Upsetting National Priorities: The Reagan Administration's Budgetary Strategy

We use simulations based on a multiequation model of federal budgetary outcomes to assess the Reagan administrations impact on the federal budget during fiscal years 1982–86. Reagan's aggregate budget priorities represent a significant departure from the priorities of prior postwar administrations. The bulk of this shift in priorities had occurred by fiscal 1984. Defense spending and uncontrollable domestic spending were higher, and spending on domestic controllable programs lower under Reagan than they would otherwise have been. The distinctiveness of Reagan's budgetary priorities can be attributed to his tax cuts and—far from a strategy of “starving the budget by reducing revenues†—to a failure to allow fiscal pressures to restrain spending. The model projects that without tax cuts Reagan's predecessors would have spent no less on defense than Reagan. Cutting taxes increased the deficit by about $400 billion cumulatively during fiscal years 1982–86 and reduced expenditures by roughly $30 billion.