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monetary system that the United States and Great Britain had devised at Bretton Woods, New Hampshire, in 1944. Under that system, the dollar was tied to the price of gold and international exchange rates were fixed, which imposed fiscal discipline on all participating countries, including the United States. The government couldn’t print and spend money as much as its leaders wanted. “When we collapsed Bretton Woods,” argues Stockman, “we took discipline out of the global economy. When the dollar was tied to fixed exchange rates, politicians were willing to administer the needed castor oil because the alternative was to make up for any trade shortfall by paying out our reserves, and this would cause immediate economic pain in the form of higher interest rates.”

President Richard Nixon scrapped the Bretton Woods system in order to avoid putting the country through a recession to pay for all of the excess government spending going to fund the Vietnam War. As Stockman put it: Nixon, listening to famed University of Chicago economist Milton Friedman, said, Let’s just let our currency and everyone else’s float and the free market will find the right exchange rates among us all. If we run persistent deficits, our currency will lose value against those of countries that don’t and that will quickly wipe out any trade deficits; the hidden hand of the market will ensure that currencies automatically adjust up or down, depending on how we each manage our economic fundamentals. The reality turned out to be more complicated, but it took a while to unfold.

Deficits ballooned during Reagan’s first term, when tax cuts, skewed toward the wealthy, reduced the revenue base by a full 5 percent of GDP while the government continued domestic spending virtually unchecked. (It fell by barely 1 percent of GDP and was overwhelmed by the costs of the Reagan defense buildup.) This alarmed Reagan, who was part of the Greatest Generation and who was not at all a fan of deficits. So he enacted five different tax increases over the remainder of his time in office, which, according to Stockman, took back more than 40 percent of the original reductions. Reagan also led a reform of Social Security in 1983 to shore up the system.

Recall the words of former vice president Cheney, whom we quoted earlier: “Reagan proved deficits don’t matter.” Reagan not only did not prove that deficits don’t matter; he did not believe that deficits don’t matter. This is a fiction that would be manufactured later by a new generation of conservatives either out of ignorance or for their own selfish or ideological reasons.

“Ronald Reagan never called them taxes,” recalled former senator Bennett, the Utah Republican. “They were ‘revenue enhancements.’ [Senator] Pete Domenici described it to me once: he said, ‘We went down to the White House and said, “Mr. President, we can’t survive on this level of revenue.” And, Reagan said, “Okay, maybe we ought to have some ‘revenue enhancements.’”’ And so the gas tax went up, which it should have, and should be going up now.”

Neither of the presidents who followed Reagan wanted to raise taxes, but to their credit, both decided to do so rather than go to war on math. President George H. W. Bush put his presidency in jeopardy to keep the deficit under control by breaking his famous promise: “Read my lips—no new taxes.” Then our first baby boomer president, the Democrat Bill Clinton, made deficit reduction one of his top priorities as well—due, in part, to the strong showing in the 1992 presidential election of H. Ross Perot’s third-party candidacy, which was dedicated to slashing the deficit above all else. In 1993 congressional Democrats enacted a deficit-reduction bill without a single Republican vote; Vice President Gore broke a tie on August 6, 1993, to pass the measure in the Senate. Four days later Clinton signed the Budget Reconciliation Act, which included about $240 billion in tax increases for high-income earners and $255 billion in spending cuts.

This is when Reagan’s bad imitators began to make themselves felt in the Republican