WE'RE ALL REAGANITES NOW:

The Man Who Was Responsible for Dividing the Country ... into Reaganite Republicans and Reaganite Democrats (Richard Jensen, 6/04/04, History News Network)

American politics today is evenly split into two camps, the Republican Reaganites and the Democratic Reaganites. Start with economics—no one had to tell Reagan, “it’s the economy, stupid!” Reagan’s first challenge was mending an economy in such deep trouble that most observers thought the country was permanently stagnating relative to its stronger competitors. Stagflation in 1980 was a combination of inflation and high unemployment. The Keynesian model said it was impossible: the theory was that the “Phillips curve” taught that you could always trade one for the other. Yet inflation was out of control and interest rates had soared to nearly 20 percent, making long-range planning almost impossible for corporations, and home mortgages prohibitively expensive for young couples. Reality destroyed Keynesianism; today it’s as dead as socialism. Critics said Reagan would need voodoo to slay that monster; his voodoo worked and it is the Democratic Reaganites (like Robert Rubin) who today warn against fiscal policies that threaten to raise interest rates again.

Reagan railed against the federal deficit—his screeds are echoed almost word for word by the Democratic Reaganites these days. (Government debt is indeed hurtful when interest rates are as high as they were in 1980; when they are as low as they are today, the debt is not much of a burden to ourselves or our grandchildren.) Reagan preached Supply Side Economics that combined basic themes of republicanism and efficiency. In terms of political ethics it reflected Grover Cleveland’s dictum that unnecessary taxation is unjust taxation—it is a corruption and an evil. In the name of efficiency, supply siders argued that cutting taxes would permanently boost the economy by releasing entrepreneurial spirits. The Republican Reaganites of course hold faithfully to the creed. Most Democrats, like John Kerry, have accepted it. (Kerry says he will only raise taxes on the undeserving super-rich, thus neutralizing the idea that unnecessary taxes are a corruption.) As for the empirical results of Supply Side, note that federal revenues, after declining in the first year after Reagan’s massive tax cuts, rebounded strongly – as predicted. Indeed, the economy that caused so much malaise in 1980 was roaring back in 1984: America was back, stronger than ever. The voters of 1984 of course realized that; 49 states rejected the old New Dealer, Walter Mondale.

The New Deal was largely reversed during the Reagan years. He did preserve the Social Security system, which was in danger of collapse. Thanks to a universally accepted compromise designed by his chief economist, Reagan and Congress raised the retirement age and thus dramatically reduced the future payouts and stabilized the system. That is Reagan lowered the implicit national debt. Reversing the hoary adage of the Progressive Era, he proclaimed, "Government is not the solution to our problems. Government is the problem.” He was an enemy of the welfare state—he cut some budgets and most important he transformed the terms of the debate.

One of his most remarkable and problematic legacies is that the argument against Social Security today is mainly moral, rather than fiscal.

Posted by Orrin Judd at June 12, 2004 5:14 PM