31.1 The reagan revolution  (Page 4/9)

Reagan was successful at cutting taxes, but he failed to reduce government spending. Although he had long warned about the dangers of big government, he created a new cabinet-level agency, the Department of Veterans Affairs, and the number of federal employees increased during his time in office. He allocated a smaller share of the federal budget to antipoverty programs like Aid to Families with Dependent Children (AFDC), food stamps, rent subsidies, job training programs, and Medicaid, but Social Security and Medicare entitlements, from which his supporters benefited, were left largely untouched except for an increase in payroll taxes to pay for them. Indeed, in 1983, Reagan agreed to a compromise with the Democrats in Congress on a $165 billion injection of funds to save Social Security, which included this payroll tax increase.

But Reagan seemed less flexible when it came to deregulating industry and weakening the power of labor unions. Banks and savings and loan associations were deregulated. Pollution control was enforced less strictly by the Environmental Protection Agency, and restrictions on logging and drilling for oil on public lands were relaxed. Believing the free market was self-regulating, the Reagan administration had little use for labor unions, and in 1981, the president fired twelve thousand federal air traffic controllers who had gone on strike to secure better working conditions (which would also have improved the public’s safety). His action effectively destroyed the Professional Air Traffic Controllers Organization (PATCO) and ushered in a new era of labor relations in which, following his example, employers simply replaced striking workers. The weakening of unions contributed to the leveling off of real wages for the average American family during the 1980s.

Reagan’s economic policymakers succeeded in breaking the cycle of stagflation that had been plaguing the nation, but at significant cost. In its effort to curb high inflation with dramatically increased interest rates, the Federal Reserve also triggered a deep recession. Inflation did drop, but borrowing became expensive and consumers spent less. In Reagan’s first years in office, bankruptcies increased and unemployment reached about 10 percent, its highest level since the Great Depression. Homelessness became a significant problem in cities, a fact the president made light of by suggesting that the press exaggerated the problem and that many homeless people chose to live on the streets. Economic growth resumed in 1983 and gross domestic product grew at an average of 4.5 percent during the rest of his presidency. By the end of Reagan’s second term in office, unemployment had dropped to about 5.3 percent, but the nation was nearly $3 trillion in debt. An increase in defense spending coupled with $3.6 billion in tax relief for the 162,000 American families with incomes of $200,000 or more made a balanced budget, one of the president’s campaign promises in 1980, impossible to achieve.

The Reagan years were a complicated era of social, economic, and political change, with many trends operating simultaneously and sometimes at cross-purposes. While many suffered, others prospered. The 1970s had been the era of the hippie, and Newsweek magazine declared 1984 to be the “year of the Yuppie .” Yuppies, whose name derived from “(y)oung, (u)rban (p)rofessionals,” were akin to hippies in being young people whose interests, values, and lifestyle influenced American culture, economy, and politics, just as the hippies’ credo had done in the late 1960s and 1970s. Unlike hippies, however, yuppies were materialistic and obsessed with image, comfort, and economic prosperity. Although liberal on some social issues, economically they were conservative. Ironically, some yuppies were former hippies or yippies, like Jerry Rubin, who gave up his crusade against “the establishment” to become a businessman.

Section summary

After decades of liberalism and social reform, Ronald Reagan changed the face of American politics by riding a groundswell of conservatism into the White House. Reagan’s superior rhetorical skills enabled him to gain widespread support for his plans for the nation. Implementing a series of economic policies dubbed “Reaganomics,” the president sought to stimulate the economy while shrinking the size of the federal government and providing relief for the nation’s wealthiest taxpayers. During his two terms in office, he cut spending on social programs, while increasing spending on defense. While Reagan was able to break the cycle of stagflation, his policies also triggered a recession, plunged the nation into a brief period of significant unemployment, and made a balanced budget impossible. In the end, Reagan’s policies diminished many Americans’ quality of life while enabling more affluent Americans—the “Yuppies” of the 1980s—to prosper.