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 Recent commentary from National Journal: Media: Missing a Beat (June 15, 2004) Political reporters always had a hard time getting a handle on Ronald Reagan's charisma. By William Powers. Political Pulse: Leaving His Mark (June 15, 2004) Ronald Reagan's legacy belongs to the whole country, not just one political party. By William Schneider. Legal Affairs: The Torture Memos: Putting the President Above the Law (June 15, 2004) Little did the Framers suspect that their Constitution would be twisted by a president to claim powers more appropriate to Roman emperors, Russian czars, King George III. By Stuart Taylor Jr. Media: It Pays to Be Wrong (June 8, 2004) The news business only pretends to be wary of byline hounds known to sometimes play it fast and loose. By William Powers. Political Pulse: Super-Charged Electorate (June 8, 2004) Back in 2000, voters didn't get energized until after the election. This year, the opposite is true. By William Schneider. Social Studies: In Iraq, Don't Cut And Run. Cut and Don't Run. (June 8, 2004) The biggest mistake America could make in Iraq would be not to try for democracy there. The second-biggest mistake might be to try too hard. By Jonathan Rauch. More from National Journal. |
Wealth of Nations 
Reagan Defeated Communism. Washington Was More of a Challenge.
Ronald Reagan sped the birth of a new world order, but he failed to change what he wanted to change the most: the scale and reach of the federal government. by Clive Crook .... Ronald Reagan transformed American politics, and then the world. Within the United States, he realigned the country's political loyalties. Beyond its borders, he defeated communism and sped the birth of a new world order. Strangely, he failed to change what he wanted to change most: the scale and reach of America's government. Reagan was an impermeable optimist, especially where America's prospects were concerned. He was also inclined to see things in very simple terms—a related and equally attractive trait. Things tended to be either good or bad, and he believed that good would prevail. Without a doubt, these were his greatest strengths as a politician. America especially loves an optimist, and with some reason, because the course of American history shows that the optimists have nearly always been right. Under the peculiar circumstances of his time, with the Soviet Union getting ready to collapse under the weight of its own failures, optimism and moral simplicity were also great assets for Reagan as a statesman. They turned out to be his biggest weaknesses as an economic reformer. How could Reagan (further handicapped by a degree in the subject) be any good at the dismal science? Economics is about complicated choices and agonizing trade-offs. Take it too seriously, and it knocks the optimism out of you. Reagan never made that mistake. Reaganomics never agonized about anything. No doubt that was good, and exactly what was needed, for America's battered spirit at the start of the 1980s. Voters certainly loved it, with the contempt of the liberal intelligentsia only warming them to it all the more. But harsh economic realities, unlike serious-faced political opponents and crippled totalitarian regimes, refuse to surrender to cheerfulness. In the end, of course, Reagan didn't mind that too much—he didn't mind anything too much. The fact remains that economics is a battle he lost. Fortunately, he won a far more important one. To read some of the conservative eulogies this week, you would think that Reagan crushed the mighty Soviet Union single-handedly. Not quite, though it takes little away from his achievement to point out that the planners in Moscow had been on his side for a long time. By the start of the 1980s, it was obvious even to the most obtuse observers that the Soviet economy was a comprehensive and terminal failure. But who knows for how many years the regime might have hung on, if not for the additional pressure—military and psychological—that Reagan applied? That pressure was partly a matter of America's defense buildup. Once the United States made clear that it would accelerate its investment in confronting Soviet power with overwhelming strength of its own—and that Western Europe, at Reagan's urging, would cooperate by allowing the deployment of medium-range missiles on its territory—the Soviet leadership despaired of keeping up. It foresaw an ever-widening military gap, even if its people were squeezed even tighter than they were being squeezed already. That only highlighted another gap: Military spending apart, America was getting richer every year, and the Soviet Union was going backwards. Wrestling these forces, and facing an American president uncompromising in his denunciations of the "Evil Empire," it is hardly surprising that the Soviet order quickly gave way. Even if Reagan advanced that moment by only a decade or two, it was still an extraordinary achievement, and he deserves the praise he has received for it. But that same defense buildup, so necessary to confront the Soviet threat, had to be paid for. This is where the dreary complexities of economics begin to intrude. And the military buildup was not the only claim on resources. As well as spending much more on defense, the Reagan administration also pushed through its big tax cut in 1981. And as Paul Volcker's Federal Reserve raised interest rates to push inflation down from the double-digit rate inherited from the previous administration, tax revenues fell yet again, because inflation (working through "bracket creep") is a disguised tax. The net effect, further augmented by the growing cost of servicing the government's debts, was an enormous increase in actual and prospective budget deficits. This created the opportunity, and you might say the need, for a genuine Reagan revolution: an assault on public spending, with the aim of greatly reducing the economic role of the government. Anybody who had listened to Reagan's speeches on the subject would have assumed that the president was keen to take on that challenge. In David Stockman, his unnervingly candid budget director, the president even had the right man in the right job. But Stockman turned out to be far more of a Reagan revolutionary than was Reagan himself. Lack of support from the president is why Stockman's struggle to cut public spending came to nothing, until the weary and demoralized budget chief resigned in 1985. Stockman titled his book about his time as budget director The Triumph of Politics: Why the Reagan Revolution Failed. Well, why did it fail? Partly through sheer inattention. Getting Reagan to concentrate on the fiscal problems that his taxing and spending choices were throwing up was no easy task. Partly, also, it was a lack of conviction. Reagan liked small government in theory, but in practice, he struggled to find programs he wanted to cut. But, again, the failure was mainly due to the president's optimism—except that, in this case, the optimism was unwarranted. Reagan appears to have been convinced at the start of his presidency that the "Laffer Curve" branch of supply-side economics made sense. Tax cuts, according to this view, would be more than self-financing, because the spur to incentives would make people want to work harder. As a result, the economy would grow, and the tax base would expand by more than enough to make up for the lowering of rates. At some very high level of tax rates, this theory must be true. (It would obviously be true, for instance, if the tax rate was 100 percent.) Reagan himself is said to have found the theory plausible because it meshed with his own experience of very high marginal tax rates during the 1940s. He and his friends in Hollywood used to work until their incomes reached the top-rate threshold, he used to say, and then stop. But in the 1980s, tax rates were nowhere near high enough for this theory to become true, or even remotely plausible to any but a handful of Laffer-Curve zealots. This is not to say that the tax cuts were a bad idea in themselves. On the contrary, they almost certainly helped lay the foundations for America's later years of rapid growth. What was wrong was the simplemindedly cheerful economics that said America could cut taxes and balance the budget at the same time. It took Bill Clinton's orthodox fiscal conservatism to deal with the deficit Reagan created. Today, the outlook for the budget deficit is again very bad. Dick Cheney has been quoted as saying that Reagan showed that deficits don't matter. What nonsense. (Although I suppose one should be grateful not to be lectured any longer about the Laffer Curve.) The deficit is not much of a problem yet, because the economy has been recovering from a slowdown and some spare capacity still remains to be taken up. But left unaddressed, it undoubtedly will be a problem, and likely a big one, once inflation reappears as a risk and the Fed has to start raising interest rates. The cost of the deficits will then be clear, as it was by the late 1980s: higher interest rates than would otherwise be required. In an economy with as much debt as America is carrying right now, that is an alarming prospect. What about Reagan the deregulator, Reagan the champion of free trade? The best you could say, if you wanted to be generous, is that his administration resisted calls for further regulation and for new protection against imports better than its predecessors had done. But the fact is that the Reagan White House granted many such requests. William Niskanen, who served under Reagan as acting head of the Council of Economic Advisers after Martin Feldstein (another disappointed fiscal conservative) resigned from that post in 1984, gave his verdict in his book, Reaganomics: "The net result is that we ended up with more regulations and more trade restraints than at the beginning of the administration." Summing up, Niskanen came to much the same conclusion as Stockman: "In the end, there was no Reagan revolution." Reagan lifted America's spirits and redrew its party-political contours, to be sure. And he changed the world as well—at the very least advancing the death of communism and speeding the peoples of Russian and Eastern Europe to liberty. Not bad going. Even so, he left the role of America's government at home, and what Americans expect that role to be, much as he found them.
What do you think? Discuss this article in the Politics & Society conference of Post & Riposte. More from National Journal. More on politics and society in Atlantic Unbound and The Atlantic Monthly. Clive Crook is a columnist for National Journal and the deputy editor of The Economist. This column appears every week in National Journal, a weekly magazine covering politics and government published in Washington, D.C. For information on National Journal Group publications, see NationalJournal.com. Copyright © 2004 by The Atlantic Monthly Group. All rights reserved. | [an error occurred while processing this directive] | ||
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