The Atlantic and Its Enemies

22. Reagan

As happened with Margaret Thatcher, one immediately interesting thing about Ronald Reagan was his enemies. They wrote him off as a lightweight, a product of the Californian television world. The intelligentsia had of course been very strongly on the side of Roosevelt, and had again been very strongly — gushingly so — on the side of Kennedy. Reagan could hardly have been more different. He was sixty-nine when he took the presidential election in 1980, and showed not much evidence of serious education — nothing remotely comparable with Kennedy’s grooming at Harvard and the London embassy. He also offered simplistic answers that the professionals regarded with derision and disbelief. ‘Virtually brain-dead’, said the New Republic; ‘a seven-minute attention span’, said the New York Times; ‘amiable dunce’, said Clark Clifford, grand old man of Cold War affairs. Word went round that he had more horses than books. He also went in for presidential fol-de-rols that struck the great and good as kitsch. His predecessor, the worthy Carter, had sold off Richard Nixon’s operetta guard uniforms, but Reagan had near replicas made for his own, and pranced happily around as the band played ‘Hail to the Chief’. Besides, Reagan’s answers to economic or national problems struck most professional commentators as absurdly simple-minded. His relations with academe went from bad to worse, and Harvard shuffled rather clumsily out of giving him an honorary degree, which was awarded instead, for some reason, to Lord Carrington. But Reagan was much loved outside such circles. The apparent nonentity won by a landslide because he could talk to voters worried about taxes and government inefficiency, and he could do so with humour and style — not for him the upraised-finger repetitive moralizing that came naturally to so many of his allies. Of the federal government, he remarked, ‘If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it’: a neat enough way of expressing the irritation felt by so many businessmen and property owners at government doings in the age of Johnson’s Great Society. On the whole, businessmen do not make good politicians, and Ronald Reagan was useful to them.

His period as Governor had not been particularly successful. He had a Democrat legislature, and although relations with it were surprisingly good, he was in no position to put through what would soon be called a ‘conservative’ programme. Taxes did not go down, and government spending went up; however, Reagan did gain an important bridgehead in what would soon be called the culture wars. In the later sixties, there were endless problems with academe, particularly Berkeley. Not long before, it had stood out as a successful state — as distinct from private — university, and the central European émigrés to California had clustered there. Franz Werfel had made a great deal of money out of a book, turned into a film, about Lourdes (the nuns of which had saved his Mahler manuscripts from the Nazis) and he was very generous in supporting other exiles, such as Schoenberg, who lived in straitened circumstances. Thomas Mann was less generous. A curious link between Reagan’s Hollywood period and his time in office occurred with the Communist element. At Hollywood, film music had been composed by central Europeans, such as Erich Korngold or Max Steiner (who composed the music for Gone With the Wind — as it turned out, Hitler’s favourite film). There was Hanns Eisler, whose brother Gerhart was not just Communist, but chief link with the Chinese Party (and who broke with his sister, Ruth Fischer, when her Communism turned dissident) — the very type of astute Communist who knew how to stage-manage front organizations. At Berkeley, philosophers came, of whom the last, Herbert Marcuse, taught heady stuff as to liberation. Berkeley set itself up as a rival to nearby Stanford, which was privately funded and dominated by a business school. Here, two Americas confronted each other: the one anarchic and on-the-road, the other briefcase-wielding and be-suited before its time. The Berkeley anarchists of course behaved absurdly, and Ronald Reagan could make some political capital out of them (‘a haircut like Tarzan, walked like Jane and smelled like Cheetah’). The president of the University of California system, Clark Kerr, refused to discipline students who were wrecking classes and taking over buildings; like many, many others, he shrank from appearing oppressive. On the whole, the natural scientists also wanted to get on with their hard work, and frequently regarded their colleagues in the Humanities as offering only ‘recreational subjects’ which did not matter very much. They therefore tended to vote ‘soft’. Universities everywhere in the USA were set on a path leading towards ‘Black Studies’ and the rest, and the great outside public shook its head. Reagan helped the regents to get rid of Clark Kerr, and there were confrontations with students, where, again, Reagan’s allies were generally helpless — either blundering or expostulating. Reagan found ways of disarming the demonstrators. They were generally fairly shallow and they handed tricks to the quick-witted Reagan: when they said they were the new generation, that in his youth he knew nothing of aircraft, television, etc., he had the good answer that this was true but that his generation had invented them all. Besides, he knew perfectly well that, on television, the rebarbative, shouting demonstrators would only make for sympathetic viewers and votes. He had a presence of mind and a light touch that set him quite apart from the preachy, humourless figures mostly to be found in his own political camp, the money-mad doctors with rimless spectacles from Pasadena, the evangelical versions of Dickens’s Reverend Melchidesech Howler of the Ranting Persuasion, and the rest. Whatever his shortcomings as Governor, he had one sure way of uniting his camp: he became somehow the chief figure of a general movement against the sixties. As such, he entered a sort of political subconscious, symbolizing something greater than himself.

After 1974, when he had to retire as Governor, Reagan faced some wilderness years. But events in the later 1970s went his way, as they did Margaret Thatcher’s. The National Review had been set up by William Buckley in 1955 as a sort of épater les bourgeois venture, to spit in the progressive winds of the age. In 1964 Barry Goldwater had forlornly stood as Republican candidate against these winds, and had got nowhere — he had even made the cause ridiculous, as it seemed to be associated with grasping and very provincial people from Arizona, a state quite fraudulently claiming to be rugged and individualistic, which would hardly have existed at all had it not been for the enormous amounts of money poured by the government into making the desert green. Goldwater had taken the Republican nomination by surprise, for it would normally have gone to an East Coast figure, in this case Nelson Rockefeller: but his divorce alienated proper-minded supporters. There was of course more to it. The Republicans were beginning, even then, to establish themselves in the South, because the Democrats had started advancing the cause of black rights, at the expense of state rights, and a great shift of the parties was under way. The Democrats under Johnson became the sixties party, and collected votes from, for instance, great numbers of women who now, for the first time, were in employment and, at that, often public employment, of course dependent upon taxes. The Republican vote — or at any rate support, since Democrats in the South did not always change party allegiance — grew in Democrat areas, such as Texas or California. In California, in 1978, there was a remarkable straw in the wind, Proposition 13. There was a property tax, which was sometimes cruelly high — for instance, affecting elderly homeowners who did not have much income. With inflation, as house prices rose, so did the tax assessments, and the money was not even spent locally: it was redistributed, following Federal prescriptions for the equalization of school funds and the like. The state constitution allowed referenda, and there was a great taxpayers’ revolt, despite an alignment of almost the entire Californian establishment against the Proposition, which passed by a large majority. It was a sign of things to come. With the inflation of the 1970s, many none-too-well-off people were paying more tax than before, simply because the levels at which higher tax was paid were not shifted upwards to take account of the lower value of money (‘bracket creep’). A programme of tax reduction therefore made sense, though of course it was also a direct attack on government employment.

‘Conservatives’ in the American case needs inverted commas. In England, to which the word properly belonged, the Conservative Party was indissolubly associated with Church and State; its leaders spoke with a different accent, ate at different times, and had institutions to defend that had no equivalent in the United States. If anything, the Conservative Party was by far the earliest and most successful version of continental-European Christian Democracy, but since this closely involved the Catholic Church, there was a huge difference. In economic matters, the Christian Democrats were not necessarily free-marketeering at all, and the British Conservatives had operated a Welfare State, with a great deal of nationalization, without demur until Margaret Thatcher’s ascent in 1975. The American ‘conservatives’ were unavoidably different: far more inclined towards the free market, hostile to big government, generally keen on decentralization to the level of the American states, and radically opposed to the welfare system that had developed since Johnson’s ‘Great Society’. In the 1980s, they had their hour: they had the presidency, controlled the Supreme Court and the Senate, and were close to control of Congress generally. But as events were to show, the American Right was very divided. Tax-cutting and limited government were one cause; so was monetarism, the campaign to stop inflation; but so too was moral resentment, a feeling that the country was disintegrating; and there was also an element that disliked the moralizers, whereas, on the question of free-marketing or abandonment of regulation, it agreed with them. Keeping this coalition together was very difficult and in the 1990s it fell apart.

Reagan somehow kept it together. He had simple answers, in what was known as ‘The Speech’. It was easy enough to show example after example of government wastefulness and inefficiency, or Communist wickedness, and in 1980 ‘the little man’ generally felt that he was being penalized whereas he was working normally to bring up his family decently. This was also a moment when the Right recovered its intellectual energy: no longer was it the apologizing me-too Republicanism of the Eisenhower era. In the sixties, there had been powerful books of the J. K. Galbraith type, on the evils of unregulated capitalism and the virtues of Keynesianism. Now, there were powerful books on the other side. Richard Perle and Jeane Kirkpatrick had been firm Democrats, consulted by Carter. After seeing how he ran his administration, they went over to Reagan’s side, and so did a further cohort of New York Jews, originally of the Left. In 1980 that side was winning the arguments. Keynesianism as understood in the sixties had produced ‘stagflation’, and an alarming fall in American productivity (as Joseph Stiglitz concedes in the preface to his Roaring Nineties of 2003). There was more than room for a return to older economics, for which Milton Friedman was the chief spokesman. The Wall Street Journal under Robert Bartley displayed panache in this cause. Later on, in 1996, he produced The Seven Fat Years, a sparklingly written account of this time. In the later seventies, he commissioned economists — and considerable ones — to write in derision of the Carter era. The school became known as ‘supply-side’, useful shorthand but no more than that: the ‘supply-siders’ were arguing perfectly seriously that taxes were too high, and were having perverse effects; that if they were lowered, the government would in fact get more money, because taxpayers would not refuse work or avoid tax in complicated, expensive accounting devices. They might even use the money for productive investment. Stiglitz and many others now dismiss these ideas, but in the short term they proved, as Bartley shows, quite right. Then there was the extraordinary deterioration of the conditions in which big-city Americans lived: squalid housing, grotesque crime rates. Myron Magnet, a scholar of English literature who knew his nineteenth century, wrote (in 1993) The Dream and the Nightmare and it was easy for him to catalogue the failures of the ‘Great Society’: as Reagan said, ‘We declared war on poverty, and we lost.’ There was also a failure, though a more complicated one, as regards America’s racial problem. ‘School bussing, more public housing projects, affirmative action, job-training programs, drug treatment projects… multi-cultural curricula, new textbooks, all-black college dorms, sensitivity courses, minority set-asides, Martin Luther King Day, and the political correctness movement at colleges’ had only led, all in all, to rather greater apartheid than before. Magnet went too far in ascribing all of this to the culture of the sixties: it all followed in a pattern of social engineering that had longer origins. However, his facts were incontrovertible: something had gone very badly wrong, and the bleakness could easily be extended as far as education was concerned. Here again, progressive ideas obviously failed. Charles Murray (Losing Ground) spelled it all out, tellingly and uncomfortably. In 1965 Daniel Patrick Moynihan had foreseen the problem; and twenty years later, three of five babies born in central Harlem were illegitimate. Welfare payments made this possible, and girls became pregnant while men refused to marry. The wisdom of the ages knew perfectly well what the family was for; there was a more complicated wisdom, developed in medieval Christianity, that considered the harm that charity might do. ‘Blessed are the poor’ was one line; but clergymen who considered the matter knew how charity could be abused and become counter-productive. At any rate, by 1980 it was clear enough that the ‘Great Society’ had gone badly off the rails. The same considerations were of course well-known in Britain, but not to nearly the same extent, and, there, the immediate problems confronting Margaret Thatcher were to do with the trade unions. At any rate, by 1979 the pendulum had swung firmly towards the Right, and the interesting books reflected this.

Reagan was of course helped, as ever, because his opponents underrated him. Carter was even quite pleased at the nomination of a washed-up actor with eccentric political views. But it was Reagan who won the exchanges. Carter mocked him, saying the economy was in depression; what he meant was ‘recession’ but did not know the difference. Reagan was quick off the mark: ‘A recession is when your neighbour loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.’ Of course the establishment — what Vladimir Bukovsky calls the new American elite — did not like this but, in the event, the election gave Reagan a comfortable victory. Carter then went off to obscurity, subsequently returning in the 1990s to inform the world that North Korea would agree not to develop nuclear weapons or that Haiti would turn into a proper democracy, announcements very rapidly falsified by events. With this hapless figure, the sixties came to an end.

In January 1981, as he took over, Reagan announced that there should be tax cuts and a reduction in domestic spending; he promised prosperity. However, as with Margaret Thatcher though for different reasons, he ran into problems. There were severe enough limitations on his power but in any case the ‘conservatives’ were implicitly divided and this showed, after initial reverses. Reagan had pledged to cut public spending, and blamed it for many ills, including inflation; at the same time he had promised to cut taxes. There was a difficult context, because interest rates (at almost 20 per cent) were so high. Private enterprise could no doubt take up slack that came from a reduction of public spending, but not if credit were so expensive: any small business would need it to keep going. Besides, Reagan was not the only wielder of power: there was a Democrat-majority Congress, there were separate states with spending rights, and there was a legal system of fabulous interferingness. Public opinion was a constant concern, and the media thereby seemed to have enormous importance — the maker and breaker of presidencies. Besides, any President would inevitably find himself dealing with foreign affairs — one complication after another, with vociferous lobbies attached. Not an easy set of cards to play.

Divisions emerged rapidly enough. Jack Kemp especially had been arguing that tax cuts would more than pay for themselves. This was a popular enough cause. The average family income in 1970 was under $10,000, and as that figure, on paper, rose, the tax rate went up by 20 per cent, though the average income in 1980 was buying about 20 per cent less than in 1970. In, say, Germany, the high taxes at least bought decent public services. Not, for the most part, in the USA. However, there was a vast constituency for social security, especially Medicare and Medicaid, the costs of which went up and up (while also leaving millions of people without health insurance). There were also endless lobbies for this or that subsidy, especially the farmers: a cow cost $2 per day, before it had even started to chew the cud or be milked. A very tortuous campaign went ahead, through a Democrat-dominated Congress (with a slight and unreliable Republican majority in the Senate). Reagan turned out to be a very astute manager. His style was less than hectic: he refused to do early-morning meetings. The team that he had chosen spoke with different voices: a James Baker, more or less in conventional mould, could, as Chief of Staff, talk lobbyists’ language, whereas a David Stockman, managing the budget, addressed fears as to deficits. Reagan could also use television as a professional, and outflank Congress in that way, with an appeal to public opinion. Above all, he did not preach or offend, and his relations with the Democrat Speaker, Thomas ‘Tip’ O’Neill, were friendly. In 1981 legislation brought a tax cut of 25 per cent, in slices — 5 per cent at once and 10 per cent for the next two years. The top rate of tax fell from 70 to 50 per cent and by 1985 tax was supposed to be indexed against inflation. By 1988 the top rate had fallen to 28.5 per cent. There were concessions elsewhere, for retirement savings and the like. So far, so good. Reagan was also shown to be right as to the effects: the better-off did not avoid tax, and income from them went up, not down. In 1986 a new tax law brought the marginal rate down from 50 to 28 per cent but cut out some loopholes, and there were only three tax brackets. However, business and other taxes did in effect rise.

David Stockman, at the Office of Management and Budget, was a man of fiscal rectitude, and he could see an immediate problem: a deficit. It stood at $50bn in 1980, and under Reagan, by 1986, reached $200bn. When he left office, the overall debt had increased by $1,500,000,000,000 (1.5 ‘trillion’, though the word is not correct). Stockman was a free-market convert (originally from the radical Left) and set himself to attack ‘forty years… of promises, entitlements and safety nets’, i.e. the welfare state as it had grown up since Roosevelt’s time. The problem here was not just the poor, for whom the welfare state had been designed. There were many middle-class ‘entitlements’ as well, and the health schemes were notoriously prodigal. There were also arrangements to subsidize the buying of houses on mortgage — great federal institutions, quite strictly regulated. Meanwhile, Reagan himself had encouraged the Defense Department to put up its budget, and according to Stockman, its Secretary, Caspar Weinberger (one of Reagan’s Californians) in effect dictated government finances. Stockman talked to congressmen with a view to having taxes put up, not down, because of the deficit and ‘leaked’ news that he had sabotaged the tax cuts, but Reagan did not dismiss him until 1986, when Stockman went on to Wall Street. His memoirs are a long statement of contempt: both for the endless political subsidization (‘pork barrel’) that went on, sometimes by small-print subterfuge, and for Reagan’s own management, which he thought very weak and even reckless. Military spending took priority, and from 1981 to 1987 went up from under $200bn to nearly $300bn. But it was not just defence: Stockman catalogues case after case of special pleading, as each congressman expected a favour or two in return for his vote. His was a curiously unstable career — Harvard theology, the anti-Vietnam Left, free-marketeering, money on Wall Street and, in 2007, an indictment for fraud.

At any rate, he could not convince the powers that be, and became a fifth wheel. The Reagan administration went along with social spending. There were ‘cuts’ — in 1981 $35bn, as food stamps and student loans were cut back. A redundant employment agency was closed down and fuel prices were freed. These ‘cuts’ were overall rather trivial, but, as ever in this period, there were dramatic howls. Even Daniel Moynihan talked of ‘devastating cuts’ and a well-known liberal economist, Robert Reich, said that it was ‘the return of Social Darwinism’ — the same hysteria as appeared in Britain. But Reagan could not cut back significantly: he went on spending, and could afford to do so because the GNP rose by a third — equivalent to the entire German economy. David Frum (Dead Right) is scathing. He notes that Reagan’s old Californian associate Edwin Meese, though supposedly overseeing the entire administration from the ‘conservative’ angle, and subsequently Attorney-General, wasted time, ran an office of legendary confusion, and protected spending programmes from Stockman’s axe — orange-growers, for instance, who were very firmly regulated as to how much each could produce. In February 1981 he trumped Stockman by announcing that all the chief programmes (Medicare, etc.) would be safe. In the same way, the despised Department of Education was not closed down, as had been, to wide enthusiasm, promised. Carter had rewarded his teacher allies with it, and the Reagan allies regarded it as pernicious. But on it went, to a budget of over $20bn in 1989: it was a useful field for patronage, particularly its Civil Rights side. William Bennett, an interesting thinker, was put in charge, and went around making speeches that electrified audiences, but his department blithely went on as before, with bussing schemes and federal instructions as to how schools should teach. The budget went up from 1981 to 1989 and the rise accounted for three quarters of the 50 per cent increase in federal education spending. Yet America’s educational performance went down, at any rate as far as schools were concerned. Literacy was barely above the level of poor countries, although spending was considerable. Perhaps the worst case occurred with farmers. They had borrowed to buy land in the 1970s and then faced high interest rates, with declining prices for land and crops. The government offered credit to a maximum of $2.5m per farm, and even forgiveness, and the extra $20bn farmers received in 1986 was three times the federal contribution to families with dependent children. Overall, spending rose from $808bn to $1,114bn. Reagan’s own record looked somewhat better, in terms of government share in GDP, only because some big bills — the savings and loan debacle — came in after he had gone. He had said that he would try to undo, not the New Deal, but the Johnson Great Society. However, an essential part of that had been Medicare, which paid most of the health costs of the elderly, over sixty-five, even when they were not at all poor. This had cost $64m when it began in 1966, and reached $32bn in 1980 and over $200bn by 1997. The usual explanation for this was that medical technology and drugs had a higher inflation rate than anything else, although quite why was not easy to see: usually, technology depressed costs. Reagan had begun by denouncing socialized medicine as likely to end up with problems of this sort, but, once in office, he of course could not attack such a large and powerful constituency, and, as happened with variations anywhere else, was reduced to tinkering with cost caps. By 1993 Medicare alone took 11 per cent of all federal revenue, having grown at 12 per cent per annum. Besides, the huge inflow of Medicare money made every other form of health care more expensive, and employers were paying more into the system instead of raising wages and giving people money to spend directly, which might have caused them to question costs. Here was a monster out of control.

The Left captured culture (broadly defined) and education, much as happened in England. Its denunciations of Reagan-and-Thatcher were loud, frequent and generally absurd. ‘The eighties’ passed into history as a decade of ‘greed’. There was an element of truth in this. The outstanding feature was that the better-off got better off, and the Economist was able to speculate, plausibly, that there was a return to the hereditary bourgeoisie, of substantial upper-middle-class families keeping their fortunes intact and passing them on to children and grandchildren, which had been a considerable feature of the English past. One aspect of this was certainly the reduction of top tax rates in the USA. For whatever reason, it did indeed have the effect of increasing government income from the top taxpayers, as the ‘supply-siders’ had claimed (to ridicule) would happen: 50 per cent. The top 1 per cent had paid 18 per cent of all revenues in 1981 and 28 per cent in 1988.

Still, there were ‘Seven Fat Years’, and this needs explanation. Median family income rose in 1990 dollars from $33,500 to $38,500. Five million new businesses emerged, and 18 million jobs were created. The stock market doubled in value, and inflation fell to a negligible figure: especially, oil prices declined, such that America returned to a cheap-energy world. It seems fair to say that the critics of the ‘supply-siders’ simply failed to foresee this, and, when they could not deny it, reckoned that it confirmed their own orthodoxies. Reagan characteristically remarked that a sure sign that it had worked was that it was no longer called ‘Reaganomics’. There was extraordinary criticism, still, and particularly of ‘the deficit’, which critics in other circumstances would have shrugged off. It was substantial, at 6.3 per cent of GDP in 1983, but with economic growth fell to 3 per cent in 1987, where it had been in 1981. Other countries had larger deficits; the American one mattered, because it brought in imports and thus carried other countries out of depression. It was also very easily covered by capital imports, since the world invested in America. The real objections to Reagan were of a different order altogether: they had to do with the displacement of ‘hegemony’. The Californian business cronies with whom Reagan filled his Cabinet could not have cared less for the opinions of J. K. Galbraith, despised the seventies, regarded universities as pollution. Reagan himself, criticized for not having economists around, remarked, why should he: his Cabinet consisted of millionaires.

Was it true that ‘the middle’ was stagnant and ‘the poor’ were poorer, while there was ‘obscene’ wealth? Such was a theme of critics in all areas. There was no doubt as to the money made out of money: Wall Street entered legend, as did the London City. In 1980 there were almost no billionaires, and in 1989 there were over fifty. There had been under 5,000 millionaires; then there were 35,000. There had been 500,000 people with assets worth one million; then there were 1.5 million. In England there was a joke that a millionaire was just someone without a second mortgage in Fulham, so far had house prices risen. Then again, the ‘middle’ was not ‘stagnant’ at all, given that the percentage of families earning $50,000 (1989) rose from 31 to 36 per cent, thus rated (no doubt misleadingly, but the losing 1984 Democratic presidential candidate, Walter ‘Fritz’ Mondale, regarded an income of $60,000 as defining ‘rich’) as ‘affluent’. There was also a huge increase in charitable giving — more than $100bn in 1990, an increase of over half in the decade.

Besides, poverty, as ever, defied generalizations. A student was poor, and so was a pensioner, even if living in a large house. People moved jobs, and got divorced, before rebounding. Then again, there was the ‘underclass’ — a problem that hardly existed in countries such as Sweden, where people who refused to work faced severe punishment, unthinkable in the USA. It was of course true that economic change greatly affected whole classes of people such as blue-collar workers and (some) farmers, but that was not a problem peculiar to the eighties: it had been a strong feature of the seventies, when the expression ‘rust belt’ came to describe Sheffields or Baltimores or Pittsburghs that had previously been steel towns, now facing competition from much cheaper producers abroad. In the 1980s, on the wreckage of these older industries, new ones shot up, generally referred to as ‘service’, but in themselves requiring sophisticated machinery. The computer was sometimes held to be as revolutionary as the railway had been for the nineteenth century. But the proper comparison is with the automobile, which had brought about the 1930s recovery in the industrial West. The recession released capital and labour in a great wave, and after the initial troubles the country boomed. But so did important places beyond the USA.