in ibid., 189.

39
. Birnbaum and Murray,
Showdown
, 193.