Ronald Reagan believed that regulations and paperwork were the real impediments to prosperity and growth. But the main component of his economic recovery program was a major reduction in the tax rate. Some, even in his administration, believed his view simplistic and naive. But Reagan was immovable.
Former Reagan Chief of Staff Ken Duberstein:
"Reagan was coming from this very simple proposition: If you lower the tax rate, then more people will work, there will be more income in the economy and everyone's lives would be better."
Despite a 25 percent income tax cut, by 1982 Reagan faced a deepening recession, mounting unemployment and homelessness.
Former Reagan Deputy Chief of Staff Mike Deaver:
"All of the things that he said were going to happen, that things were going to get better, were not getting better. His budget had, in fact, not caught up with the recession in the country as fast as he thought it would."
Reagan responded by sticking to his economic plan and telling and retelling an anecdote about two boys: one an optimist and the other a pessimist. The pessimist was given a pile of new toys and responded by crying because he was afraid someone would come and take them all away. The optimist was given the job of going down to the barn and shoveling out the stalls. He tackled the chore with great enthusiasm, heartily digging into the manure, because he was convinced that "there's got to be a pony in here somewhere."
"He told that story incessantly. It was not just for himself
but all of us. Gotta keep our optimism up! We're gonna make it!"
"I think Reagan probably talked the country back into prosperity for about a year there before it all clicked in."
Ultimately under Reagan, the economy turned around. The legacy was tinged, however, by record deficits that more than doubled the national debt.