The Potomac — Mike Z
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May 2008
The Idiocy of The Gipper "Legacy"

Mike Zasadil Explains How Reagan's Economic Chickens Are Coming Home to Roost

THERE IS NO JOY IN MUDVILLE FOR CONSERVATIVES contemplating the 2008 presidential primary. They were hoping against hope for the return of their “once and future king”—Ronald Reagan. Fred Thompson, even based his campaign largely on the fact that he, like Reagan, was an aging actor. Sadly, conservatives will have to settle for an aging war hero instead—the only credible contender on either side who has taken leadership seriously enough to have defied public sentiment on the war in Iraq and party dogma on the environment, government borrowing and campaign financing.

The fact that conservatives are less than thrilled with a candidate such as John McCain is one result of the Reagan Revolution, a fundamental transformation of American politics.  As with all revolutions this one comes with a heroic narrative crediting Ronald Reagan with winning the Cold War, cutting taxes, rebuilding the economy, restoring American’s confidence, and lifting this nation from the malaise of the Carter years to its rightful place in the world. 

Reagan is so revered that few are willing to question his legacy. But there is no better time to revisit the history of Ronald Reagan than the beginning of the 21st century, as we begin to suffer the full consequences of his policies and the revolution that bears his name. 

Reagan is so revered that few are willing to question his legacy. But there is no better time to revisit the history of Ronald Reagan than the beginning of the 21st century, as we begin to suffer the full consequences of his policies and the revolution that bears his name. 

The jewel in the crown of the Reagan Revolution is the fall of the Soviet Union. Reagan supporters would have us believe that his hard line towards the Soviets either caused or hastened their demise. Okay, how did that work? Exactly what did Ronald Reagan do to bring down the Soviet Union?

Well, he made some mighty fine speeches—“Evil Empire,” “Ash heap of history,” and “Mr. Gorbachev, tear down this wall.” Great stuff, which may have resonated in Eastern Europe. But Pope John Paul with his local connection and Catholic following probably had a much greater influence.

Commonly, more direct action of the Reagan administration is credited with toppling the Soviet Union, specifically the support for the mujahedeen in Afghanistan and the US arms buildup which challenged the Soviets to an arms race they could not win.

US support of the mujahedeen was critical in their war to expel the Soviets from Afghanistan. Although defeat in Afghanistan was a bitter blow to the Soviets, they had endured worse. In 1940 they suffered the humiliation of the Winter War with Finland followed in 1941 by the invasion of Nazi Germany. A Soviet Union that could be finished off by misadventure in Afghanistan was a pale shadow of the Soviet Union of World War Two. 

This is where personal responsibility should enter the Reagan legend. If the Soviet Union was weak enough to be destroyed in Afghanistan, then the Soviet system—based on brute force and the proposition that once you get rid of the capitalists everyone else will dedicate themselves, heart and soul, to the common good—must bear a great deal of the responsibility for their fate. Similarly, if the Reagan administration is credited for defeating the Soviet Union by supporting the Afghan “freedom fighters,” it must take responsibility for the ultimate consequences of arming and funding these freedom fighters / Islamic fundamentalists / terrorists.  It is not only implausible but downright dishonest to claim that the Reagan administration’s policy in Afghanistan had such a devastating effect on the Soviet Union without acknowledging the military and financial power it provided to Islamic fundamentalists. 

Beyond direct military action, Reagan’s main challenge to the Soviets was the prospect of a ruinous arms race. With the American economy behind him, this was the most serious challenge Reagan could offer the Soviets, short of all out war.

This is probably the most plausible role for Reagan to have played in the demise of the Soviet Union. Thinking through this scenario leads to some troubling conclusions. It assumes that when the Soviet leaders were faced with the prospect of long term economic ruin they did not resort to vast programs of deficit spending, obscured by smoke and mirrors accounting. They did not debase their currency or mortgage their future. Instead, they took a cold, hard look at the realities of the world and made the difficult choice to live within their means even if it meant giving up their pretensions to superpower status. This is exactly the kind of farsighted, honest and rational leadership so desperately needed and so completely lacking in the United States. 

This brings us to Ronald Reagan’s own economic policies.  

The Reagan Revolution went far beyond economics, but in 1980 the only revolutionary idea Reagan brought to the table was a new economic theory. Dubbed Reaganomics by some and “voodoo economics” by his future Vice President, the theory was that reduced tax rates would result in increased economic activity which, in turn, would result in higher tax revenues. Reagan’s promise was that this would result in a balanced budget within his first term. 

Today, in terms of GDP, the national debt is twice what Reagan inherited. In total dollars it is ten times as high. By his own definition, Ronald Reagan became the first in a long line of “conservative” presidents to mortgage our children’s future for the convenience of the present.

In the midst of a recession, with marginal tax rates as high as 70%, proposing a tax cut was hardly revolutionary. Neither was it beyond the pale to propose that tax rates could be adjusted downward in order to ultimately increase revenue. 

It didn’t work out that way. Instead of balancing the budget—ever—Ronald Reagan almost tripled the entire national debt, signing off personally on virtually every penny spent.  Since the sixties, he had preached about the horrors of the national debt. In his first inaugural he said, “For decades, we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present.” For what it is worth, he was substantially wrong about that. In real terms the national debt had been declining as a percentage of GDP since the end of the Second World War, but that changed once he took office. Today, in terms of GDP, the national debt is twice what Reagan inherited. In total dollars it is ten times as high. By his own definition, Ronald Reagan became the first in a long line of “conservative” presidents to mortgage our children’s future for the convenience of the present.

The defining aspect of the Reagan Revolution was not that so called conservatives would place the economy at risk with radical experiments, but that they would completely ignore the results. This new liberty to ignore facts extended far beyond economics, and today’s new age conservatives have become completely untethered from reality. They seem to believe that if they can get enough votes they can ignore global warming, evolution and/or our diminishing oil reserves. The definition of a conservative now focuses on unswerving devotion to dogma. Ironically, even Ronald Reagan wouldn’t pass muster as a conservative today. He raised taxes in 1982 to try to staunch some of the red ink, thereby violating a first principle of this dogma: no new taxes.

Ronald Reagan and his revolution have a substantial legacy. We have already fought three wars against two of his allies: Saddam Hussein and Osama Bin Laden. Our growing national debt gives us limited room to maneuver in economic downturns. Arguably, Reagan’s conservative rhetoric about the national debt combined with his wastrel policies have given Americans of all political stripes the cover they needed to emulate his polices in their own lives. As a result, the national savings rate has declined from ten percent of disposable income when Reagan was elected to less than zero today. As a nation we consume five to six percent more than we produce. That certainly sounds like Reaganomics at work.

Maybe all this is Ronald Reagan’s fault. Or perhaps he was nothing more than the standard bearer for the most self indulgent generation of Americans to ever trod the planet. A generation that was perfectly happy with the politics of Prozac. A generation that just wanted to feel good and be assured that greatness was an American birthright that never needed to be questioned.

 






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