June 13, 2004
One for the Gipper
I’m not sure how much I can add to what’s already been said about Reagan, especially since I didn’t really follow politics that much back when he was in office. Plus, I’ve already written a good deal of what I thought of him in my reaction to the whole Reagan dime proposal and in my lengthy discussion of supply-side economics. But as you might expect, this won’t stop me from writing a lot more. In short, I think he was a very good, but not great president. Someone who was a lot more important to the Republican party than he was to the country (and even in that respect, I think Barry Goldwater doesn’t get his fair share of the credit). But Reagan was still clearly much better than any of his successors thus far.
Economic Record
Still, for those partisan Republicans who like to point to how much the economy improved, my reaction would pretty much mirror that of conservative blogger, Jane Galt:
I saw some Republican… saying that Reagan was great because when he took office, unemployment was 10% and interest rates were sky-high, and when he left office everything was boom-a-riffic. This is every bit as fine a bit of data mining as Democrats who make similar claims for Clinton — the economy sucked when he took office, and was booming when he left. When Clinton took office, the economy was already recovering from a recession; when he left, it was sliding into another one. That’s luck, not talent. … Similarly, high unemployment and interest rates under Reagan were not because Democrats Had Been Driving the Economy Into the Ground Until the Grownups Took Over. High inflation was the result of a dozen years of bad fiscal and monetary policy under two Republicans — Nixon and Ford — and two Democrats — Johnson and Carter — that was brought under control only when Paul Volcker, the Carter-appointed head of the Federal Reserve, jammed interest rates up to national-heart-attack levels and left them there until inflationary expectations were well and truly tamed. Reagan had nothing to do with unemployment and interest rates falling; that was the invevitable [sic] result of a drastic monetary tightening finally working its way through the economy.
Glad to see someone else giving Volcker his due. For a quick primer, inflation (rampantly increasing prices) is caused when demand outstrips supply for a long enough time that the expectation of future inflation also starts increasing demand, thus creating a vicious cycle. The only known way to break the cycle is to crush demand (or you could skyrocket supply, but nobody knows how to do that — Laffer’s claim that tax cuts would do it is a crock).
Volcker’s predecessors had tried to fight inflation via raising interest rates (which reduces demand), but none of them were willing to raise them high enough because that would also cause a recession. However, Volcker was willing, and he did cause a recession. But once it was over, inflation was killed, and he could restore interests back down to the rate they had been before inflation, and the economy was finally able to roar.
Some partisan Republicans will concede Volcker’s role, but then try to give credit to Reagan for supporting Volcker. Certainly, Reagan deserves some credit for this, but realistically, a President doesn’t have much say in what the Fed does. Only in a President’s last year of their term can they appoint a Fed chair (note that Dubya just recently reappointed Greenspan), so Reagan was stuck with Volcker no matter what. And yes, Volcker was appointed by Jimmy Carter, so anybody who wants to give Reagan his due for supporting Volcker needs to give Carter at least as much due for appointing Volcker in the first place, and of course, partisan Republicans are rather reluctant to do so. While it’s true Reagan didn’t publicly criticize Volcker, Carter didn’t either. The main difference is that Carter had Volcker’s services for just a single year, which isn’t enough to do anything in our economy. Of course, partisan Democrats predictably like to give Carter all the credit for everything Reagan accomplished and yet ignore how he initiated support for Islamic fundamentalists in Afghanistan. And you wonder why I hate our two-party system and am a strong advocate of electoral reform (our political parties aren’t sports teams, people — and even sports teams don’t deserve blind loyalty).
But to get back to Reagan, regardless of whatever “support” he provided Volcker, I would also point out that Reagan’s actual policies made Volcker’s job a lot harder. Recall that at the same time Volcker was trying to crush demand, Reagan was passing his massive tax cut. Say what you will about whether the tax cut was good for the economy (and certainly, a 70% marginal rate was ridiculous), I think it’s obvious that a tax cut will greatly stimulate demand — especially in an environment of high inflation where people are buying things as soon as they can to beat the expected price hikes. In other words, the tax cut fanned the flames of inflation at exactly the time when Volcker was just starting to try and put them out. Which is a pretty strange way of showing your support. This meant Volcker had to increase rates even higher than he would have had to, thus making the resulting recession a lot worse. If Reagan really wanted to help Volcker out, he could have done so and still have his tax cut by merely delaying the cut until 1982, when inflation was finally tamed. Perhaps that wasn’t politically viable, I don’t know. But at any rate, I don’t think he deserves much credit for supporting Volcker.
However, he does deserve credit for tapping Volcker’s successor, Alan Greenspan, who has done a pretty darn good job in his own right (albeit, an easier job than Volcker’s), and Greenspan also deserves far more credit for the economic prosperity in the Clinton years than Clinton does (but also the bulk of the blame for that last recession — don’t try to pin that on Dubya). There’s also the matter of the deficits, but I think I cover that sufficiently in my supply-side piece (yes, I think Reagan’s on the hook for those).
Ending the Cold War
As for the Cold War, I think it’ll be a long time before that debate is settled. Republicans like to give Reagan all the credit for winning the Cold War, while Democrats prefer to give it all to Gorbachev for allowing the Soviet Union to crumble. I would be inclined to give more credit to Gorbachev than Reagan, but this still means Reagan at least deserves credit for hastening the end of the Cold War, as The Economist points out in this opinion column on the topic:
Nor should Reagan’s admirers claim that without him the collapse of communism would never have happened. It would have collapsed anyway, in the end. A system which believes that a small group of self-selected possessors of the truth knows how to run everything is sooner or later going to run into the wall. But Reagan brought the wall closer. He got the American economy growing again (admittedly at a price), which made more Russians realise their own system’s incompetence; he could therefore spend far more money on America’s military power; and he put those new missiles into Europe. The result: maybe 20 years less of Marxist-Leninist ideological arrogance, and of the cold war’s dangers.
And I should also point out that even if you believe the collapse of Communism was inevitable, how it collapsed was not a foregone conclusion.
Jelly Beans
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Jelly beans for a man who liked simple things |
What Conservatives Overlook
Anyway, the Economist article does fail to mention the issue that angers most liberals (including my wife), namely his failure to respond swiftly to the AIDS crisis. While that is certainly a valid criticism, I would offer the moderating point that it would have been politically difficult for him to do much while the social conservatives viewed it as a “gay disease.” This doesn’t let him off the hook, but I’d just want to point out that the choice wasn’t quite as easy and cut-and-dry as some liberals would have you believe. And certainly, Reagan wasn’t the only one who could have done more (for example, the gay community could have closed down their bath houses much sooner). And while he was probably the one person who had the most power to nip this thing in the bud, remember that you can say the same of Clinton and the Rwandan genocide (I’m not equivocating the two, just pointing out that you’ve gotta be consistent to be fair).
But I do think it’s worthwhile to recognize Reagan’s faults as well as his merits because I think it’s best we remember him for who he was, and not as something he wasn’t. Reagan was a very down-to-earth kind of guy, and I think he would have wanted it that way. It would be a disservice to history and to the man to whitewash his record.
And clearly, he wasn’t nearly as perfect as conservatives like to remember him. Indeed, via Brad DeLong, Jonathan Chait in The New Republic has a real good article pointing out that Reagan deviated a lot more from conservative dogma than they care to remember. For example, in his tax reform:
It’s true that the bill reduced the top marginal tax rate to 28 percent, but it did so only by eliminating loopholes and preferences for the rich. The bill raised taxes on corporations and ended (temporarily, alas) preferential treatment for capital gains income. And so, while it reduced nominal rates, Reagan’s tax reform made the affluent pay a higher share of the tax burden. All this made it anathema to conservatives at the time. Newt Gingrich, Jack Kemp, and Dick Cheney led a revolt among House Republicans, who were backed by the business lobby, which stood to lose billions in tax preferences. It’s inconceivable that a Republican president today would enact a progressive tax reform like that. Any Republican in good party standing would denounce such a thing as “class warfare.”
Of course, Reagan did it because he believed it was the right thing to do, damn partisan politics. If Dubya wants to emulate Reagan, I think that’s a lesson he should take to heart.
But yes, there was also the Iran-Contra scandal where he somehow got off scot free even though it’s highly implausible that he didn’t know about it (and even that would have been gross negligence anyway). I sometimes think the only reason Reagan’s scandal didn’t tarnish him like Clinton’s did was because Clinton’s involved sex, which captured and held the public’s attention in a way that no arms deal could ever hope to do. That, plus it’s pretty hard to claim ignorance of someone giving you a blowjob. But Iran-Contra was clearly orders of magnitude worse, especially if you consider that the Contras were absolutely brutal to civilians and would likely be labeled terrorists today.
A New Hope
But for all his faults and mistakes, I have to agree with Dan Drezner in his guest post on Reynolds’ MSNBC blog:
None of this will alter Reagan’s greatest achievement — he changed the national mood of the country. After two decades of notable failures — Vietnam, Watergate, the energy crisis, the hostage crisis, stagflation, Soviet belligerence — Reagan altered the domestic and foreign perceptions of the United States. Americans started believing in America again, and other countries began to respect us as well.
After all, he was immensely popular and beloved among Americans, including many Democrats, which is how he won landslide elections in a time where Democrats actually outnumbered Republicans by a sizable margin. So I definitely agree his strength was in how he conveyed a shining vision of hope to America at a time when it sorely needed it. If, in the end, that’s all history gives him credit for, I think it’s a legacy he should be proud of.
June 13, 2004 09:45 AM in Economics, Politics | Permalink