Does anybody remember, back in the depths of the recession of 1981-82, how President Ronald Reagan kept his chin up and exhorted American businesses to work hard and produce an economic recovery?

Reagan had a program of tax cuts, limited domestic spending, deregulation, and a strong defense aimed at overturning Soviet Communism. He argued in speech after speech that his domestic plan would produce higher economic growth and lower unemployment, and that prosperity would generate the resources to fund a strong national security.

Cynics proliferated. But Reagan stayed with it, praising free enterprise and entrepreneurs. And eventually, sunny skies replaced gloomy clouds. “Morning in America” appeared in 1983-84.

But here’s the key point: When Reagan praised our capitalist system and the businesses inside it, he provided a psychological lift to accompany his fiscal program. That was leadership.

Now contrast President Reagan’s performance with President Obama’s recent attack on business. Instead of exhorting entrepreneurship, Obama demonized it. Here’s the money quote: “If you’ve got a business, you didn’t build that. Somebody else made that happen.”

That’s a put down to business recovery, not an exhortation. Reagan praised entrepreneurs into recovery. Why must Obama trash them into recession?

Great innovators like Thomas Alva Edison, Henry Ford, and Andrew Carnegie didn’t rely on government. There was hardly any of it in those days. More recently, Steve Jobs, Bill Gates, and Larry Ellison used genius to put brand-new ideas into production.

And then you’ve got a whole smaller class of entrepreneurs: The electricians, bakers, clothing designers, and financial planners. They don’t depend on government. It’s always been a question of the American genius of entrepreneurship that makes the country run. And that’s optimism. It’s not name-calling or negativism. But it is the reliance on government under Obama that has undermined the morale of our economy.

This week I interviewed Tim Geithner. The treasury secretary said the problem with the economy is insufficient government spending. But I would argue that government spending is the problem.

A week earlier, I interviewed Alan Greenspan. I asked him about the impact of over $1 trillion in federal spending. He answered, “Well, actually, strangely as it may seem, the data are showing that it’s negative.” Greenspan said businesses — especially smaller businesses — are essentially on a capital strike. They see large-scale deficits and debt and assume that prohibitive tax rates cannot be far behind. Greenspan also said the U.S. government has borrowed so much money it has drained scarce capital from the private sector. Nobody wants to build long-term assets, like factories, buildings, and houses.

Obama does not understand that his government-centered model is doing vastly more harm than good. That’s why, three-and-a-half years in, he’s got slumping numbers on jobs, retail sales, manufacturing, and home sales, and a GDP rate that could be 1 percent or less. We may be on the front end of another recession without even going through a real recovery.



And the center of economic gravity has shifted in the wrong direction. Food stamps are soaring. Social Security disability benefits are rising faster than jobs. And roughly half of U.S. households are receiving federal-transfer-payment assistance. This is a European-style model, not an American one.

Then you have some of the dumbest fiscal ideas ever, like the new one from Senator Patty Murray. She wants all the Bush tax cuts to expire on December 31, 2012 — an event that will surely lead to recession — and then have Congress magically vote for middle-class tax cuts in 2013. This is incredibly foolish (and improbable).

But like Obama, Murray has it out for successful earners, investors, and small-business owners. In order to tax them, she is more than willing to risk recession.

Raising the tax on the upper two income brackets would slam the 3.5 percent of small business owners who generate 53 percent of the small business income, according to the Joint Tax Committee. And that’s where the jobs are. Ernst & Young estimates a job loss of 710,000 if those upper tax brackets are raised. And when you combine all that with scheduled new taxes from Obamacare, you’re looking at substantially higher tax rates than anything Bill Clinton ever had. And of course, Clinton cut the capital-gains tax. But today’s Democrats want to raise it (along with taxes on dividends and estates).

This whole assault on success by left-wing politicians is a staggering reversal from the spirit of Ronald Reagan. You can even go back to FDR: His big-government, tax-the-rich policies failed, but at least he preached that happy days were coming again.

Most Democrats today don’t understand or recall the history of American economic success. That’s why this country desperately needs change in the White House and the Senate if we’re to stop this American economic decline.

Larry Kudlow is the host of CNBC’s “The Kudlow Report.”