I remember a critic once hissed, “Ronald Reagan was two-thirds show and one-third substance.” I’ve often wondered how someone could dismiss Reagan’s substance so readily. Most of us are passively swept along by the tumultuous currents of history. A very few are audacious enough to defy the currents and determine their own course. Ronald Reagan went further. He not only went his own way, but he brought history with him.
When he came to office, unemployment was climbing near 8 percent and the economy was sinking. Meanwhile, inflation was soaring at 12 percent per year. In today’s prices, gas was selling for $2.87 a gallon and interest rates were at 21 percent (the highest level since the Civil War).
The dominant macroeconomic school of thought, Keynesianism, could not even account for simultaneous economic stagnation and inflation. But Reagan listened to a new generation of economists which included Milton Friedman, Robert Lucas and Robert Mundell. They counseled tight monetary policy to break the back of inflation and an easing of the tax burden to free the economy.
Reagan stood by Federal Reserve Chairman Paul Volker as he sharply reduced the supply of money. The President then ushered (cajoled) historical 25 percent tax cuts through Congress. The monetary policy change promised to be painful in the short run. Unemployment soared to nearly 11 percent, and the economy dipped deeper into recession. Despite flagging government revenue, Reagan stayed the course: he would not go back on the income tax cuts.
When the last of the tax cuts finally came into effect in 1983, everything turned around. The economy suddenly grew at a 4.3 percent annual growth rate. GDP then leapt ahead at a 7.3 percent clip the following year and remained strong there on out. Gas prices and interest rates steadily declined. Unemployment began falling too, reaching a low of 5 percent by 1989. The stock market more than doubled in value under his watch. What’s more, inflation remained in check.
In foreign affairs, Reagan was equally influential. He launched the nation on the largest peacetime military buildup in U.S. history and began talking tough about the evils of totalitarian communism. He challenged the decades-old belief that the only way to avoid nuclear war was an offensive strategy called “mutually assured destruction” (MAD). Instead, he proposed a defensive strategy, the Strategic Defense Initiative. And in pure Reagan form, he even promised to share the technology with the Soviets. Eventually, Reagan found “peace through strength.” He and President Gorbachev would negotiate the first-ever reduction in strategic arms.
Between 1974 and 1980, 10 nations had fallen under communism. After 1980, not one more nation would fall. During his two terms, dictatorships collapsed in Chile, Haiti, and Panama. Nine more nations moved toward democracy: Bolivia, Honduras, Argentina, Grenada, El Salvador, Uruguay, Brazil, Guatemala, and the Philippines. Nicaragua soon followed. Within three years after Reagan left office, the Soviet Empire itself had dissolved and Eastern Europe was liberated. In 1975 the late Senator Daniel Patrick Moynihan had written that, “Increasingly, democracy is seen as an arrangement peculiar to a handful of North Atlantic countries.” By the early 1990s, that was no longer true.
Not all was good. Like every other president in the 20th century, Reagan presided over an expansion in government. In 1989, the federal government was almost twice its 1980 size. Welfare reform would have to wait for another president. And we are still waiting for Social Security reform. He launched an expensive but ultimately futile War on Drugs. And, of course, there was the gross mismanagement that led to the Iran-Contra Affair.
For better or worse, Reagan cast a long shadow. He virtually towers over the latter-half of the twentieth century. So how on earth could he be considered “one-third substance?” The answer lies in the other two-thirds. For all his substantive influence on history, the Reagan “show” was even larger. He was a showman and proud of it. Somehow his Midwestern tongue made complicated economic doctrine and grand historical visions accessible to the common ear. And it is in his mellifluent voice that freedom found one of its greatest spokesmen.
Have you seen the transcript of the 1967 CBS “Town Meeting of the World?” Well worth the read. Don’t miss Reagans’s last word!