|Many historians agree that the election of Ronald Reagan to the presidency in 1980 ushered in the most dramatic change in American politics since the New Deal. Reagan's election demonstrated the increasingly conservative mood of the American people in the wake of the liberalism of the Sixties and the disillusionment of the Seventies. Reagan won the White House by promising to get the government off the backs of the people. This would be accomplished through deregulation and tax relief. Government would be reined in through budget cuts, while America's power and prestige abroad would be restored, with the first step being a strengthening of the military. Reaganomics led to economic recovery after the Great Inflation of the 1970s, but at the cost of serious trade and budget deficits.
Reagan won a landslide victory over incumbent president Jimmy Carter, with a 489-49 electoral vote margin, taking 45 states to Carter's five. For the first time in 30 years Republicans won control of the Senate. (The Democratics would get it back in 1986.) Seeking a second term in 1984, Reagan would do even better, with the biggest landslide victory in American presidential politics, winning 59% of the popular vote and taking 49 states to challenger Walter Mondale's one (his home state of Minnesota.) It's safe to say that the 1980s witnessed a reformation in the Democratic Party, as fiscally conservative "New" Democrats seized the reins from the old-style, New Deal liberals. It wasn't until 1992 that the Democrats managed to regain the White House, only to lose both houses of Congress two years later in the wake of Bill Clinton's ill-advised flirtation with "nationalized" health care -- a proposal far too reminiscent of New Deal liberalism to appeal to the American people.
For thirty years before Reagan became president, federal spending on domestic programs increased, doubling in the 1950s, doubling again in the 1960s, and nearly doubling yet again in the 1970s. The Reagan administration sought to stop the growth of government and at the same time stimulate a struggling economy by slowing the growth of domestic spending and cutting taxes. The Reaganites hoped that an energized economy would mean greater tax revenues in spite of the tax cuts, and allow for a balanced budget by 1984. Congress passed the 1981 Economic Recovery Tax Act, which called for a 25% income tax reduction for all taxpayers. It also lowered corporate tax rates.
Due in large part to the tight money policies of the Federal Reserve (policies put into place to reduce inflation), the economy went into recession in 1981. While federal spending on social services increased to provide for the poor and unemployed during these hard times, tax revenues declined. In 1982, the budget deficit topped $110 billion. In 1986 it was $203 billion. By the latter year the nation was well into a 96-month-long economic recovery during which 20 million new jobs were created -- the longest peacetime expansion in modern American history. Inflation had fallen, as had interest rates. The stock market tripled in value. Unemployment was down. Government revenues doubled. And yet the budget deficits remained high. By the end of the decade the national debt (the accumulation of budget deficits) had tripled, from $900 million to nearly $2.7 trillion.
The reason was simple enough. The Reaganites found it extremely difficult to find budget cuts, and the government continued to spend more in the Eighties. In 1986, 41 cents out of every dollar spent by the government went to cash payments to individuals (social security, military pensions, etc.) representing 47% of the population; 28 cents out of each dollar went to defense spending; 15 cents on each dollar paid the interest on the national debt; 6 cents went to essential government services (like the FBI and the National Weather Bureau); and the remaining 10 cents funded aid to states and local governments for such things as schools and urban renewal. In addition, the unexpected disinflation of the 1980s -- the inflation rate dropped from 8.9% in 1981 to 4% in 1984 -- resulted in $2.5 trillion less GNP (Gross National Product) between 1981-86, with a loss in federal revenue of $500 billion. As a result, several tax "reforms" -- i.e., tax increases -- were put in place: the 1982 Tax Equity and Fiscal Responsibility Act, the 1984 Deficit Reduction Act, and the 1986 Tax Reform Act. Indeed, federal tax revenues increased in the latter half of the Eighties, and the deficits grew smaller.
Federal budget outlays increased during the decade, from $678 billion in 1981 to $1144 billion in 1989. However, the rate of growth did slow -- from 6.4% in 1980 (in real 1987 dollars) to 3% in 1989. Reagan's critics claim that social spending was sharply reduced during the 1980s. Congressional Research Service figures show that total social program spending increased from $104 billion in 1981 to $123 billion in 1989. In such categories as health and housing, there was a 60% increase, but in other categories -- nutrition, social services and training -- there was no increase, which, when inflation is taken into account, means the value of assistance actually declined.
A criticism of Reagan's policies is that they created a situation in which the rich got richer while the poor got poorer. However, a 1990 Bureau of the Census study revealed that all income groups realized gains from 1980 to 1989. Average real income rose by 15%. Average household income for the lowest fifth was $6,836 in 1980 and $7,372 in 1989. The gains of those in the upper levels were greater, however -- in 1980 the average household income for the highest fifth was $73,752, and that rose to $90,150 in 1989. A Treasury Department study showed that there was great mobility within the levels, with 86 percent of those who were in the lowest fifth in 1979 moving into higher income categories by 1989. In fact, more people moved up than down in every income group except the top 1% -- in that group, 53% went down. The poverty rate did, however, rise from 11.7% in 1979 to 13.5% in 1990, according to Business Week. Provocateurs like Mitch Snyder used grossly exaggerated and misleading numbers to claim that an epidemic of homelessness reflected the government's callous attitude toward the less fortunate. (Snyder claimed there were 2-3 million homeless when, in fact, as a thorough study by HUD indicated, there were but 250,000 to 350,000; in 1989 Snyder admitted his figures were bogus.)
Conservatives felt the nation had veered too far to the left since the Sixties, and hoped that Reagan's election heralded their victory in the "culture wars." Many were disappointed with the results by decade's end. While paying lip service to key issues like school prayer and ending abortion, the White House focused on turning the economy around and defeating the Soviet Union. Though during his presidency Reagan appointed over half of the judges on the federal bench as well as two Supreme Court associate justices, the conservative renaissance some had hoped for did not come to pass.
The 1980s were tumultous times on the global stage. In December 1979, the Soviet Union invade Afghanistan, an action which worsened relations between the U.S. and the USSR. Afghan guerrilla fighters resisted the Soviet military presence throughout most of the decade, until, finally, the Russians withdrew. In 1981, Poland's Communist government declared martial law to control growing unrest which it blamed on the militancy of the Solidarity labor movement. The U.S. imposed economic sanctions on Poland in response. In 1983, the Soviets walked out of the Strategic Arms Reduction Talks (START) after NATO deployed American Pershing II medium range missiles in western Europe to counter Soviet medium range missiles in eastern Europe. The United States boycotted the 1980 Moscow Olympics to protest the invasion of Afghanistan, and the Soviet Union (with its Eastern Bloc satellites) answered by boycotting the 1984 Los Angeles games. Terrorism was prevalent, and Americans were often the target, with passenger planes and even a cruise ship, the Achille Lauro, hijacked. In 1986 the United States struck a blow against Libya, whose leader, Muammar Qaddafi, was a chief sponsor of terrorism.
In the wake of Vietnam, the United States seemed reluctant to use military force, and by 1980 many Americans deplored the government's apparent weak and indecisive approach to foreign policy. In the 1970s, communism was on the march, democracy in retreat, and the U.S. looked powerless to protect its global interests. Ronald Reagan promised a recommitment to a strong military, and delivered. Between 1981 and 1986, the defense budget increased by more than 50%. The Stealth bomber, the MX missile, and a 600-ship navy were just a few elements of this expansion. In the scramble to spend our way to a stronger military, there was some notable waste and fraud, and critics made much of the fact that sometimes the Pentagon misspent taxdollars -- for instance, when it paid $436 for a $7 hammer.
Some feared that Reagan was a Cold War cowboy who would use America's new military might recklessly. This turned out not to be the case. Apart from a peacekeeping mission in Lebanon which ended in tragedy when a terrorist truck-bomb killed 241 Marines, and an invasion of the Caribbean island of Grenada in the wake of a coup by Marxist hardliners, and the strike against Libya in response to Qaddafi's sponsorship of a terrorist act that killed an American serviceman in Germany, America did not flex its military muscle.
Central America became the principal Cold War battleground in the Eighties. The White House consistently lobbied Congress for economic and military aid to the government of El Salvador, which fought a Marxist guerrilla movement, as well as to the Contra rebels who opposed the Marxist Sandinista government of Nicaragua. The U.S. had backed a bloodless coup in 1979 which established a reform-minded government in El Salvador. Right-wing extremists violently opposed the reforms, while leftists stirred up unrest because they believed the reforms were insufficient. Reagan claimed the Nicaraguan Sandinistas posed a very real threat to the stability of the region because their intent was to export Marxist revolution in El Salvador, Honduras, Guatemala and Costa Rica. Opposition to support for the Contra rebels however, was strong both in Congress and among the American public. Many feared the U.S. would become embroiled in a Central American version of Vietnam. Congressional refusal to aid the Contras led the White House to engage in an ill-advised scheme to trade arms for hostages in Iran and funnel the profits into support for the Nicaraguan rebels -- the so-called Iran-Contra Affair. The administration's focus on Central America is made evident by the Caribbean Basin Initiative, a six-point economic plan to combat poverty (and thereby reduce unrest) in the region.
International trade -- and a growing trade imbalance -- was a major concern for Americans in the 1980s. In 1985, the U.S. imported many more goods than it exported, setting a record trade deficit of $148 billion. Many experts feared this trade imbalance would cost hundreds of thousands of jobs, particularly in the steel, automobile, textiles and agriculture industries. In addition, budget deficits drove up interest rates, which led to increased foreign investment in the United States, since investors received a good return on their money. The resulting strong dollar made imported goods cheaper in the U.S. while making American goods more expensive in foreign markets. This resulted in shrinking domestic profits in some industries. The high dollar destabilized international trade, and in 1985 the U.S. and other industrial nations intervened to stabilize currency rates. Meanwhile, struggling American industries urged Congress to erect trade barriers to protect them from overseas competition, just as Japan and European nations had done. The White House, staunchly free trade, warned against this growing protectionist sentiment -- and the trade wars that would result if such barriers were erected.
The apartheid (racial segregation) policies of the South African government were much in the news in the 1980s. In that country of 30 million, 73% were black. But black South Africans had no political rights and limited civil rights. Racial tensions exploded, with massive riots followed by government crackdowns followed by more riots. The United Nations supported economic and cultural boycotts of South Africa. The U.S. had long enjoyed close economic ties with South Africa; over 300 American corporations had invested more than $2 billion in a country rich in rare minerals such as gold, diamonds, chromium and platinum. While his predecessor had been decidedly cool towards South Africa, President Reagan resisted calls for economic sanctions and argued that a policy of "constructive engagement" would serve better in the long run to improve conditions in that country. However, by 1985, the Reagan administration had imposed economic sanctions on South Africa following a year of massive unrest and harsh government repression there. More and more Americans urged corporations to divest themselves of their South African holdings.
The election of Ronald Reagan marked the end of an era of detente between the United States and the Soviet Union. Faced with aggressive Soviet expansionism in the 1970s, Reagan believed it was foolhardy to seek peaceful coexistence with an "evil empire" bent on world domination. Instead, he sought "peace through strength" and resistance to the spread of communism. During the 1980s there were four Soviet leaders -- Leonid Brezhnev, Yuri Andropov, Konstantin Chernenko, and Mikhail Gorbachev. In a series of summit meetings, Reagan developed a rapport with Gorbachev, a reformer willing to take drastic measures to save the Soviet Union from economic collapse -- including negotiations to end the superpowers arms race. One impediment to an agreement between the two nations was the Strategic Defense Initiative proposed by Reagan in 1983, a space-based missile defense system which caused grave concern in the Kremlin. Nonetheless, Reagan and Gorbachev signed the INF Treaty, which called for the elimination of an entire class of nuclear weapons, a landmark accord indicative of the fact that relations between the U.S. and the USSR were significantly improved as the decade drew to a close. In 1989, eastern Europe finally freed itself from the Soviet yoke. Shortly thereafter the Soviet Union disintegrated, and the 40-year Cold War was over.