Conservatives in Power

The new president kept his political message clear and simple. “What I want to see above all,” he remarked, “is that this country remains a country where someone can always get rich.” Standing in the way, Reagan believed, was government. In his first year in office, Reagan and his chief advisor, James A. Baker III, quickly set new governmental priorities. To roll back the expanded liberal state, they launched a three-pronged assault on federal taxes, social-welfare spending, and the regulatory bureaucracy. To prosecute the Cold War, they advocated a vast increase in defense spending and an end to détente with the Soviet Union. And to match the resurgent economies of Germany and Japan, they set out to restore American leadership of the world’s capitalist societies and to inspire renewed faith in “free markets.”

Reaganomics To achieve its economic objectives, the new administration advanced a set of policies, quickly dubbed Reaganomics, to increase the production (and thus the supply) of goods. The theory underlying supply-side economics, as this approach was called, emphasized investment in productive enterprises. According to supply-side theorists, the best way to bolster investment was to reduce the taxes paid by corporations and wealthy Americans, who could then use these funds to expand production.

Supply-siders maintained that the resulting economic expansion would increase government revenues and offset the loss of tax dollars stemming from the original tax cuts. Meanwhile, the increasing supply would generate its own demand, as consumers stepped forward to buy ever more goods. Supply-side theory presumed — in fact, gambled — that future tax revenues would make up for present tax cuts. The idea had a growing list of supporters in Congress, led by an ex-professional football player from Buffalo named Jack Kemp. Kemp praised supply-side economics as “an alternative to the slow-growth, recession-oriented policies of the [Carter] administration.”

Reagan took advantage of Republican control of the Senate, as well as high-profile allies such as Kemp, to win congressional approval of the 1981 Economic Recovery Tax Act (ERTA), a massive tax cut that embodied supply-side principles. The act reduced income tax rates for most Americans by 23 percent over three years. For the wealthiest Americans — those with millions to invest — the highest marginal tax rate dropped from 70 to 50 percent. The act also slashed estate taxes, levies on inheritances instituted during the Progressive Era to prevent the transmission of huge fortunes from one generation to the next. Finally, the new legislation trimmed the taxes paid by business corporations by $150 billion over a period of five years. As a result of ERTA, by 1986 the annual revenue of the federal government had been cut by $200 billion (nearly half a trillion in 2010 dollars).

David Stockman, Reagan’s budget director, hoped to match this reduction in tax revenue with a comparable cutback in federal expenditures. To meet this ambitious goal, he proposed substantial cuts in Social Security and Medicare. But Congress, and even the president himself, rejected his idea; they were not willing to antagonize middle-class and elderly voters who viewed these government entitlements as sacred. As conservative columnist George Will noted ironically, “Americans are conservative. What they want to conserve is the New Deal.” After defense spending, Social Security and Medicare were by far the nation’s largest budget items; reductions in other programs would not achieve the savings the administration desired. This contradiction between New Right Republican ideology and political reality would continue to frustrate the party into the twenty-first century.

A more immediate embarrassment confronted conservatives, however. In a 1982 Atlantic article, Stockman admitted that supply-side theory was based on faith, not economics. To produce optimistic projections of higher tax revenue in future years, Stockman had manipulated the figures. Worse, Stockman told the Atlantic reporter candidly that supply-side theory was based on a long-discredited idea: the “trickle-down” notion that helping the rich would eventually benefit the lower and middle classes. Stockman had drawn back the curtain, much to Republicans’ consternation, on the flawed reasoning of supply-side theory. But it was too late. The plan had passed Congress, and since Stockman could not cut major programs such as Social Security and Medicare, he had few options to balance the budget.

As the administration’s spending cuts fell short, the federal budget deficit increased dramatically. Military spending contributed a large share of the growing national debt. But President Reagan remained undaunted. “Defense is not a budget item,” he declared. “You spend what you need.” To “make America number one again,” Reagan and Defense Secretary Caspar Weinberger pushed through Congress a five-year, $1.2 trillion military spending program in 1981. During Reagan’s presidency, military spending accounted for one-fourth of all federal expenditures and contributed to rising annual budget deficits (the amount overspent by the government in a single year) and a skyrocketing national debt (the cumulative total of all budget deficits). By the time Reagan left office, the total federal debt had tripled, rising from $930 billion in 1981 to $2.8 trillion in 1989. The rising annual deficits of the 1980s contradicted Reagan’s pledge of fiscal conservatism (Figure 30.1).

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FIGURE 30.1 The Annual Federal Budget Deficit (or Surplus), 1940–2009
During World War II, the federal government incurred an enormous budget deficit. But between 1946 and 1965, it ran either an annual budget surplus or incurred a relatively small debt. The annual deficits rose significantly during the Vietnam War and the stagflation of the 1970s, but they really exploded between 1982 and 1994, in the budgets devised by the Ronald Reagan and George H. W. Bush administrations, and again between 2002 and 2005, in those prepared by George W. Bush. The Republican presidents increased military spending while cutting taxes, an enjoy-it-now philosophy that transferred costs to future generations of Americans.

Deregulation Advocates of Reaganomics asserted that excessive regulation by federal agencies impeded economic growth. Deregulation of prices in the trucking, airline, and railroad industries had begun under President Carter in the late 1970s, but Reagan expanded the mandate to include cutting back on government protections of consumers, workers, and the environment. Some of the targeted federal bureaucracies, such as the U.S. Department of Labor, had risen to prominence during the New Deal; others, such as the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA), had been created during the Johnson and Nixon administrations. Although these agencies provided many services to business corporations, they also increased their costs — by protecting the rights of workers, mandating safety improvements in factories, and requiring expensive equipment to limit the release of toxic chemicals into the environment. To reduce the reach of federal regulatory agencies, the Reagan administration in 1981 cut their budgets, by an average of 12 percent.

Reagan also rendered regulatory agencies less effective by staffing them with leaders who were opposed to the agencies’ missions. James Watt, an outspoken conservative who headed the Department of the Interior, attacked environmentalism as “a left-wing cult.” Acting on his free-enterprise principles, Watt opened public lands for use by private businesses — oil and coal corporations, large-scale ranchers, and timber companies. Anne Gorsuch Burford, whom Reagan appointed to head the EPA, likewise disparaged environmentalists and refused to cooperate with Congress to clean up toxic waste sites under a program known as the Superfund. The Sierra Club and other environmental groups aroused enough public outrage about these appointees that the administration changed its position. During President Reagan’s second term, he significantly increased the EPA’s budget and added acreage to the National Wilderness Preservation System and animals and plants to the endangered species lists.

Ultimately, as these adjustments demonstrate, politics in the United States remained “the art of the possible.” Savvy politicians know when to advance and when to retreat. Having attained two of his prime goals — a major tax cut and a dramatic increase in defense spending — Reagan did not seriously attempt to scale back big government and the welfare state. When he left office in 1989, federal spending stood at 22.1 percent of the gross domestic product (GDP) and federal taxes at 19 percent of GDP, both virtually the same as in 1981. In the meantime, though, the federal debt had tripled in size, and the number of government workers had increased from 2.9 to 3.1 million. This outcome — because it cut against the president’s rhetoric about balancing budgets and downsizing government — elicited harsh criticism from some conservative commentators. “There was no Reagan Revolution,” one conservative noted. A former Reagan aide offered a more balanced assessment: “Ronald Reagan did far less than he had hoped … and a hell of a lot more than people thought he would.”

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Another Barrier Falls
In 1981, Sandra Day O’Connor, shown here with Chief Justice Warren Burger, was appointed to the Supreme Court by President Ronald Reagan, the first woman to serve on that body. In 1993, she was joined by Ruth Bader Ginsburg, an appointee of President Bill Clinton. O’Connor emerged as a leader of the moderate bloc on the Court during the 1990s; she retired in 2006. Black Star/Stockphoto.com.

Remaking the Judiciary Even if he did not achieve everything many of his supporters desired, Reagan left an indelible imprint on politics, public policy, and American culture. One place this imprint was felt in far-reaching ways was the judiciary, where Reagan and his attorney general, Edwin Meese, aimed at reversing the liberal judicial philosophy that had prevailed since the late 1950s. During his two terms, Reagan appointed 368 federal court judges — most of them with conservative credentials — and three Supreme Court justices: Sandra Day O’Connor (1981), Antonin Scalia (1986), and Anthony Kennedy (1988). Ironically, O’Connor and Kennedy turned out to be far less devoted to New Right conservatism than Reagan and his supporters imagined. O’Connor, the first woman to serve on the Court, shaped its decision making as a swing vote between liberals and conservatives. Kennedy also emerged as a judicial moderate, leaving Scalia as Reagan’s only genuinely conservative appointee.

But Reagan also elevated Justice William Rehnquist, a conservative Nixon appointee, to the position of chief justice. Under Rehnquist’s leadership (1986–2005), the Court’s conservatives took an activist stance, limiting the reach of federal laws, ending court-ordered busing, and endorsing constitutional protection of property rights. However, on controversial issues such as individual liberties, abortion rights, affirmative action, and the rights of criminal defendants, the presence of O’Connor enabled the Court to resist the rightward drift and to maintain a moderate position. As a result, the justices scaled back, but did not usually overturn, the liberal rulings of the Warren and Burger Courts. In the controversial Webster v. Reproductive Health Services (1989), for instance, Scalia pushed for the justices to overturn the abortion-rights decision in Roe v. Wade (1973). O’Connor refused, but she nonetheless approved the constitutional validity of state laws that limited the use of public funds and facilities for abortions. A more conservative federal judiciary would remain a significant institutional legacy of the Reagan presidency.

HIV/AIDS Another conservative legacy was the slow national response to one of the worst disease epidemics of the postwar decades. The human immunodeficiency virus (HIV), a deadly (though slow-acting) pathogen, developed in Africa when a chimpanzee virus jumped to humans; immigrants carried it to Haiti and then to the United States during the 1970s. In 1981, American physicians identified HIV as a new virus — one that caused a disease known as acquired immunodeficiency syndrome (AIDS). Hundreds of gay men, who were prominent among the earliest carriers of the virus, were dying of AIDS. Within two decades, HIV/AIDS had spread worldwide, infected more than 50 million people of both sexes, and killed more than 20 million.

Within the United States, AIDS took nearly a hundred thousand lives in the 1980s — more than were lost in the Korean and Vietnam Wars combined. However, because its most prominent early victims were gay men, President Reagan, emboldened by New Right conservatives, hesitated in declaring a national health emergency. Some of Reagan’s advisors asserted that this “gay disease” might even be God’s punishment of homosexuals. Between 1981 and 1986, as the epidemic spread, the Reagan administration took little action — worse, it prevented the surgeon general, C. Everett Koop, from speaking forthrightly to the nation about the disease. Pressed by gay activists and prominent health officials from across the country, in Reagan’s last years in office the administration finally began to devote federal resources to treatment for HIV and AIDS patients and research into possible vaccines. But the delay had proved costly, inhumane, and embarrassing.

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HIV/AIDS
The HIV/AIDS epidemic hit the United States in the early 1980s and remained a major social and political issue throughout the decade. Here, AIDS patients and their supporters participate in the 1987 March on Washington for Gay and Lesbian Rights, demanding that the Reagan administration commit more federal resources to finding a cure for the deadly disease. © Bettmann/Corbis.

EXPLAIN CONSEQUENCES

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