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Responding to Paul Krugman's unacceptably unimpressed take on Regan's taxation record, a reader writes in to chide him. "Taxes were cut at the beginning of the Reagan administration," argues Krugman's correspondent. "Federal tax receipts increased by 50% by the end of the Reagan Administration. Although correlation does not prove causation the tax cut must have accounted for some portion of this increase in federal tax receipts." Krugman replies:
Actually, federal revenues rose 80 percent in dollar terms from 1980 to 1988. And numbers like that (sometimes they play with the dates) are thrown around by Reagan hagiographers all the time.But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.When you're given multi-year economic statistics with really surprising results, it's always worth remembering that not correcting for inflation and population growth makes a ham sandwich from 1980 look like the world's wisest investment.
