Reagan Conservatism

The decades following World War 2 served to deepen the divide between the left and the right in America as government grew rapidly during the 1940s and 50s then people saw that sometimes government gets corrupted or fails to so they started to push against it in the 60s and 70s.

The interesting thing to me is that the civil rights campaigners and anti-war protesters were not inherently liberal or conservative. They could have been embraced by either side. They both wanted less government involvement and interference which is the hallmark of conservatism.

However, their move away from traditional “family values” put them at odds with the conservative establishment. Sexual liberation, drug culture, anti-war pacifism, and even racial equality were seen as harmful influences to American culture. So they joined the left, for the most part, and the idea of maintaining traditional values became equated with government protection. Only this time, the threat wasn’t from a foreign army, but a foreign idea.

The 1980s

Ronald Reagan was just the patriotic shot in the arm that America needed after the long slog that was the 1970s. He was a master communicator who believed that government was not the solution to the problem, it was the problem. He condemned the excesses of the welfare state that had been created, he advocated for anti-union free-market economics, and he didn’t want to handle the ongoing Cold War with namby-pamby diplomacy but with a show of power and strength.

He was also beloved by the coalition of religious conservatives known as the Moral Majority (founded by Jerry Fallwell in the 1970s in opposition to abortion rights and in favor of prayer in schools) for standing for those aforementioned “family values.” It must be noted that even though Reagan himself seemed to be warm to civil rights (he did, after all, create Martin Luther King Jr. Day) many who followed him were those in the south who felt as though the civil rights movement was an attack on states rights. He was even endorsed by the Ku Klux Klan in the 1980 election.

There are two things that Reagan is best known for bringing about during the 1980s. The end of the Cold War (which we will discuss next week) and his economic reforms (sometimes called trickle-down economics or Reaganomics)

Economic Reform

How do you end the stagflation of the 1970s? New Deal Liberals would have probably begun a large infrastructure project to allow big government to distribute wealth evenly but Reagan and his economic advisors believed that injecting the country with money would kickstart the economy by allowing the rich to invest and grow private businesses while middle and lower-income classes would be freed up to use their money on discretionary spending.

He did this through massive tax cuts particularly for the wealthy (though just about everyone saw a decrease) and decreased government spending. From 1981-1986 the top tier tax bracket saw their income tax rate fall from 70% to just 33%. Meanwhile, the country’s production rate steadily increased the Per Capita GDP (Total value of finished goods and services divided by population) went from $14,000 in 1981 to over 22,000 in 1989.

Economists bicker back and forth about what exactly caused the economic recovery of the 1980s. Was it Reagan’s broad tax decreases, or the Federal Reserve’s reduction of interest rates, maybe it was the austerity of reducing wasteful government spending (Oh, that’s right spending never decreased). I think that the answer is more than simply one of these but all of them working together along with a technological boom that had started in the mid-1970s and Reagan was lucky enough to be in office as it came to bear fruit.

You may recognize many of the names in that technological boom. Bill Gates started a little company called Microsoft in 1975, Steve Jobs countered by beginning Apple in 1976, and Atari released the Atari 2600 in 1977. These three events would effectively begin the computer and electronics entertainment industry that we know and love today. This technological revolution would produce new opportunities for growth that hadn’t been seen since the industrial revolution.

However, one of the lasting legacies of Reaganomics is the increase in income inequality. This began under Reagan but increased to unheard-of levels in the 1990s during the Clinton years. Take for instance the gap between the average salary of a CEO and a worker within the company. There has always been a gap as there should be, but that gap nearly doubled during Reagan’s time in office so that in 1989 if an employee made 15,000 a year then the CEO was making around 900,000.

Here’s another look at that gap. Notice the black line. That is 1968. Up until that point, there had been a steady growth in the years following World War 2 for everyone pretty equally. In 1968, we see the beginning of the stagflation that carried through Nixon, Ford, and Carter. But in 1982 something happens that woke up the economy (at least for the top 10%). Those of us in the bottom 90% of Americans have not seen any increase to our income over the last 45 years while the top 10% began to increase rapidly and have barely looked back.

This tends to make economists think that while Reaganomics did increase the output of the economy, the benefits did not “trickle-down” as much as promised. What do you think about all this? I know I just threw a lot of numbers at you.

Whether you see Reagan’s presidency as a success or a setback largely depends on your political leanings. I’d love to hear your thoughts below. In the meantime, I thought you might need a joke. Reagan was an excellent speaker and it is hard to listen to him and not like him. That alone made him a great president.