How ironic that as America debated its debt ceiling all summer and faced a stunning credit downgrade, the nation approached a most timely anniversary: It was Aug. 13, 1981, that President Reagan signed the Economic Recovery Act. Understanding Reagan’s thinking 30 years ago is critical to discerning where we are now.

Reagan’s initiative was the antithesis of President Obama’s $800 billion “stimulus” that didn’t stimulate. The 2009 version was the single greatest contributor to our record $1.5 trillion deficit. It was, plain and simple, what Reagan didn’t do.

When Reagan signed the Economic Recovery Act at his ranch near Santa Barbara, it was the largest tax cut in American history. He also revealed leadership that Democrats and Republicans alike agree we are not seeing currently from the White House. Even The Washington Post called Reagan’s action “one of the most remarkable demonstrations of presidential leadership in modern history.”

Confiscatory tax policy

The enemy that day was America’s progressive federal income tax system, birthed in 1913 by Congress and President Woodrow Wilson. It was revolutionary, requiring a constitutional amendment. That tax, which began as a 1% levy on the wealthy, would rocket up to a top rate of 94% by the 1940s.

Ronald Reagan personally felt the toll. In the 1940s, the so-called “B”-movie actor was one of the top box-office draws at Warner Bros. Then a Democrat, Reagan saw no incentive in continuing to work — that is, make more movies — once his income hit the top rate. He also realized who suffered from that choice. It wasn’t Reagan; he was wealthy. It was the custodians, cafeteria ladies, camera crew and working folks on the studio lot. They lost work.

Reagan viewed such rates as punitive, confiscatory — “creeping socialism,” as he put it. In speeches in the 1950s and 1960s, he blasted the tax as right out of Marx’s Communist Manifesto.

By the late 1970s, Reagan concluded that out-of-control taxes, spending and regulation had sapped the economy of its vitality and ability to rebound. And so, on that August day in 1981, Reagan, with a Democratic House and Republican Senate, secured a 25% across-the-board reduction in income tax rates over a three-year period beginning in October 1981. Eventually, the upper rate would drop to 28%.

As biographer Steve Hayward notes, even when Reagan compromised with Democrats on tax increases in exchange for promised spending cuts in 1982, he “never budged an inch on marginal income tax rates.” Reagan understood that not all taxes, or tax increases, are equal.

After a slow start through 1982-83, the stimulus effect of the cuts was extraordinary, sparking the longest peacetime expansion in U.S. history. The “Reagan Boom” not only produced widespread prosperity but — along with the attendant Soviet collapse — also helped generate budget surpluses in the 1990s. Carter-Ford era terms such as “malaise” and “misery index” vanished. Only now has America re-approached similar misery-index levels, reaching a 28-year high.

Reaganomics myths

Unfortunately, liberals have so maligned Reaganomics that they are unable to separate facts from myths — to the detriment of their party and president. Among the worst myths is that Reagan’s tax cuts created the deficit, even as the deficit increased under Reagan.

In fact, Reagan inherited chronic deficits. Since Franklin Roosevelt, the budget had been balanced a handful of times, mainly under President Eisenhower. From 1981-89, the deficit under Reagan increased from $79 billion to $153 billion. It peaked in 1983-86, hitting $221 billion. Yet, once the economy started booming, the deficit steadily dropped.

Tax cuts were not the problem. Tax revenues under Reagan rose from $599 billion in 1981 to nearly $1 trillion in 1989. The problem was that outlays all along outpaced revenue, soaring from $678 billion in 1981 to $1.14 trillion in 1989.

The cause of the Reagan deficits was the 1982-83 recession and spending — as is always the case. And, yes, the culprit was not just social spending by congressional Democrats but Reagan defense spending designed to take down the Soviet Union. What a bargain that turned out to be: It helped kill an “evil empire” and win the Cold War, paving the way for a peacetime dividend in the 1990s.

Yet it is clear today that we have refused the proper lessons of history. For one, our problem remains excessive spending. Obama must bear this in mind if he’s considering tax increases (which hamper growth) as part of his “balanced” approach to deficit reduction. More than that, the best “stimulus” relies on the tried-and-true American way: Let free individuals stimulate the economy through their earnings and activity.

Ignoring such realities explains the mess we face in August 2011 — a millennium removed from the wisdom of August 1981.

It was a rag-tag group at best: they came from all corners, some more experienced than others, but all with a passion for upsetting the status quo.  They were restless.  Inspired by some undisciplined Tea Partiers, they agreed that taxation had gotten out of hand.  They disagreed on as much as they agreed upon, but they were united in their desire to be free of a government so remote that that it had lost understanding of the plight of the real person.

In the battles that followed, this army (if you could call it that) took its lumps.  There was little chance of mounting an offensive that would strike a knock-out blow to the other side.  Theirs became a guerilla war, of sorts, seizing upon the other side’s arrogant blunders, incorrect assumptions about their opponents’ intellect, abilities, common sense, and the public’s deep-seated agreement with the rebels’ unifying views.

This motley group’s leader was a man from the establishment; he had served faithfully for years in circles of relative power and learned from the best what works and what doesn’t.  Of course, that association made him suspect: Did he share the passion?  Did he have the commitment?  Could he deliver as a leader?

And then too he was not spectacular when it came to delivering results.  Often against overwhelming odds, he would make some small sign of progress, but worked into a position of inevitable loss, he would—dare I say?—retreat.  His detractors, who were many, demanded his resignation; the press was critical; even some of his colleagues wondered what would become of their movement and themselves.

Over time, however, this concept of “strategic retreat” became a hallmark of the movement’s eventual success: a series of small victories which wore down their opponents, educated the masses, and gained popular support.  It was an outcome that was not meant to be, but it was a victory no less.

The time was the American Revolution; the leader was George Washington; the army was the Patriots who risked all for what they believed.

*****

Analogies are never perfect.  Speaker of the House Boehner is no General Washington, the Tea Party caucus is not the Patriot army of the Revolution, and the often mind-numbing blather in the Capitol cannot truly be compared to the heroic actions on the Revolutionary battlefield.  Yet similarities exist and are worth noting.  For one, General Washington seemed to appreciate Tacitus’ adage, “He that fights and runs away, may turn and fight another day; but he that is in battle slain, will never rise to fight again.”

More than a convenient excuse rationalizing retreat, it is a time-honored military tactic to assess the cost-benefit of any particular action and proceed accordingly.  No military leader would rush into a situation that is knowingly unwinnable without considering the probability of success and cost of such action.  Passion for one’s cause is noble, but it must always be tempered with a realistic view of possible outcomes.  And sometimes, to both Tacitus’ point and Washington’s actions, the better option is strategic retreat.

So it was in our Nation’s capital recently during debate to raise the debt ceiling.  After a recent success in the U.S. House of Representatives, in which that chamber passed the so-called “Cut, Cap, and Balance” bill—which the SATP and most Americans supported—the Senate’s inaction and the White House’s announced veto ensured that action would go nowhere.

The subsequent House proposal, though possibly agreeable to the Senate and the White House, would have been (in the minds of many conservative House members) a bridge too far, a compromise they could not accept, and it was withdrawn without a vote.

That proposal was followed by a third that gained tepid approval from both the Senate and White House.  It was the eleventh-hour deal that ultimately passed by a vote of 269 to 161 in the House, and later in the Senate.  It was a vote that split the Tea Party Caucus fairly evenly (32 for to 28 against).

A retreat from the original intent of the conservative leadership?  Yes.  A compromise with the “enemy”?  Yes.   A reason to disparage those conservative leaders who voted to accept the deal?  Not necessarily.

Without compromising our own beliefs or our commitment to seeing them enacted, Tea Partiers, as General Washington, must never lose sight of the big picture.  Success of this movement does not hinge on one vote, but the forward movement of our cause over time.  The United States of America did not arrive at this political, economic, and social brink overnight, and we surely will not move back from it overnight.  Much as the American Revolution, it will be a protracted war, with many battles.  In some we’ll see tremendous strides; in others we’ll see baby steps; and in still others we may encounter retreat or even loss.  Ronald Reagan would say, “The future doesn’t belong to the faint-hearted; it belongs to the brave.”  The brave aren’t those who are willing to end it all in one battle, but those who wisely navigate the ebb and flow of the war to achieve the desired goal, often realizing small victories along the way.

So what were the victories in this latest episode?  Here are several:

1) The bill prevented a default, with a credit downgrade and weakening of the U.S. dollar it would bring.  Many will argue, and rightly so, that default was not inevitable: it’s a matter of priorities of how the revenues will be spent.  Obviously it’s a choice on whether the U.S. will pay its debts to creditors, pay entitlements such as Social Security and pensions/benefits, or pay discretionary spending.  It could have even been forced to shut down certain government functions and agencies.  Given who currently controls the Executive Branch of government and its current priorities, this could have been disastrous.

2)  The bill mandates significant savings over ten years by capping discretionary spending.  Granted many of these cuts do not phase in until 2013 and there could have been more and sooner actions, but this represents a step in the right direction.

3)  The bill sends a wake-up call to the Nation on the hazards of overspending when the raising of the debt ceiling has been almost a routine event over recent decades.  It shows that Washington’s spending culture is beginning to change and the conversation has shifted from an agenda of ever-growing government and increased taxes. It marks the new conversation about cutting spending.

4)  The debate reopened discussion on a Balanced Budget Amendment, which the SATP has long advocated.  It begs the obvious question that if a BBA is good for most of the states, why is it not good for the Federal government?

5)  The bill forced the President and big-spenders to back off on some of their liberal demands.  Until now, the President showed no intention of abandoning his out-of-control spending agenda, which always included raising taxes on at least some part of the population.  That discussion came to the table having given up the idea of kicking the can down the road and raising taxes on hard working families and businesses. Otherwise, it seems like the Republicans should have taken the President’s initial offer of an 83/17 spending cut/tax increase.

6)  The debate showed government leadership that we Tea Party patriots will not submissively follow what we didn’t believe would bring at least some, even small, success to the battle.  As famously noted in the second round of House discussions, Tea Party Caucus members and others let Speaker Boehner know he could not count on their support unless other key concepts were part of the final bill.  That was impetus for the final discussions that produced a bill that many could support.  It’s ironic that our detractors see our success as greater than we see it, with the mainstream press and commentators disparaging the Tea Party because of their success, and even the Vice President reportedly referring to us a “terrorists.”

It’s not time to celebrate: the budget deal is far from perfect.  It may be, however, the best deal we conservatives could get at this point in time, controlling only half of Congress, minus the Senate and the White House.  Consider this: in 2009 we had no chance of being heard on these issues, much less influencing a vote.  2010 brought us a major success as We the People spoke loudly and clearly that promises of “hope” and “change” weren’t working, and sent to Congress several dozen new representatives.  Since January 2011, they have navigated the bureaucracy, learned the ropes, and most recently demonstrated they are willing and able to take a strong and principled stand on the core issues.  The modest actions of 2011 are not an end; they are only a plateau from which to continue the climb.

As columnist Michael Tanner of the Cato Institute noted in the National Review Online, “It could be worse. President Obama started out the year calling for an increase in government spending. Instead, the deal included cuts or at least reductions in the rate of spending growth. And, Republicans stood firm against any tax increase. … And a precedent has been set. Call it the Boehner Rule: Future increases in the debt ceiling will almost certainly have to include additional spending cuts.”  In short, the deal was very likely the best that conservatives could get under the circumstances.  The way we will know if it were a surrender out of fear or a strategic retreat is the action our representatives take in the future—whether it is back to subservience and acceptance of government growth, or a stepping stone to true and proper change for America.

*****

Washington knew that for the Revolution to succeed the war would be long and costly.  A minority of Patriots, even one fervently committed to grand success, would find small, sometimes imperceptible, successes along the way. Ultimate success would be through thoughtful actions that would from time to time require strategic retreat.  These are not abandonment of core principles, but an acceptance of small victories as building blocks for great future successes.

We, as Washington, must understand success will not come overnight.  Conservatives must now capitalize on momentum and ensure movement resumes in a forward direction.  That action must come with our monitoring and directing their focus on moving America in the right direction.

Only time will tell if these warriors we sent to our Nation’s Capitol are of the true conservatives they profess to be.  We will trust for the moment they are simply emulating Washington’s heroic actions, even in strategic retreat.  If voters find, however, it is a surrender, an abandonment of the core principles we hold dear, these weak soldiers will pay the same price in November 2012 as did their predecessors in November 2010.

They say that when you find yourself stuck in a hole, step one is to stop digging. In President Obama’s case, step one might be to stop talking. Lately, every time he’s tried to reassure Americans about the economy, things have gotten worse. Monday, he made another attempt to shore up the markets. The speech was barely 10 minutes long, but the rout rolled on all day, with the Dow finally ending down 634 points which means it went down 200 points as soon as he spoke. Add that to last week’s drop, and stocks have lost nearly 7 percent of their value in one week. For good measure, S&P lowered the credit ratings of the government mortgage giants Fannie Mae and Freddie Mac, too.

But it wasn’t so much what President Obama said that failed to inspire confidence. It’s that he just keeps repeating the same boilerplate stuff that hasn’t worked. Right down to yet another call for more stimulus spending, even after Obama himself admitted that the only shovels the stimulus bill got moving were those that shovel tax money down a rat hole. Doing the same thing over and over and expecting different results was Albert Einstein’s definition of insanity. You could actually watch the Dow tick lower and lower as investors realized that his reaction to our credit downgrade wasn’t to propose bold new policies to boost business, cut spending and regulation, and reduce the debt, but to attack S&P and shift blame. Granted, at least he didn’t blame the Tea Party for the debt crisis, when they seem to be the only faction in Washington that’s serious about solving it. Instead, he blamed “gridlock.” “Gridlock” is every politician’s favorite punching bag. It’s easy to slam because it’s value-free. If the problem is simply that nothing can get done, then you can just throw your hands up and walk away without getting into messy subjects like what you think actually SHOULD be done and how you plan to make it happen anyway.

S&P made it abundantly clear: they lowered our credit rating because the government spends too much and isn’t making a serious effort to reign it in. If we want to reverse that, we all know how. Most of us have had to do it ourselves. But you don’t get it done by attacking the messenger, demonizing political opponents and continuing the status quo. Investors weren’t reassured because they heard nothing to suggest that Obama is ready to take the lead, change directions and make some really tough reforms. In fact, when he was running late, and some cable outlets just ran video of the Presidential lectern standing empty for 45 minutes as the Dow fell and fell, I began to wonder if that picture would go down in history as the iconic image of the Obama years.

*****

The U.S. Treasury Department came out today with its Debt Position and Activity Report for July. The news is bleak.

With the additional $238 billion the Treasury immediately borrowed when the debt ceiling was raised on August 2, total current debt now exceeds 2010 gross domestic product (GDP) for the entire United States.

Debt at these levels is why Moody’s and Standard & Poor’s is concerned enough to be considering a downgrade of their credit ratings on U.S. debt.

Debt as of July 31 totaled $14.342 trillion. That was made up of $9.756 trillion held by the public and $4.587 trillion the U.S. government owes itself (intergovernmental borrowing, largely from the Social Security and Medicare trust funds to the general fund). GDP—the value of all of the goods and services produced in the United States—in 2010 was $14.5265 trillion. With the Treasury’s additional borrowings of $238 billion so far in August, the total of all debt outstanding has now increased to $14.5807. That’s $54.2 billion more than average 2010 U.S. GDP, the last year for which we have final estimates on GDP from the U.S. Department of Commerce.

This is a noteworthy event. It is going to be a very long time before the politicians in Washington are able to pay this debt back with interest. They should at least not be borrowing more. One wonders how they would like to mark this new milestone on the road to economic ruin. They can’t hide it. Maybe they will want to pass out Dumbo dolls to commemorate the $14.5807 trillion elephant in the room.

President Obama appeared for another speech…, er press conference today where he again harangued Republican leaders for not signing on to his plan to dramatically raise tax rates (in direct opposition to his many pledges not to raise taxes). There was one curious line that caught our attention, in response to a direct question from Chuck Todd:

Wow. 80% of Americans support tax increases? That’s a staggering number of people, especially given the general conservative nature of Americans and our fondness for free markets and capitalism. So we were curious about that figure and decided to look around. Shockingly enough, we couldn’t find a single poll out there that even hinted at what the president was Audaciously suggesting. For example, Rasmussen has a poll out that suggests 55% of Americans oppose increasing taxes:

We’re not math experts at NTPA, but even we can figure out that the 45% of Americans surveyed by Rasmussen who support raising taxes is a few percentage points lower than the 80% suggested by the president. In fact, in all of our surveying, we couldn’t find a single poll that suggested what President Obama was claiming, and that’s alarming to say the least.

What is even worse that the president’s fuzzy math is the way he simply refuses to lead on what will be the overall defining moment of his entire presidency, his leadership on the economy. His method of leadership appears to be little more than personal insults, storming out of meetings, and attacking Republicans for not coming up with a specific plan (ignoring the many that they have proposed, beginning with Paul Ryan’s budget plan). Yet has anyone heard him castigate his fellow Democrats for refusing to submit a budget in over 800 days (and counting)?

The brilliant Charles Krauthammer spells out Obama’s stunning leadership failure in a marvelous column entitled “Call His Bluff”:

To reiterate, the president created a debt reduction commission that came up with a grand proposal that he literally ignored, making the commission just as phony as his promise to change Washington through the power of sheer brilliance and charisma.

As you’d expect, Krauthammer offers up a brilliant strategic maneuver that Republicans could use to call Obama’s bluff:

Doing so would force the president to either take action or completely own the financial calamities that would likely follow. This would give a clear opening for conservatives to take the White House and demonstrate competency on the economy once and for all.

The budget crisis continues, but many in Washington still don’t get it.  No civilization can withstand uncontrolled spending without paying the bill; capitalism and a free-market economy cannot survive with over taxation; a democratic republic cannot survive when its public servants fail to listen and represent their constituents who put them into office and pay their salaries.

To be fair, there are some in Washington who have heard and are representing in the way their constituents expect.  Some (such as Congressman “Quico” Canseco of the TX 23rd District and a handfull of other fiscal conservatives including Congresswoman Michele Bachmann of MN and Ron Paul of TX), guided by principle that no more credit should be given, voted no on raising the debt ceiling limit under any circumstance; others (such as Congressman Lamar Smith of the TX 21st District), guided by principle that the debt ceiling limit might be raised under a strict “cut, cap, and balance” plan, voted yes to just such a plan.  Although their actions were different, and even Tea Party Patriots will disagree on the better road ahead, we are united in commending the principled stands of both of these groups in their commitment to limited spending and no new taxes.

The symbol of “a line in the sand” has special meaning for Texans.  We now need to convince those in Washington that just as our line is drawn concerning their support of these common-sense principles, they too must draw line against those in the Congress and the White House who by irresponsible actions are hastening the fall of a once-great Nation.

Patriots, the time to act is now!  Contact your Congressman, Speaker of the House John Boehner, and Senate Minority Leader Mitch McConnell.  Hold their feet to the fire: the principles of “cut, cap, and balance” are sound; the proposal by the Senate’s so-called “Gang of Six” is not.  Act now before it is too late!