Many of this president’s advisors argued for massive government spending to stimulate demand and create jobs. He said, “It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise revenues in the long run is to cut the tax rates.” He further stated that “an economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never produce enough jobs or enough profits.”
He sponsored legislation to cut taxes across the board, including the rich, by 30 percent; furthermore, he promised to increase defense spending as one way to grow the economy faster.
His tax cut was debated for months and passed despite vigorous opposition by the opposing party. Prior to his tax cut, federal government revenues averaged $67.7 billion dollars over a four year period. After the tax cut, federal government average revenues increased to $84.1 billion dollars over the next four years. The rich actually ended up paying a large share of the tax burden under his tax cuts.
The impact of the tax cut was economic growth and job creation. The national growth rate went from 4.3 to 6.6 percent. Investment spending soared. The unemployment rate fell to its lowest peacetime level in more than 30 years as over a million jobs were created in the private sector.
In testimony before Congress, the Chairman of the Council of Economic Advisors stated, “Did the tax cut pay for itself in increased revenues? I think the evidence is very strong that it did.”