When Ronald Reagan took the oath of office as America’s 40th President on January 20, 1981, the country was experiencing some of bleakest economic times since the Depression. Taxes were high, unemployment was high, interest rates were high and the national spirit was low. Bringing America back was the new President’s top priority. He shared his vision in his Inaugural Address:
President Reagan had earned a degree in Economics at Eureka college, and even though he would sometimes joke about “two economists having three opinions”, he knew what needed to be done and how to do it. He had a simple, but specific plan, of which he spoke often during the campaign: cut taxes, get control of government spending and get the government out of the way so that the entrepreneurial spirit of the American people could be unleashed. Some skeptics derisively called his plan “Reaganomics,” but President Reagan was undeterred. He knew that only if people had money in their pockets and incentives to invest and build businesses would jobs be created, inflation tamed and interest rates reduced. Almost as soon as the Inaugural ceremony was over, President Reagan set his sights on Capitol Hill. From day one, he and his team worked tirelessly to get Congress to pass legislation to put the economy back on track. Even a near-fatal assassination attempt did not slow him down. While still recovering, he summoned Congressional leaders to the White House to twist their arms. Ronald Reagan may have been the first President to wear pajamas to a meeting with the bipartisan Congressional leadership. He wanted them to know he meant business. His efforts paid off. In August 1981, President Reagan signed the Economic Recovery Tax Act of 1981, which brought reductions in individual income tax rates, the expensing of depreciable property, incentives for small businesses and incentives for savings. So began the Reagan Recovery. A few years later, the Tax Reform Act of 1986 brought the lowest individual and corporate income tax rates of any major industrialized country in the world. The numbers tell the story. Over the eight years of the Reagan Administration:
Given actual rates of inflation, through 1987, the Reagan tax cuts saved the median-income two-earner American family of four close to $9,000 in taxes from what it would have owed in 1980. Tax cuts were only one “leg of the stool.” The second, jobs, was equally strong. Not only were there millions of new jobs, but the benefits of job creation were not limited to one segment of society. Employment of African-Americans rose by more than 25% between 1982 and 1988, and more than half of the new jobs created went to women. Taming the lion called government spending was another key component of the plan – the “third leg of the stool.” Here, too, President Reagan did what he said he would do. During his Administration, growth in government spending plummeted from 10% in 1982, to just over 1% in 1987. With inflation factored in, Federal spending actually went down in 1987 – the first time that had happened in well over a decade. So impressive was the Reagan Recovery that at the G7 Economic Summit in 1983, when it was obvious the President’s plan was working, the West German Chancellor asked him to “tell us about the American miracle." That was quite a turnaround from two years earlier, when President Reagan outlined his economic recovery plan to an unconvinced group of world leaders. Now, however, they all wanted to know how he did it, so he told them: reducing tax rates restored the incentive to produce and create jobs, and getting government out of the way allowed people to be entrepreneurs. From there, the free marketplace operated as it was supposed to. As President Reagan observed with a wry smile, “I could tell our economic program was working when they stopped calling it Reaganomics.” But what really pleased him most about the Reagan Recovery was not the vindication or all the impressive statistics. To him, the success of Reaganomics was what it brought to the American people. Millions had good jobs and were able to keep more of the money for which they worked so hard. Families could reliably plan a budget and pay their bills. The seemingly insatiable Federal government was on a much-needed diet. And businesses and individual entrepreneurs were no longer hassled by their government, or paralyzed by burdensome and unnecessary regulations every time they wanted to expand. In a phrase, the American dream had been restored.
Ronald Reagan was elected President of the United States on November 4, 1980. His triumph capped the rise of the new right/conservative wing of the Republican Party and ushered in a new era of governing. Reagan served as arguably the first true conservative U.S. president in over 50 years. Reagan advanced domestic policies that featured a lessening of federal government responsibility in solving social problems, reducing restrictions on business, and implementing tax cuts. Internationally, Reagan demonstrated a fierce opposition to the spread of communism throughout the world and a strong distrust of the Soviet Union, which in 1983 he labeled an "evil empire." He championed a rearmed and strong military and was especially supportive of the MX missile system and the Strategic Defense Initiative ("Star Wars") program. Economic Policy When Reagan took office the economy was one of double-digit inflation and interest rates near 20%. During the campaign Reagan promised to restore the free market from excessive government regulation and encourage private initiative and enterprise. Reagan's economic policies highlighted his long-standing dislike of high federal income taxes. Reagan embraced the theory of "supply side economics," feeling that tax cuts encouraged economic expansion which would result in increases in federal government revenue at a lower tax rate. Higher revenues would then be used to increase defense spending and balance the federal budget. This overall approach became known as "Reaganomics," or as Republican primary candidate Vice President George H.W. Bush once called it, "voodoo economics." The President also vowed to protect certain entitlement programs (like Medicare and Social Security) while cutting the budgets for other social programs by targeting waste, fraud and abuse. During his first year in office, Reagan engineered the passage of $39 billion in budget cuts into law, as well as a massive 25 percent tax cut spread over three years for individuals, and faster write-offs for capital investment for business. At the same time, he insisted on, and for the most part, was successful in gaining increased funding for defense. Although inflation dropped from 13.5% in 1980 to 5.1% in 1982, a severe recession set in, with unemployment exceeding 10% in October, 1982 for the first time in forty years. The administration modified its economic policy after two years by proposing selected tax increases and budget cuts to control rising deficits and higher interest rates. After the 1982 downturn, the reduced inflation rate (under 5% for the remainder of the administration), lowering interest rates, and added discretionary income from tax cuts sparked record economic growth, and produced one of the lowest unemployment rates in modern U.S. history (unemployment hit a 14 year low in June of 1988). As Reagan left office, the nation was experiencing its sixth consecutive year of economic prosperity. The economic gains, however, came at a cost of a record annual deficit and a ballooning national debt. The budget deficit was exacerbated by a trade deficit. Americans continued to buy more foreign-made goods than they were selling. Reagan, however adhered to his free trade stance, and was the primary proponent of the Free Trade Agreement with Canada, which evolved into the North American Free Trade Agreement (NAFTA). He also signed, reluctantly, trade legislation designed to open foreign markets to U.S. goods. Domestic Affairs Reagan's domestic policies had a major impact on the American people and have had for many years. He followed up the passage of the largest tax cut in U.S. history by supporting and signing into law the Tax Reform law of 1986. Reagan led the battle for a Social Security reform bill designed to ensure the long-term solvency of the system, and oversaw the passage of immigration reform legislation, as well as the expansion of the Medicare program to protect the elderly and disabled against "catastrophic" health costs. Reagan elevated William Rehnquist to the Chief Justice of the Supreme Court and appointed three justices to the bench: Anthony Kennedy, Antonin Scalia, and the first woman named to the Supreme Court, Sandra Day O'Connor. Part of the New Right's basic beliefs was that "judicial activism" was un-Constitutional and judges should be selected by an adherence to "judicial restraint." Reagan's judicial selections were based on this principle. Reagan consistently received very high approval ratings. He was not popular with some minority groups, particularly African-Americans, many of whom did not benefit from the economic prosperity. In 1986, over 30 percent of the black population had an income below the official poverty level. While many labor leaders disliked Reagan, especially after he fired the air traffic controllers when they refused to end their strike (1981), he was popular with labor union members. Reagan encouraged the development of "private sector initiatives" as well as federalism, with the objective of transferring from the federal government some of the responsibilities believed to be better served by private business or state and local government. As the president called for international cooperation to stop the influx of illegal drugs, especially cocaine, into the U.S., First Lady Nancy Reagan led the campaign against drug abuse, urging the nation's youth to "just say no." Foreign Policy At the heart of Reagan's foreign policy was preventing communist expansion in the world. US actions throughout the world demonstrated this including strong financial and military support of the Contras against the communist Nicaraguan government, the aid given to the government of El Salvador in their fight against the communist guerrillas, the U.S invasion of Grenada when that nation was perceived as falling under Cuban domination in 1983, the support given to UNITA anti-communist fighters in the Angolan Civil War involving Cuban proxy troops, and the support given to rebels fighting Soviet troops in Afghanistan. These combined efforts were named "The Reagan Doctrine." While efforts for peace in Central America faltered, the Soviets announced the withdrawal of forces from Afghanistan in 1988, and the Angola conflict was successfully negotiated with a withdrawal of Cuban troops. Reagan believed that the nation should negotiate with the Soviet Union from a position of strength. To such an end, the administration embarked on a strategic modernization program which included the production of an intercontinental missile, a stengthened navy, and a feasibility study for the Strategic Defense Initiative. The increase in military spending, and the rise of Mikhail Gorbachev as General Secretary of the Soviet Union at the beginning of Reagan's second term, opened a new era of relations between the two superpowers. After a number of meetings between Reagan and Gorbachev, the two men signed an Intermediate Nuclear Force (INF) Treaty at the Washington Summit in December, 1987. The agreement promised to eliminate an entire class of intermediate-range nuclear missiles and was the first arms control agreement in history to reduce the nuclear arsenal. In addition, the administration began the Strategic Arms Reduction Talks (START) which would reduce the strategic nuclear arsenals by 50%, including large multiple warhead missiles. When pro-U.S. dictators in Haiti and the Philippines appeared on the verge of being toppled from power, Reagan engineered their safe removal from their countries, ensuring bloodless coups and new government which, he hoped, would be friendly to the U.S. In Middle East affairs, Reagan reported in his inaugural address that the 52 American hostages held in Iran for 444 days were at that moment being released and would soon return to freedom. The President maintained a firm stance against terrorism, exemplified by the American retaliating against Libya for an air attack in 1981 and again in 1986 for the death of Americans in a Berlin discotheque. Reagan's peacekeeping force in war-torn Lebanon experienced tragedy in 1983 when a truck bomb killed 241 soldiers. Tragedy struck again in 1987 when a missile from an Iraqi warplane killed 37 sailors aboard the U.S.S. Stark, part of a U.S. naval taskforce which had been sent to the Persian Gulf to keep that waterway open during the Iran-Iraq war. The darkest hour of the Reagan administration would become known as the Iran-Contra affair. After lengthy, nationally televised hearings, a special congressional hearings review board reported that Reagan authorized the sale of arms to Iran in exchange for help in freeing U.S. hostages in Lebanon. Investigations revealed the money gained from the arms sale was illegally diverted to aid the Contras, opponents of the Nicaraguan Sandinista government. The congressional report criticized Reagan for his detached, hands-off style of management. In the aftermath of the affair, National Security Advisors Robert McFarlane and John Poindexter, as well as National Security Council aide Colonel Oliver North were indicted by a federal grand jury and convicted of various charges regarding the Iran-Contra operations. McFarlane was later pardoned by President George H.W. Bush and both Poindexter and North's convictions were set aside on appeal for technical reasons. The Reagan Legacy The eight years of the Reagan presidency was one of the most dynamic periods, in recent U.S. history, resulting in a major refocusing of the nation's social, business, and international agenda. More importantly, his election changed the demographic composition of the Republican Party and built the core beliefs still practiced today: lower taxes, less government restrictions on businesses and individuals and a strong military. Few presidents have enjoyed the affection of so many of the American people. Support for Ronald Reagan grew when he was seriously wounded by an assassin's bullet in 1981 and during major surgical procedures in 1985 and 1987. Reagan was known as the "Great Communicator," and often went on television to ask the viewers for their support for a particular piece of legislation. When he ran for a second term in 1984 against former Vice-President Walter Mondale, Reagan stood by his record and asked the voters if they were better off now than they were four years ago. At 73 years of age, Reagan became the oldest man ever elected president, receiving 525 electoral votes, the most of any presidential candidate. As his second term ended, polls showed that more than half of the American people gave him a favorable rating. When Ronald Reagan became president, he had a distinct vision of what the nation should be and spelled out the direction he hoped it would take during his administration. Reagan had a clear social, economic, and foreign policy agenda, and with political guile and personal persuasiveness he was able to achieve many of his goals. Early in his presidency, Reagan remarked: "What I'd really like to do is go down in history as the President who made Americans believe in themselves again." A month before the election of his successor, Reagan looked back on his eight years in office: "I am the same man I was when I came to Washington," he said, "I believe the same things I believed when I came to Washington, and I think those beliefs have been vindicated by the success of the policies to which we hold fast." About his foreign policy, he said, "At every point on the map that the Soviets have applied pressure, we've done all we can to apply pressure against them." He went on "And now we are seeing a sight many believed they would never see in our lifetime: the receding of the tide of totalitarianism." Reagan lived to see the dismantling of the Soviet Union's communist empire and it's retreat from surrounding neighboring countries which ultimately resulted in the toppling of the Berlin Wall in the fall of 1989. Chronology of the Reagan Presidency, 1979-19891979-1980
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