Ronald Reagan is the only person who has ever explained fiscal conservatism well

A post by John Hawkins at Right Wing News caught my eye this week and I was delighted to find he quoted and linked a speech by Ronald Reagan that I had been looking for. In it, Reagan explained how he had turned California’s economy around as governor. It was his “Let them go their way” speech in 1975 to CPAC. That, and the one he gave to Hillsdale College, were influential in my realization during the 2008 presidential campaign that I really believed in fiscal conservatism rather than liberalism. It also helped that I learned during the 2008 campaign that Reagan was an economics major in college — unlike the Republican actor currently in charge of California’s economy.

Here’s where Reagan explained at CPAC how he brought California back from the financial brink:

When I went to Sacramento eight years ago, I had the belief that government was no deep, dark mystery, that it could be operated efficiently by using the same common sense practiced in our everyday life, in our homes, in business and private affairs.

The “lab test” of my theory — California-was pretty messed up after eight years of a road show version of the Great Society. Our first and only briefing came from the outgoing director of finance, who said: “We’re spending $1 million more a day than we’re taking in. I have a golf date. Good luck!” That was the most cheerful news we were to hear for quite some time.

California state government was increasing by about 5,000 new employees a year. We were the welfare capital of the world with 16 percent of the nation’s caseload. Soon, California’s caseload was increasing by 40,000 a month.

We turned to the people themselves for help. Two hundred and fifty experts in the various fields volunteered to serve on task forces at no cost to the taxpayers. They went into every department of state government and came back with 1,800 recommendations on how modern business practices could be used to make government more efficient. We adopted 1,600 of them.

We instituted a policy of “cut, squeeze and trim” and froze the hiring of employees as replacements for retiring employees or others leaving state service.

After a few years of struggling with the professional welfarists, we again turned to the people. First, we obtained another task force and, when the legislature refused to help implement its recommendations, we presented the recommendations to the electorate.

It still took some doing. The legislature insisted our reforms would not work; that the needy would starve in the streets; that the workload would be dumped on the counties; that property taxes would go up and that we’d run up a deficit the first year of $750 million.

That was four years ago. Today, the needy have had an average increase of 43 percent in welfare grants in California, but the taxpayers have saved $2 billion by the caseload not increasing that 40,000 a month. Instead, there are some 400,000 fewer on welfare today than then.

Forty of the state’s 58 counties have reduced property taxes for two years in a row (some for three). That $750-million deficit turned into an $850-million surplus which we returned to the people in a one-time tax rebate. That wasn’t easy. One state senator described that rebate as “an unnecessary expenditure of public funds.”

For more than two decades governments-federal, state, local-have been increasing in size two-and-a-half times faster than the population increase. In the last 10 years they have increased the cost in payroll seven times as fast as the increase in numbers.

We have just turned over to a new administration in Sacramento a government virtually the same size it was eight years ago. With the state’s growth rate, this means that government absorbed a workload increase, in some departments as much as 66 percent.

We also turned over-for the first time in almost a quarter of a century-a balanced budget and a surplus of $500 million. In these eight years just passed, we returned to the people in rebates, tax reductions and bridge toll reductions $5.7 billion. All of this is contrary to the will of those who deplore conservatism and profess to be liberals, yet all of it is pleasing to its citizenry.

Make no mistake, the leadership of the Democratic party is still out of step with the majority of Americans.

Speaker Carl Albert recently was quoted as saying that our problem is “60 percent recession, 30 percent inflation and 10 percent energy.” That makes as much sense as saying two and two make 22.

Without inflation there would be no recession. And unless we curb inflation we can see the end of our society and economic system. The painful fact is we can only halt inflation by undergoing a period of economic dislocation-a recession, if you will.

We can take steps to ease the suffering of some who will be hurt more than others, but if we turn from fighting inflation and adopt a program only to fight recession we are on the road to disaster.

Here are the lines in Reagan’s 1977 speech to Hillsdale College, “What ever happened to free enterprise?,” which had a big impact on me:

The most dangerous myth is the demagoguery that business can be made to pay a larger share, thus relieving the individual. Politicians preaching this are either deliberately dishonest, or economically illiterate, and either one should scare us. Business doesn’t pay taxes, and who better than business to make this message known? Only people pay taxes, and people pay as consumers every tax that is assessed against a business. Begin with the food and fiber raised in the farm, to the ore drilled in a mine, to the oil and gas from out of the ground, whatever it may be — through the processing, through the manufacturing, on out to the retailer’s license. If the tax cannot be included in the price of the product, no one along that line can stay in business.

But if you want to explain it simply, a loaf of bread: If the farmer can’t get enough for his wheat to pay the tax on his farm — the real estate tax — he can’t go on raising wheat. And so when you buy that loaf of bread tomorrow, just take a look: a hundred and fifty one taxes are in that loaf of bread amounting to more than half of the price of bread.

If fiscal conservatism is not prospering as a philosophy for taxing and governing, I think the biggest reason is that no one has ever explained it as well as Reagan.