Category Archives: Ronald Reagan’s economic policies

Why the GOP Loves Reagan

It is difficult to remember what things occurred during the term or terms of each of the Presidents, even the ones who were my contemporaries. So when the Republicans started acting like Ronald Reagan was the best thing that ever happened to America (just as LBJ was the worst) I had to do a quick presidential review. I went to Wikipedia, which although not a scholarly choice is pretty trustworthy when it comes to our Presidents and what they have accomplished. I know you could read Wikipedia yourself but I am planning to condense the information and focus the information, because the things the Republicans admire about Ronald Reagan pretty much all have to do with his economics.
Ronald Reagan actually started out as a Democrat. He became a Republican as he got older and his marriage to Nancy Davis, who was already a Republican, cemented the switch in 1962. He had strong feeling against racism, but he had even stronger feelings against communism. Reagan served as the Governor of California in 1966 and again in 1970. He was defeated twice in his run for the Republican presidential nomination in 1968 and 1976. In 1980 Reagan won the nomination and the general election defeating incumbent Jimmy Carter.
In his first term, 1981-1985:
1.       This term began with an assassination attempt by John Hinckley.
2.       Air Traffic Controllers Strike
3.       “Reaganomics” (supply side economics, trickle-down economics)
4.       Lebanon and Operation Urgent Fury (Grenada) 1983
5.       Escalation of the Cold War – Reagan was very worried about communism and its spread. He felt it was truly “evil” and that Russian was an “evil empire”. He had played a role in the McCarthy Hearings on Un-American Activities during his Hollywood years.
In his second term, 1985-1989
1.       War on Drugs
2.       Libya Bombing
3.       Immigration (Amnesty)
4.       Iran-Contra Affair (money from sale of arms to Iran was given to the Contras in Nicaragua, an act outlawed by an act of Congress. Reagan avoided blame, but it hurt his popularity.)
5.       End of Cold War (“tear down this wall” speech) (the Berlin Wall was torn down in November, 1989) – (ironically Ronald Reagan ended up going to the Soviet Union in 1988 and he was treated like a celebrity. He said he no longer considered Russia the “evil empire”).
There were also accomplishments in the judiciary. Reagan said in his 1980 campaign that he would, if given the opportunity, appoint the first female Supreme Court Justice. In his first year in office he was able to nominate Sandra Day O’Conner. He also elevated William Rehnquist to succeed Warren Burger as Chief Justice and named Antonin Scalia. His last nominee who was approved was Anthony Kennedy.
The Republicans love the blow that Reagan struck against the unions when he fired over 11,000 air traffic controllers who did not return to work on August 5, 1981. He replaced them with supervisors and managers until new air traffic controller were trained and ready to work. Republicans, who back a free marketplace with as few regulations as possible have never been fans of labor unions. However it is in the area of economics that the GOP of 2012 seems to be channeling Ronald Reagan. He was a classic Republican in spite of his Democratic roots and he approached the economy in ways that are traditionally Republican. He had some economic issues to face. When Carter left office in 1980 inflation was 12.5%. In the last year that Reagan was in office, 1988, inflation was 4.4%. The highest rates of unemployment during his terms in office were in 1982 (10.8%) and in 1983 (10.4%). His average over eight years was 7.5%. (I do not believe that America was feeling strong effects of globalization or out-sourcing yet.)
Reagan believed that cutting taxes would stimulate the economy, that cuts to the budget and less government would help the economy and that cutting taxes on the wealthiest Americans would bring benefits that would “trickle-down” to the rest of Americans. This is exactly the same agenda which we hear the GOP touting today and it was successful for Reagan. The economy was healthier when he left office although the national debt increased from $997b to $2.82 trillion. It would make sense to repeat a successful economic strategy if the details of the American economy had not changed so much since then.
Reagan had a laissez-faire philosophy and believed he could stimulate the economy with large across the board cuts. He supported returning the US to some sort of gold standard and had Congress appoint a commission to study the possibilities. Reagan subscribed to the economic theories of Arthur Laffer. Reagan promoted tax cuts as potentially stimulating the economy enough to expand the tax base offsetting the revenue loss due to reduced rates of taxation, an effect known as the “Laffer curve”. Because his defense strategy was “peace through strength” and “firm but fair”, America saw a 40% real increase in defense spending between 1981 and 1985. He did not have the “political nirvana” experienced by LBJ. Democrats were in charge of the Congress, but he did not have to battle the extremes of partisanship we have today.
Reagan’s policies proposed that economic growth would occur when marginal tax rates were low enough to spur investment which would lead to increased economic growth and higher employment and wages. Does this belief that tax policies that benefit the wealthy will create a “trickle-down” effect to the poor sound familiar? You betcha. This belief has been encased in the concrete of the GOP agenda and may soon be given a star on the Hollywood Walk of Fame. Wikipedia notes that “questions arose about whether Reagan’s policies benefited the wealthy more than those living in poverty, and many poor and minority citizens viewed Reagan as indifferent to their struggles.”
Reagan also worked to create less government, a direction the GOP still promotes today as we know. He froze the minimum wage at $3.35 per hour and slashed federal assistance to local governments by 60%. He cut the budget for public housing and Section 8 rent subsidies in half, and eliminated the Community Development Block Grant Program. Wikipedia notes that “the widening of the gap between rich and poor begun in the 1970’s grew wider under Reagan.” They go on to say that Reagan “has remained popular as an antitax hero despite raising taxes eleven times.”
There’s more, but not much. We’re done here. I think you can clearly see the connections between the policies Reagan put into effect and the policies the Republicans wish to see enacted today as they tell us every day, over and over again. They obviously wish for the return to Reagonomics with every fiber of their beings. Reagan’s Presidency represents, they believe, a true test of the efficacy of their view of economic and government and they feel that it all worked “like a charm”. Many poorer Americans did not feel the same way and Reagan did not face nearly the same issues the American economy does today. But now I feel I understand why we have been hearing so much about Ronald Reagan.