For one thing, the Reagan tax cuts were offset by a series of subsequent tax hikes, implemented by Congress in the early 1980s, by the first President Bush in the late 1980s and by President Clinton in the early 1990s.
Contrary to the fears of supply-side economists, who have supported the Reagan and Bush tax cuts, the economy grew despite these tax hikes, while spending discipline in the 1990s helped turn deficits into surpluses.
And an April 2000 study by Harvard economist Benjamin Friedman for the National Bureau of Economic Research said Commerce Department data showed that, contrary to popular belief, the Reagan deficit did not lead to an investment boom -- all rates of domestic investment actually slowed down in the 1980s.
"The familiar conclusion that sustained government deficits at full employment depress private capital formation has stood up well," Friedman wrote.
[link|http://money.cnn.com/2004/02/02/news/economy/budget/index.htm|CNNMoney]