A GOOD ECONOMICS LESSON
The truth about the Reagan deficits

From the Houston Chronicle, Linda Bilmes, who was an assistant secretary of commerce in the Clinton administration, and teaches budget and financial management at Harvard's Kennedy School of Government opines on the folly of Bush's insane tax cuts and spending:

The Bush budget announced recently shows revenue falling some $500 billion short of projected spending. Is this a cause for alarm, or is it true that, as Vice President Dick Cheney reportedly asserted, "Reagan proved that deficits don't matter"?

Fans of Reaganomics note that former President Reagan's spending spree followed a formula similar to President Bush's: tax cuts combined with a major boost in defense spending. The current Bush deficit is equal to 4.5 percent of gross domestic product. The Reagan deficits grew beyond 5 percent. The aftermath in the 1990s was not a fiscal train wreck but rather a sustained economic boom that enabled President Clinton to balance the budget and even to generate a surplus by 2000. Bush is hoping the nation will outgrow its recent deficits as we did last time around.

Unfortunately, history is not about to repeat itself. The ability to recover from the 1980s deficits was the result of three historical "flukes" that happened at the same time: a huge demographic bulge, an extremely strong dollar and a sudden peace dividend.

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