By 1986, Reagan's tax-reform plan left two marginal rates of 28 percent and 15 percent, a long stone's throw from the 70 percent top rate he had inherited. His plan also cut about 2,000 pages from the tax code.
Ideas matter. Results quickly followed for Reagan. Between 1982 and 1989, the economy grew, adjusting for inflation, by 35 percent: more than 4.5 percent per year. As growth was restored, tax revenues came flowing in. Income-tax revenues grew by 50 percent during this period, even as tax rates dropped. By 1986, the inflation rate had fallen to 1 percent. By the end of his term, unemployment had dropped to 5.5 percent. Interest rates had plunged. The stock market had soared.
From July 1982 through the end of 1988, the S&P 500 averaged a near 21 percent annual gain. Brand new industries arose in computing, software, communications and the Internet -- original endeavors that completely streamlined and transformed the American economy for the decades to come. In effect, Reaganomics launched a 20-year boom, the longest prosperity period in the 20th century.
Reagan critics to this day continue to harp on deficits and debt, rather than the growth miracle produced by Reaganomics. But they are factually wrong. Reagan inherited a budget gap of roughly 2.5 percent of the economy. By the end of his two terms, he left it exactly where he found it. In between, he restored our economic health and revitalized our standing around the world.
By the time of his summit meetings with Soviet Chairman Gorbachev, Reagan was able to say calmly and diplomatically that the United States could produce the goods and the Soviets could not. In the next few years, the Berlin Wall came down and the Soviet Union collapsed. Reagan's visionary linkage of domestic economic recovery, military preparedness and worldwide peace had worked with a stunning swiftness that literally no one but the former Hollywood actor had ever visualized.
The greatness of Ronald Reagan was his optimistic vision. His unequivocal belief in freedom and democracy, in America as a city on the hill, never faltered. His free-market prescription for economic growth relied on the creativity of ordinary people working in free enterprise rather than government planning. He believed in entrepreneurship, not welfarism. He understood how to use military power. And his optimistic faith in America gave a moribund country a new life.
Reagan saved America. His passing is a sad occasion. But as his soul gazes down from the heavens, he will see that his ideas will live forever.