The Reagan Revolution
From Brad DeLong:
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The "Reagan Revolution" did not shrink the size of the federal government: in 1980 when Ronald Reagan ran for president federal spending (gross of offsetting receipts) was 22.7% of GDP; in 1992 when Bill Clinton ran for president federal spending was 23.2% of GDP. The "Reagan Revolution" did change the shape of federal spending: one-third of domestic federal spending outside of the entitlement programs went missing between 1980 and 1992, replaced primarily by debt interest and secondarily by higher military spending. (A truly amazing fact, and testimony to the strength of the military-industrial complex: defense took a higher share of GDP in 1992 after the collapse of the Soviet Union than it had taken in 1980). Higher debt interest came from the huge debts run up to finance Reagan's unfunded tax cuts. Debt held by the public amounted to 48% of GDP in 1992, compared to 26% of GDP in 1980. The 4.7% of GDP deficit of 1992 was a structural one: forecast--given then-current policies--to persist and grow as far out as the eye could see (my own winter of 1993 forecasts saw a then-current policy debt-to-GDP ratio of 72% of GDP by 2000).
The first Bush term has been a tragedy. The second one, if it happens, will be the farce.
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