If you think Reagan was a lousy President, what were his failures and shortcomings? Please pass on attributing later diagnosis of Alzheimer's with in-office policy and other parlor tricks.
Reagan was criminally negligent during the cold war with his stupid militaristic rhetoric, and needlessly escalated nuclear tensions at a time when the Soviet Union was very paranoid. This led to nuclear panics and inched the world closer to war in 1983, and personally, as a 10 year old, it caused me endless nightmares. The Soviets had a scare in 1983 during the ridiculously provocative NATO maneuvers, their radar malfunctioned. If that meteorite that landed in Siberia this year had instead landed in 1983, we wouldn't be chatting online, we would be hairless and vomiting over our rat stew. This stuff is a joke now, it's hard to remember that 30 years ago, everyone day to day had to factor into their calculations a non-negligible probability for complete annihilation.
I was 10, but I knew what kind of bullshit he was doing, and this is unforgivable. For this alone, reversing Carter's detente, he qualifies as a terrible president, since increasing the chance of that kind of catastrophe by even 1% outweighs everything else. Reagan changed course in 1985, after a slew of nuclear-war films and warnings, but does a person really need that much of a kick in the pants just to not stir up trouble?
Reagan often gets credit for market-oriented reforms that are entirely due to Carter, airline deregulation and austerity to curb inflation. The monetary policy of the early 80s which ended the inflationary 1970s was due to Volcker, who was a Carter appointee. The inflation was a relic of Nixonian hyperstimulation of the economy when all the big industrial production sucked up by the war in Vietnam.
What Reagan added to Carter's modern policies was a nonsensical tax-cut and anti-union component that decimated working wages in the 1980s, leading to the modern polarized economy. The idea here was to reverse Keynsian policies and make a flat tax. The extreme of Reaganomics was the 1987 budget deal, where top brackets were slashed to 28%. That's as flat as the tax system ever got, and Reaganites like Jack Kemp, wanted to take it further, and make a pure 25% flat tax.
The idea of a flat tax flies in the face of modern economics. The purpose of taxation in a post-depression economy is to redistribute incomes, which are always distributed completely lopsidedly, to come closer to economic equilibrium, so that economic demand can keep up with industrial capacity. Without tax and spend redistribution, the spontaneous segregation of wealth in the economy makes all the income go to certain people in certain social classes.
This segregation of wealth is theoretically forbidden in economic textbooks, it should be reversed by competition, but experience shows that it happens anyway. In every free-market economy ever formed, people who control capital can turn capital into income, despite the fact that other people are willing to do the same job for less, they just don't accept bids from those people. This siphoning off of income means that the workers do not make as much as they would in a competitive equilibrium, which means they can't purchase all the goods the economy can theoretically produce, and this means people working for dropping wages, only controlled by minimum wage and working-day limits, without the benefits of economic growth.
Reagan encouraged this polarization in incomes, since he thought it would improve economic activity. The idea was "whatever happens in an unregulated market is getting you closer to equilibrium", and this is a farce.
Reagan's economy was bracketed by two immense recessions, in 1981 and in 1991, and a minor stock-market crash in 1987. The era saw a rise in homelessness and childhood poverty, and an increase in racial tensions, things which subsided in the 1970s. The market changed when the tax rates went back up under Bush then Clinton, and especially when Clinton expanded the Earned Income Tax Credit to make it a true income redistribution program. Clinton's economy ran circles around Reagan's, in fact, it produced levels of growth and employment which had been declared to be impossible in a modern economy. The US was growing at 5-6% a year during this era, and unemployment was at 4% by the time Clinton left office.
The income redistribution allowed the economy to function at full capacity, for the first time since the 1960s. Entirely new industries, like internet sales, and telecommunications companies, took root and prosper in conditions where consumers had enough money to demand the services these companies provided. These economic policies were explicitly redistributive, and hated by the Reaganites, who considered Clinton's economy a lucky streak. or attributed it to Reagan's policies.
I have no doubt that if Clinton's tax rates were kept, and increased somewhat at the high end, and the EITC was doubled again, the economy would have grown proportionately. It is also not clear to me that if Gore was elected, that the internet growth would have ever stopped. The internet boom of the 1990s is essentially repeated today, more slowly, and it was not really a bubble as much as an actual reconfiguration of the economy.
Inflation is the marker of when the government is doing too much redistribution, and there was no hint of inflation in the 1990s. Unemployment and falling wages are the sign of the government doing too little redistribution, and these could be seen in spades in Reagan's economy, and Bush's.
It is obvious to anyone who knows anything about the functioning of markets that income redistribution is necessary in markets with inequality on a vast scale, so as to allow the market to produce at peak capacity. This was advocated by conservatives as a substitute for government spending in Nixon's day--- the negative income tax was a replacement for unnecessary spending on military contracts, or onerous bureaucratic social spending with strings attached. With a negative income tax, all you are doing is removing income from people who have a monopoly on their labor and can charge exhorbitant rates for this labor, and redistributing to people who are not laboring in a closed position, and who deal with competition from others. In other words, you are taking undeserved monopolistic income, and distributing to those who work hard and efficiently under competition from others, and so deserve it.
Reagan was the first modern conservative to oppose redistribution of income. He opposed Keynsianism, replacing it with his own brand of voodoo nonsense. Keynes is about demand, so Reagan called his vision "supply side economics", meaning, you have to make the climate nice for the suppliers. This is only true in those cases where the suppliers are somehow inhibited because there are not sufficient incentives for people to join their ranks. If you asked random people whether they would like to run a company, at any time in the 1950s-1990s, I don't think at any point they would say "no, it's not enough reward for the work". There has never been a supply-side incentive loss.
Reagan's appointees gutted anti-trust law. In the 1980s, the definition of "competitor" was relaxed so that even very distant companies which offer a vaguely similar product suddenly became "competitors", and the requirements for a competitive industry was that only 1 or 2 other large firms compete. This was a retrenchement of Teddy Roosevelt's hard-won gains.
So Reagan was appealing to big pockets, saying, "look, we can reverse the Roosevelts, finally!" And they did. The growth with Reaganite policies has been tepid and lopsided, the incomes of working people do not suffice to purchase all the goods that the US economy could be producing today. You can see it, because there are people sleeping on the streets who could be making golfballs instead, but their labor is not needed, because consumers have too little money.
Reagan also came to power with a religious socially conservative coalition that opposed the social advances of the late 1960s. The only thing they were right on was the drugs, but the left figured that out without their help.
I was contemplating your answer, and I think you could establish a sufficient theoretical basis for "spontaneous segregation of wealth" without even evoking monopoly power. Simply divide the society into savers and non-savers, where savers always set aside some fraction of income and non-savers don't. Any real returns savers get from investments will be spent in the same proportion as income, but since it is in the hands of the saver class, any return on capital will translate into consumption by a multiplier less than one. One could propose that the saver class would continue to grow the capital account, but if it were in the form of corporate wealth, this isn't practical in the real world if not substantiated by growing revenue, which it isn't.
Of course, even if it is not necessary, monopoly power does exist. The saver/non-saver dichotomy would predict return on capital to approach zero on average, and while this may be close to reality for low-risk asset classes it poorly describes the world overall. Your framing is likely more correct, but these are two distinct theoretical mechanisms that have an interlocking role in the real world (large capital ownership making one's labor more valuable, for instance).
This is a reasonable model for capital formation, but the issue I have is that even someone with no savings and a good idea should be able to persuade people to lump together their savings and invest it in their venture, in promise of returns--- this is what venture capital does. Then the return will be shared between the investors and the non-capitalist entrepreneur, and with time, you expect the economy to flatten out the income from one large firms to many small competitors.
But what you see in real markets is not this desegregation of wealth, but instead companies swallowing up smaller companies and becoming these behemoths, and then getting good deals through their market clout which essentially permanently locks out any competition from forming. It's exactly the kind of monopoly power that wrecks efficient production in markets.
I think that individuals can have variations, you can have an income distribution with a spread, but this spread will be relatively small compared with observed inequality--- maybe a factor of 10 or 20, so that there are millionaires and people living hand-to-mouth, but you can't have billionaires without monopoly of some sort, and it seems to be the way modern economies operate--- they produce enormous firms run by billionaires, instead thousands of small firms run by millionaires or hundred-thousand-aires. I doubt that there is any gain in efficiency from this, as it is clear from experience that the small firms are more efificient and more innovative both, but they are driven out of business either by acquisition or by unfair competition by the giants.
This kind of thing is depressing, because it isn't capitalism, at least not the competitive type of capitalism you read about in books. It's something else--- it's a class system where a few people with money pick out a winner from among a bunch of firms and capitalize it to the point where it can swallow up all the rest in a merger process, like what happened with Amazon or Google. These things are squashing the development of an ecosystem of competing small firms in the new economy, essentially declaring that a monopoly is inevitable and desirable, and it is neither.
I don't see any reason that there aren't 1,000 Amazon clones, each competing on rates and services, instead of one centralized company. I don't understand why Google, which was such a nice and profitable small company, suddenly became a monster through capital financing, instead of thousands of google-like ventures purchasing search power from google and adding value. This type of centralization is contrary to all market theory, and it doesn't seem to be getting better, as their is no international anti-trust mechanism.
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Reagan was charming sometimes, and he had a legitimate point of view regarding the inability of government regulation to work well in micro-managing an economy. But this was already understood by Kennedy and Carter, it wasn't something that Reagan invented. Reagan wasn't a charlatan like Bush 2, and his convictions were on rare occasions justified, but his policies regarding taxation were no good, and known to be no good at the time.
In the early years of his presidency, he basically made half the world crap their pants. Reagan had no intention of first strike, and he could have just said so in 1981, saving the world the panic attacks and the near-disasters. But he hid his sensible abhorrence of nuclear war behind swagger and bluster, for political gain. It wasn't until 1985 that Gorbachev persuaded the Politburo that there was no risk of a first strike from Reagan, until then, they were on hair-trigger alert, and remember, the window for retaliation in the 1980s was approximately 20 minutes. Under the circumstances, that type of brinksmanship was completely insane. It was criminal negligence.
If I had to choose something to like about Reagan--- he was always steadfast that people in Eastern Europe and Russia deserve freedom of thought and economic growth, more so than others who liked having the Soviets around, for the pro-worker counterweight they provided in the west. He was also friendly to science, something which later Republicans forgot. He was also not very religiously motivated, he partnered with religious folks to get stuff done, and he wasn't an Ayn Rand follower. That's about it. I think his policies were essentially brain-dead otherwise.
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The USA is not quite as stupid as it looks from the outside, at least not when it functions well--- the idea of the country is that there are two opposing forces at work: politics and money. The politics is democratic, the money is shadowy and uncontrolled, and the two aspects keep fighting, and they have to work out a compromise.
This works well when the money is efficiently distributed, as in a perfect free market, because then the money reflects innovation and efficiency. But the efficient stuff is done by small companies, and then an oligarch buys them out, or suppresses their growth through anti-competitive practice, and the class of money people keeps shrinking as the class segregation mechanism become more efficient. Without this class segregation, the US might be a good system.
Sometimes the money people have a smart idea which leads to greater efficiency--- like introducing options and derivatives or junk bonds for fast corporate restructuring of insufficiently profitable ventures--- and if you put these ideas to any sort of political vote, they would always lose. The reason is Machiavelli's dictum--- any new order has as enemies all those who do well under the old system, and only as lukewarm supporters those who would do well in the new. These ideas, unpopular as they are, do really lead to higher market efficiency, so they are really good for society (despite superficial first impressions). They do need good social policies in order to mitigate the harm caused by layoffs, with good unemployment benefits, and income supplements that ensure that people aren't going to end up destitute.
On the other hand, sometimes the money oligarchy gets trapped in stupid ruts, and then the democratic politics allows you to fix these things with government restructuring. Airlines supported regulation in 1976, they didn't want to get fixed. The banks don't want regulation, even though it would be good for them.
Both Republicans and Democrats have supported good ideas in the past. Eisenhower was reasonable, as was Teddy Roosevelt. Lyndon Johnson, aside from civil rights, was a horror. So it's not really partisan, although in recent decades, since Reagan, only the Democrats seem to have sensible policies, since only the Democrats understand the basic principles of Keynsian economics.
The system requires that any democratic political change be ok'd all of the thousands of separate money interests that exist in the country. Each money interest represents the livelihood of some thousands of people, and the point of view is concentrated and made important in a way that is anti-democratic, but reflects the economic activity generated by these folks. The political stuff also has to be consistent with popular will, so people always are walking this tightrope between the money and the politics, and this can prevent innovations in government.
But this system that balances money and democracy has advantages---- ideally it allows new profitable businesses or economic ideas to come to exist without fear of political reprisal, which is sometimes important, for example, if you want to start a GNU/Linux company, you can do it in the US (in theory) without someone from Microsoft politically making new laws to stop you (although, I might have chosen a bad example, because this is exactly what Microsoft tries to do).
I think a few of the answers on this page belie a strong ideological dislike of Reagan that biases their point of view.
For a peacetime president, Reagan was good, and arguably great.
His presidency coincided or just preceded:
A strong and sustained economic boom -- after the protracted recessionary environment of the 1970s.
A successful and decisive ending of the Cold War, with the collapse of the Soviet Union. Hallelujah! Who would have thought that was possible in our lifetime?
A re-establishment of American position of military strength, in the wake of the disastrous after-effects of the Vietnam War and Jimmy Carter's weak stewardship and paralysis.
A significant slowdown in big government growth.
Reagan's policies played a critical part in achieving each of these outcomes.
His tax and budget cuts spurred significant economic growth.
His military escalation (increased Pentagon spending, Star Wars) likely accelerated the economic collapse of the Soviet Union.
His willingness and effectiveness in using military force meant that the Soviets and other rogue states thought twice before crossing the US.
His inspirational leadership around the world encouraged freedom fighters in Eastern Europe and elsewhere to resist Soviet oppression. I remember being very proud of his various pro-democracy speeches in Europe, especially "Mr. Gorbachev, tear down this wall."
Reappointing Paul Volcker as Fed Chairman and endorsing his strong anti-inflationary policies. This re-appointment was controversial, even among Reagan's own aides.
He also picked an awesome Vice President (George H.W. Bush), who won subsequent election as President and did an awesome job during the Iraq-Kuwait crisis.
To be clear, my view is shared by historians in several recent surveys. In these surveys, Reagan ranks between 6th and 18th among our 43 past presidents.
It's hard to crack the "great list" if you aren't a wartime president. Of peacetime / post-Revolutionary period presidents, it's clear that Teddy Roosevelt is on the list, and probably Eisenhower also. Other than that, Reagan looks pretty good.
Reagan did not help American growth, and he had nothing to do with the collapse of the Soviet Union. If you read the minutes of the 70th Soviet Party Congress in 1987, you can see that the restructuring was caused by consistent poor farm yeilds, and economic inefficiencies that were due to local politics mucking up all innovation in the Soviet economy. They couldn't produce good home computers, and their tech stuff for anything other than military was second rate. Reagan did exploit the weakness of the Soviets to malign leftist policies unfairly, because although the Soviet economy was a disaster, Marx knew what he was talking about.
It sounds like you agree with Reagan that the Soviet system was a very flawed economic model.
I agree with Reagan on this, as did Carter, and Clinton, and Kennedy, and anyone who visited the Soviet Union, or who spoke to people living in communist states. This wasn't Reagan's innovation, his innovation was nonsense tax cuts, nonsense SDI, nonsense nuclear brinksmanship, and a complete rejection of Keynsian economics, which is the resolution to the problem Marx identified.
A lot of others on this particular thread are claiming that Reagan's economic policies were "merely" Keynesian economics, i.e., deficit spending to boost consumption. I'm curious to understand your view regarding his rejection of Keynesian economics.
Keynsian economics is not just deficit spending, which Reagan opposed by the way --- he just couldn't control spending. It is also a leveling income tax on high incomes, and an attempt to approach equilibrium wages, where nobody makes a ton of money, because competition drives wages down. Equilibrium wages are Soviet wages--- the Soviet Union did wages by pure supply and demand, this was the only place where they were 100% successful --- wages in the Soviet Union were completely competitive and followed the laws of supply and demand almost exactly as an economics textbook predicts.
Reagan made "supply side" economics, meaning, he wanted to reduce taxes so as to give money to rich people. He and his appointees explicitly renounced Fed policy to lower unemployment, and made the Fed's job only to lower inflation. He wanted an unequal society, because he wanted the suppliers to have a ton of capital, to increase investment, so as to increase the productive capacity.
The idea here is that there wasn't enough capitral for economic expansion, this is why you had stagflation. Reagan supposed that the anemic growth in the US was due to insufficient entrepreneurial capital, so he wanted to put more capital in rich people's pockets, so they can expand businesses to employ people, so that inflation and unemployment would never again happen together.
To a certain extent, he was probably right, in that you did need more investment capital in a situation where there is not enough capacity to absorb all the workers. But this type of investment capital does not have to come from wealthy individuals, or from enormous businesses expanding--- you should be able to make it happen in an organic way in small businesses which don't require enormous individual capital accumulations, if you allow the economy to structure itself without monopolistic tendencies.
But Reagan ignored the insights of anti-trust law, and gutted enforcement of this. The idea in Reagan's time was that if you have a google, you're competing with the yellow pages, that's enough competition. This never has been reversed.
He also got rid of union pressure on wages, to allow the economic distribution to become more unequal. The goal was to make the class of capitalists, who own enormous businesses, wealthier, so they can expand, and absorb the surplus capacity revealed by 1970s unemployment through investment.
In a healthy textbook economy, you would have enough small firms that can organically grow to absorb labor, and split off new firms by dividing to absorb more labor in regions where there is unemployment. In Reagan's economy, all that happened is that you got new Kmarts, or Woolworths, in lots of suburban malls, and the jobs were not independently managed entrepreneurial positions, but low-pay positions of no power, to absorb the extra labor as wage slaves. The regulation of enormous firms to achieve efficiency was through leveraged buyouts, which made it that every company was afraid of a hostile takeover, and so arranged itself to be maximally profitable, because if it's stock valuation was too low, it would get bought out.
This type of thing created the modern economy of corporate giants, and a tiered unequal society with entrenched money classes. This is a reversal of the progress of the 20th century in eliminating this class structure. The policies Reagan opposed, progressive taxation, inflationary monetary policy, were proposed by Marx. The other policies he gutted, anti-trust ideas, were proposed by American progressives, in order to make more competitive markets which would avoid the Marxist end-state of capitalism, with lots of empoverished low-wage workers, and a class of wealthy moochers who live off the income they generate.
Keynes was also doing Marx lite, he understood that depressions happen because industrial workers don't get a competitive income, they are being ripped off. So he suggested to boost this income by putting more money in their pockets. This is through government spending in high-wage jobs which makes private sector wages go up, by competition, by removing money from wealthy people with punitive income taxes, and also through anti-trust enforcement to ensure companies stay small, competitive, and efficient. The income disparaties are unhealthy, they wreck a free market, they don't appear in textbook economic equilbrium.
I grew up in Reagan's capitalism, and the large firm takeover of the economy, and the polarization, just didn't seem to me to produce any innovation at all. All the innovation of the 1980s, at least all the good stuff, was in smaller companies, and individual ideas. The large companies, even when they were innovative at first, like Apple, always ended up closing off an economic sector in the end. Apple II was open hardware, had lots of clones, and was innovative. The Mac was closed hardware, had zero clones, and degenerated into inefficiency. Microsoft made some nice programs in the early 80s, like AppleSoft basic, but they also destroyed the software world, by copyrights and restrictions that required free software to overcome.
The alrge firm capitalism that Reagan advocated is not much different for the individual than Soviet communism, except in number of large actors. Ok, it's 1000 different company structures you are beholden to, rather than 1 party, that's a little better, but it's not 3,000,000 independently managed small and medium sized companies which work together to make an economy. That's the ideal of textbooks, and this is what I compare policies relative to.