Simultaneously, Federal Reserve Chairman Paul Volcker embarked on a tight-money policy designed to rein in inflation, moving the inflation rate from a staggering 13.5 percent in 1981 down to 3.2 percent just two years later.
“What the Reagan Revolution did was to move America toward lower, flatter tax rates, sound money, freer trade, and less regulation,” Laffer writes in The Wall Street Journal. “The key to Reaganomics was to change people's behavior with respect to working, investing, and producing.”
“Changing tax rates changed behavior, and changed behavior affected tax revenues. Reagan understood that lowering tax rates led to static revenue losses,” Laffer writes. “But he also understood that lowering tax rates also increased taxable income, whether by increasing output or by causing less use of tax shelters and less tax cheating.”
The result: 21 million jobs created between December 1982 and June 1990, Laffer writes.
“The true lesson to be learned from the Reagan presidency is that good economics isn't Republican or Democrat, right-wing or left-wing, liberal or conservative. It's simply good economics,” Laffer writes.
Read more: Laffer: Reaganomics Created 21 Million Jobs