"So, the challenge before us is setting spending priorities, deciding where to spend some of the additional revenue, but not spending it all so we can reduce the deficit," he said.
Was Reagan right? Indisputable proof can be found in the historical budget numbers published by the Obama White House.
When Reagan took office in 1981, according to President Obama's Office of Management and Budget, federal revenues were $599.3 billion. When Reagan left office in 1989, federal revenues were $991.1 billion, a nominal increase of $391.8 billion. Even when adjusted for inflation, this represents a real increase in revenue of $173.6 billion (from $817.5 billion in 1989 dollars in 1981 to $991.1 billion in 1989 dollars in 1989). During Reagan's eight years, real federal revenue increased 21 percent.
But spending increased more, equaling $1.143 trillion in 1989, leaving an annual deficit that year of $152.6 billion.
After Reagan left, as he predicted, federal revenues continued climbing. By 1993, they reached $1.154 trillion. Had federal spending been held at 1989 levels for four years, the government would have run an $11 billion surplus in 1992. But federal spending grew $266 billion, and the government ran a $255.1 billion deficit.
For the "iron triangle," it was a triple play: Federal revenues grew, federal spending grew, and the federal deficit grew.
What has happened since then? More of the same.
According to Obama's OMB, federal revenues will be $2.57 trillion this year. In nominal terms that is about $1.58 trillion more than the $991.1 billion in federal revenue for 1989. Even adjusted for inflation, it is $830 billion more.
But, again, federal spending has grown faster. According to Obama's OMB, the federal government will spend $3.83 trillion this year, running a deficit of $1.27 trillion.
Adjusted for inflation, the $152.6 billion deficit of 1989 equals $268.4 billion in current dollars. That means the $1.27 trillion deficit Obama plans to run this year is almost five times larger in real terms than the deficit Reagan ran the year he left office naming the deficit as the only regret in his farewell address.
When Reagan left office in 1989, federal spending was 21.2 percent of gross domestic product. This year, the Obama administration plans to spend 25.1 percent of GDP.
Perhaps the America Ronald Reagan saw ready to stand up against the iron triangle of entrenched congressmen, special interests and the liberal press has finally fully awoken in the tea party movement.
We are reaching the point where either America breaks the iron triangle, or the iron triangle breaks America.