Monthly Archives: January 2011

MSNBC liberal talk show host Rachel Maddow likes the word “awesome.”  On HBO’s Real Time with Bill Mahr, Maddow teamed up with Pres. Reagan’s former budget director David Stockman and poured a bucket-full of bunk about Reagan’s economic record.  Wall Street Journal editorial board member and senior economics writer Steve Moore ably and adroitly defended Reagan’s economic success.

MADDOW: “The top 1% of of the country’s income went up roughly 80%.  The bottom part of the country went down.”

FALSE:  Between 1981 and 1989 (Reagan years), the poorest 20% of Americans saw their real family incomes rise 6%, the next quintile rose 8%, the 3rd quintile rose 10%, the 4th quintile rose 15%, and the richest 20% saw their real family incomes rise 20%.

By contrast, in the years preceding Reagan (1973 – 1981), the poorest saw their incomes DROP 5% and the next quintile saw a decline in real incomes by 2%.  The poor got richer under Reagan.

MADDOW: “From 1980 – 1990, the richest 1% saw their incomes go up 80%.  The median wage in the country over 10 years went up 3%.”

FALSE: Between 1981 and 1989, real median household income rose 11%, from $37,000 to $41,000 (Census Bureau, 2008 Statistical Abstract of the United States, Tables 670 and 671).

MADDOW:  “So if you were rich, Reagan was awesome!  And if you were anybody else it sucked.”

TRUE AND FALSE:  If you were rich, the Reagan years were awesome.  If you were anybody else, it was awesome for you, too.  Why?

  • From 1981 to 1989, the U.S. economy produced 17 million new jobs, or roughly 2 million jobs each year.  In the 1990s, another 26 million jobs were added.
  • The poorest 20 percent of Americans experienced a 6 percent gain in real income in the 1980s after suffering a 5 percent decline in the 1970s.
  • Black Americans saw their incomes grow at a slightly faster pace (11 percent) than whites (9.8 percent) in the Reagan years.
  • By 1989 there were 5.9 milion more Americans whose salaries exceeded $50,000 a year than there were in 1981 (adjusting for inflation).
  • There were 2.5 million more Americans earning more than $75,000 a year, an 83 percent increase.
  • The number of Americans earning less than $10,000 a year fell by 3.4 million workers.
  • The stock market more than tripled to 3,000 (!) by the end of the Reagan years.
  • The percentage of all workers who owned stock rose from 16% of all workers in 1980 to 26% by the end of Reagan’s term.

Yes, the deficit exploded.  But it’s tough to blame the deficit on Reagan’s tax cuts since real federal revenues grew by 24 percent.  No, spending was the real culprit.  The cumulative increase in defense spending from 1981 to 1989 ($806 billion) was larger than the entire cumulative increase in the budget deficit ($779 billion) in those years.

Finally, when given the opportunity to concede Moore’s points about the strength of the economy during the 1980s, Stockman unfortunately only talked about the deficit.

Here’s the clip.

We’ve written before about the failures of film tax credits.  Here’s another post.   If there are better examples of tax policies gone bad, I’d love to see them.  Check this one out that ran in the Boston Globe.

Mass. tax credits used to cover movie stars’ wages

January 12, 2011 03:29 PM

Associated Press

A quarter of the tax breaks given movie companies under Massachusetts’ film tax credit program have gone to help cover the salaries of millionaire movie stars.

An Associated Press review of a Department of Revenue report on the program found that $82 million of the $330 million in film spending eligible for the tax credits in 2009 went to pay the salaries of nonresident actors earning more than $1 million.

Under the program a film production can apply for a tax credit equal to 25 percent of a film’s production and payroll costs. In 2009 film companies applied for a total of $82.4 million in credits.

Critics have complained the state shouldn’t be giving tax breaks to Hollywood stars, but supporters say that without the program, there would be virtually no feature films shot in Massachusetts.

Lost in discussion about Gov. Brewer’s FY11-12 budget proposal is the fact that she proposes to control future state spending by limiting revenue (and expenditure) growth to an ongoing 10-year rolling average.  While we would prefer a limit based on the state’s population and inflation, this is a positive foray into controlling future state spending with a couple of important caveats.

First, the spending limit needs to be constitutional.  The constitution, in fact, already has a spending limit, although it is so high that its meaningless.  After all, if the current limit didn’t control spending when revenues jumped 50% over a three-year period, it will never control spending.  Arizona needs a constitutional limit with the appropriate flexibility to allow a legislature to override the limit with a supermajority vote.

Second, the governor’s proposal would direct any “surplus” (revenues that exceed the spending limit) in the following manner:

  1. Debt reduction
  2. Rollover reduction (another form of debt)
  3. Filling the Rainy Day Fund
  4. One-time capital projects
  5. Tax rebates

To begin with, how state revenues are appropriated are decisions that should be left to the legislature, period.  Having the constitution yet again direct where appropriations go is partially what got us into this mess to begin with.  However, because the first three priorities can reach an end point (debt can be paid off, for example), there is a compelling argument to take care of those items first, as long as it doesn’t encourage new debt.

Items number 4 and 5, however, should be left to the legislature.  There should be no requirement enshrined in the constitution (assuming the limit were constitutional) that one-time capital projects be funded at all, let alone in favor of reducing taxes.  Again, prioritizing spending is the job of the legislature.

Finally, when it comes to reducing taxes, rebates are the worst way.  Sending checks to people who have already worked to earn their after-tax dollars is better than a kick in the shin, but it does nothing for economic growth nor does it provide any incentive to work to earn that next after-tax dollar.

The legislature should be able to decide whether to give rebates, reduce tax rates across-the-board, or spend it on one-time capital projects.  A robust debate would ensue and frankly, that’s ok.

So while improvements to a new state spending limit can and should be made, Governor Brewer deserves credit for intending to leave a solid fiscal reform as part of her legacy.



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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.