Austin Communications
Political Consulting Media Affairs Crisis Management Curson & Austin Advertising Store Contact

ROBB AUSTIN'S TURN

Reagan Economic Lesson in the Roosevelt Room

November 15, 2010

The first time I met President Ronald Reagan was in August of 1981.

It was in the Roosevelt Room in the West Wing of the White House one evening after work. The President was talking to a group of high rollers (major Republican donors) from the state of Connecticut.

My friend and mentor, former Assistant to the President, and Chairman of the National Republican Committee, Lee Atwater, asked me to sit in on the meeting.

The Roosevelt Room is impressive. Located just a few feet from the Oval Office, it is the best known meeting in the West Wing, and was once the office of former President Theodore Roosevelt. His “Rough Rider” portrait hangs above the fireplace mantel in the room.

On this particular evening, President Reagan asked this group of influential Republicans to continue their support for his economic recovery program, most notably his across the board reduction in federal income tax rates for all taxpayers, that had just passed Congress.

He was confident an economic recovery was just around the corner. The President often used the backdrop of his Hollywood experience when explaining the genesis of his political policy.

On this evening, he told the group a story about the filming of one scene in the 1940 biographical film, Knute Rockne, All American, a story about the famous Notre Dame Football coach.

“There was a scene that had only a farmer and a horse in it, but shooting on location created work for seventy people,” the President said, adding that in his mind, this same principle affected his thinking when it came to tax policy and people in all tax brackets.

President Reagan wanted people to be able to spend more of what they earned because it would lead to more employment and prosperity.  Some called his theory “supply-side economics”, whereas Reagan liked to say, it was “common sense”.

The country is about to engage in another tax cut debate as the so-called Bush tax cuts (enacted in 2001 and 2003) are set to expire December 31st, unless Congress votes to extend them.  These include hikes in the federal income tax rate on everyone, capital gains and investment dividend tax rates, the inheritance tax, and taxes in a host of other areas.

Many are surprised there is a debate going on at all. The economy is reeling, the job picture continues to look bleak, and the voters just sent a stern message to President Barrack Obama, and Congress, to cut spending, and taxes, too.

Voters want taxes cut for everyone. They seem to sense what President Reagan was saying many years ago in the Roosevelt Room, that when taxes are low and people have more money to spend, the economy gets a boost, and this helps everyone.

The tax cut debate will be the first test to determine whether the voters’ voice was heard in the congressional mid-term elections.

The average recession has lasted 18 months, and despite what some economists say, that the recession technically ended in June, 2009, everyone considers this to be the 35th month of a recession that began in December of 2007.

Extending or making permanent the Bush tax cuts will be determined in the lame duck session of Congress, controlled by Democrats. The big question will be whether Democrats will take a hard-lined position about keeping tax rates lower for everyone, including those making over $250,000 per year.

President Obama says the country can’t afford tax cuts for the wealthy, and that providing such relieve would cost the country $700 billion over 10 years in tax revenue. Although some in the White House say the President might be open to extending lower tax rates for the wealthy for a year or two.

As the current debate continues, my thoughts go back to President Reagan in the Roosevelt Room – and his remembrance of one scene in the 1940 movie Knute Rockne, All American – with a farmer and a horse.

It created 70 jobs, and someone of wealth did the hiring.