THE FISCAL LEGACY
Favoring Tax Cuts and Tolerating Deficits
By DAVID E. ROSENBAUM
Published: June 10, 2004
...The federal deficit grew to $208 billion in the 1983 fiscal year, Mr. Reagan's second budget year, from $79 billion in the 1981 fiscal year, the last year the government operated under a budget prepared by President Jimmy Carter. As a percentage of the national economy, the deficit in 1983 was 6 percent, the highest ever, up from 2.6 percent in 1981.
The large deficits were antithetical to Mr. Reagan's view of himself as a fiscal conservative, and he never seemed completely reconciled to them. He signed tax increases later in his first term that repealed more than one-third of the 1981 tax cuts. But the lesson the Republicans in power today took from the Reagan experience was that they could disregard deficits. President Bush's first treasury secretary, Paul H. O'Neill, reported in his book, "The Price of Loyalty," that at a crucial budget meeting, Vice President Dick Cheney brushed off a question about the deficit by saying, "Reagan proved deficits don't matter."...
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Another lesson the current administration took from the Reagan years is that it can be politically advantageous to publish budgets with numbers that are less than fully honest....
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The budgets prepared by David A. Stockman, Mr. Reagan's first budget director, adopted what was called a "rosy scenario" - impossibly optimistic predictions about future growth, inflation and interest rates. They also included what was called the "magic asterisk" - a gimmick that allowed for the budgeting of unspecified, and never intended, spending cuts.
Both techniques allowed the budgets that were submitted by the White House to Congress in January or February to show lower deficits than what was probable....
(More in the article, including info on changing tax policy since Reagan.)
http://www.nytimes.com/2004/06/10/politics/10budget.html