2 The "Reagan Revolution"

2.1 The assault on U.S./Soviet Détente

The 1970s inflicted damaging blows to the American confidence characteristic of the 1950s and early 1960s. The Vietnam War and the Watergate crisis shattered confidence in the presidency. International frustrations, including the fall of South Vietnam in 1975, the hostage crisis in Iran in 1979, the Soviet invasion of Afghanistan, the growth of international terrorism, and the acceleration of the arms race raised fears over the country's ability to control international affairs. The energy crisis, unemployment, and inflation, derided as stagflation, raised fundamental questions over the future of American prosperity.

American "malaise," a term that caught on following Carter's 1979 "malaise speech," in the late 1970s and early 1980s was not unfounded. Under the leadership of Leonid Brezhnev ( 1964- 1982), the Soviet Union improved living standards by doubling urban wages and raising rural wages by around 75%, building millions of one-family apartments, and manufacturing large quantities of consumer goods and home appliances. Soviet industrial output increased by 75%, and the Soviet Union became the world's largest producer of oil and steel.

Even abroad, the tide of history appeared to be turning in favor of the Soviet Union. While the United States was mired in recession and the Vietnam quagmire, pro-Soviet governments were making great strides abroad, especially in the Third World. The United States had failed to prevent communist forces from taking Vietnam, which became an independent state united by a Communist government. Other Communist governments and pro-Soviet insurgencies were spreading rapidly across Africa, Southeast Asia, and Latin America. And the Soviet Union seemed committed to the Brezhnev Doctrine, sending troops to Afghanistan. The Afghan invasion in 1979 marked the first time that the Soviet Union sent troops outside the Warsaw Pact since the inception of the Eastern counterpart of NATO.

Reacting to all these perceptions of American decline internationally and domestically, a group of academics, journalists, politicians, and policymakers, labeled by many as "new conservatives" or " neoconservatives," since many of whom were still Democrats, rebelled against the Democratic Party's leftward drift on defense issues in the 1970s (especially after the nomination of George McGovern in 1972), harped on America's geo-political decline, blaming liberal Democrats. Many clustered around Sen. Henry "Scoop" Jackson, a Democrat, but then they aligned themselves with Ronald Reagan and the Republicans, who promised to confront charges of Soviet expansionism.

Generally they were anti-communist and supported minimal social welfare services by the government. But their main targets were the old policies of containment of Communism (rather than "rollback"). Détente with the Soviet Union was their immediate target, with its aims of peace through negotiations, diplomacy, and arms control.

Led by Norman Podhoretz, the neoconservatives attacked the foreign policy orthodoxy in the Cold War as " appeasement," an allusion to Neville Chamberlain's negotiations at Munich. They regarded concessions to relatively weak enemies of the United States as "appeasement" of "evil," attacked Détente, opposed most-favored nation trade status for the Soviet Union, and supported unilateral American intervention in the Third World as a means of boosting U.S. leverage over international affairs. Before the election of Reagan, the neoconservatives, gaining in influence, sought to stem the antiwar sentiments caused by the U.S. defeats in Vietnam and the massive casualties in Southeast Asia that the war induced.

During the 1970s Jeane Kirkpatrick, a prominent political scientist and later US ambassador to the United Nations under Ronald Reagan, a position she held for four years, increasingly criticized the Democratic Party. Kirkpatrick became a convert to the ideas of the new conservatism of once liberal Democratic academics.

2.2 Ronald Reagan and the elections of 1980

In addition to the growing appeal of conservative sentiment, President Carter's prospects for reelection in the U.S. presidential election of 1980 were weakened by a primary challenge by liberal icon Senator Edward Kennedy of Massachusetts. Kennedy, although a far more magnetic personality than Carter and beloved by the Democratic base, could not transcend personal controversies, most notably a 1969 automobile accident at Chappaquiddick Island in Massachusetts that had left a young woman dead. Carter easily won the nomination at the Democratic convention. The party also renominated Walter Mondale for vice president.

Against the backdrop of economic stagflation and perceived American weakness against the USSR abroad, Ronald Reagan, former governor of California, received the Republican nomination in 1980, and his chief challenger, George H. W. Bush, became the vice-presidential nominee. During Reagan's campaign, he hired Kirkpatrick as his foreign policy adviser to exploit Carter's vulnerabilities on foreign policy.

Reagan promised an end to the drift in post-Vietnam U.S. foreign policy and a restoration of the nation's military strength. He also promised an end to "big government" and to restore economic health by use of supply-side economics. However, all these aims were not reconcilable through a coherent economic policy.

Supply-side economists led the assault on the welfare state built up by the New Deal and Great Society. They asserted that the woes of the U.S. economic were in large part a result of excessive taxation, which "crowded out" money away from private investors and thus stifled economic growth. The solution, they argued, was to cut taxes across the board, particularly in the upper income brackets, in order to encourage private investment. They also aimed to cut government spending on welfare and social services geared toward the poorer sectors of society, which had built up during the Vietnam era.

The public, specifically the middle class in the Sun Belt regions, which Reagan won handily in 1980, was enthusiastic about Reagan's proposals. Critics charged that Reagan's attacks on federal assistance programs were demagogic, appealing to a middle class supposedly insensitive to the problems facing poor families and minorities. They also pointed out international economic factors in the troubles of the '70s, such as the breakdown of the Bretton Woods international monetary order and the oil shock of 1973.

The presidential election of 1980 was a key turning point in American politics. It signaled the new electoral power of the suburbs and the Sun Belt; moreover, it was a watershed ushering out the commitment to government anti-poverty programs and affirmative action characteristic of the Great Society. It also signaled a commitment to a hawkish foreign policy.

Although Reagan's candidacy was burdened by Representative John B. Anderson of Illinois, a moderate Republican and primary opponent who ran as an independent, the two major issues of the campaign were far greater threats to Carter's prospects for reelection: the economy, national security, and the Iranian hostage crisis. Carter seemed unable to control inflation and had not succeeded in obtaining the release of U.S. hostages in Tehran before Reagan took office.

Reagan won a landslide victory, and Republicans also gained control of the Senate for the first time in twenty-five years. Reagan received 43,904,153 votes in the election (50.7 percent of total votes cast), and Carter, 35,483,883 (41.0 percent). Reagan won 489 votes in the electoral college to Carter's 49. John Anderson won no electoral votes, but got 5,720,060 popular votes. Anderson's share of the popular, totaling 6.6 percent, was moderately impressive for a third party candidate in the United States, demonstrating that a sizable share of moderate voters, while disenchanted with Carter, did not approve of Reagan's staunchly conservative agenda.

3 The Reagan administration

Reagan's approach to the presidency was somewhat of a departure from his predecessors; he delegated a great deal of work to his subordinates, letting them handle most of the government's day-to-day affairs. As an executive, Reagan framed broad themes and made a strong personal connection to voters. Unlike fellow Republican Richard Nixon, Reagan was not nearly as concerned with the day-to-day drudgery of executive governance, which he delegated among subordinates.

3.1 Reaganomics and the 1981 federal budget

Ronald Reagan promised an economic revival that would affect all sectors of the population. He proposed to achieve this goal by cutting taxes and reducing the size and scope of federal programs. Critics of his plan charged that the tax cuts would reduce revenues, leading to large federal deficits, which would lead in turn to higher interest rates, stifling any economic benefits. Reagan and his supporters, drawing on the theories of supply-side economics, claimed that the tax cuts would increase revenues through economic growth, allowing the federal government to balance its budget for the first time since 1969.

Reagan's 1981 economic legislation, however, was a mixture of rival programs to satisfy of all his conservative constituencies (monetarists, cold warriors, middle class swing voters, and the affluent). Monetarists were placated by tight controls of the money supply; cold warriors, especially neoconservatives like Kirkpatrick, won large increases in the defense budget; wealthy taxpayers won sweeping three-year tax rate reductions on both individual (marginal rates would eventually come down to 50% from 70%) and corporate taxes; and the middle class saw that its pensions and entitlements would not be targeted. Reagan declared spending cuts for the Social Security budget, which accounted for almost half of government spending, off limits due to fears over an electoral backlash, but the administration was hard pressed to explain how his program of sweeping tax cuts and large defense spending would not increase the deficit.

Budget Director David Stockman raced to put Reagan's program through Congress within the administration's deadline of forty days. Stockman had no doubt that spending cuts were needed, and slashed expenditures across the board (with the exception of defense expenditures) by some $40 billion; and when figures did not add up, he resorted to the "magic asterisk" - which signified "future savings to be identified." Pleas by constituencies threatened by the loss of social services were futile. The budget cuts passed through the Congress with relative ease.

3.2 The recession of 1982

The Rust Belt is highlighted on the above map in red.

By early 1982 Reagan's economic program was beset with difficulties. The nation had entered the most severe recession since the Great Depression. In the short term, the effect of Reaganomics was a soaring budget deficit. Government borrowing, along with the tightening of the money supply, resulted in skyhigh interest rates (briefly hovering around 20 percent) and a serious recession with 10 percent unemployment in 1982. Some regions of the " Rust Belt" (the industrial Midwest and Northeast) descended into virtual depression conditions.

Although Reagan would win reelection in a historic landslide in his 1984 presidential election, his approval ratings plummeted in the worst months of the recession of 1982. Democrats swept the mid-term elections, making up for their losses in the previous election cycle. At the time, critics often accused Reagan of presiding unknowingly over fiscal and economic crisis, content with telling stories about his movie days, appearance, sound bites, and slogans. For example, by 1982, former Budget Director David Stockman, an ardent fiscal conservative, wrote, "I knew the Reagan Revolution was impossible - it was a metaphor with no anchor in political and economic reality."

Yet, the recession stretched well back into 1970s, well before the Reagan economic program. Moreover, the performance of the U.S. economy under Reagan compared favorably to Margaret Thatcher's Britain, which had been consistent in its application of a monetarist regime (a tight monetary policy and a tight fiscal policy, which resulted in deflation in the midst of depression).

3.3 Recovery

Unlike Thatcher, Reagan combined the tight-money regime of the Federal Reserve with an expansionary fiscal policy. The administration presided over a scale of fiscal stimulation not seen since the sixties, but this time with the spending not on welfare (as during Lyndon Johnson's Great Society) but defense. Following the recession of 1982, high government spending was one of the factors that contributed to strong growth (4.2 percent per year in the period 1982- 1988). With the simultaneous reduction in tax rates, it also drove up the deficit significantly.

Another factor in the recovery from the worst periods of 1982-83 was the radical drop in oil prices, which ended inflationary pressures of spiraling fuel prices. The virtual collapse of the OPEC cartel enabled the administration to alter its tight money policies, to the consternation of conservative monetarist economists, who began pressing for a reduction of interest rates and an expansion of the money supply, in effect subordinating concern about inflation (which now seemed under control) to concern about unemployment and declining investment.

By the middle of 1983, unemployment fell from 11 percent in 1982 to 8.2 percent in the middle of 1983. GDP growth was 3.3 percent, the highest since the mid- 1970s. Inflation was below 5 percent. GDP growth, however, obscured increasingly uneven distribution of income, growing poverty, and falling real wages for the bottom half of income earners.

3.4 Deficit spending, the dollar, and trade

Following the economic recovery that began in 1983, the medium-term fiscal effect of Reganomics was a soaring budget deficit as spending exceeded revenue year after year due to tax cuts and increased defense spending. Military costs rose while tax revenues, despite having increased as compared to the recessionary late '70s and early '80s, failed to make up for the spiraling cost.

In his first term, Reagan kept demanding increases to the defense budget of up to 10 percent a year. Congressional committees, meanwhile, investigated charges that the $1 trillion of U.S. military spending in Reagan's first term bought surprisingly little, pointing to alleged Pentagon mismanagement. In the 1980s, for example, nearly 50 of the largest U.S. defense contractors came under investigation for overcharges and other criminal malfeasance.

The 1981 tax cuts, the largest in U.S. history, also eroded the revenue base of the federal government in the short-term. The massive increase in military spending (about $1.6 trillion over five years) far exceeded cuts in social spending, despite wrenching impact of such cuts spending geared toward some of the poorest segments of society. Even so, by the end of 1985, funding for domestic programs had been cut nearly as far as Congress could tolerate.

In this context, the deficit rose from $60 billion in 1980 to a peak of $220 billion in 1986 (well over 5 percent of GDP). Over this period, national debt more than doubled from $749 billion to $1,746 billion.

While deficit spending has value as an economic stimulus, and assisted the recovery in the post-1982 Reagan years, the dimension of the budget shortfalls of the 1980s left interest rates high and the dollar over-valued, causing investment and exports to suffer and, consequentially, increasing the U.S. trade deficit.

Since U.S. saving rates were very low (roughly one-third of Japan's,) the deficit was mostly covered by borrowing from abroad, turning the United States within a few years from the world's greatest creditor nation to the world's greatest debtor. Not only was this damaging to America's status, it was also a profound shift in the postwar international financial system, which had relied on the export of U.S. capital.

The deficits were keeping interest rates, although lower than the 20 percent peak levels earlier in the administration due to a respite in the administration's tight money policies, high and threatening to push them higher. The government was thus forced to borrow so much money to pay its bills that it was driving up the price of borrowing. Although supply-siders promised increased investment as a result of top-rate and corporate tax cuts, growth and investment suffered for now in the context of high interest rates.

Perhaps more alarmingly, Reagan-era deficits were keeping the U.S. dollar overvalued. With such a high demand for dollars (due in large measure to government borrowing), the dollar achieved an alarming strength against other major currencies. As the dollar soared in value, so American exports became increasingly uncompetitive, with Japan as the leading beneficiary. The high value of the dollar made it difficult for foreigners to buy American goods and encouraged Americans to buy imports, coming at a high price to the industrial export sector.

The U.S. balance of trade grew increasingly unfavorable; the trade deficit grew from $20 billion to well over $100 billion. Thus, American industries such as automobiles and steel, faced renewed competition abroad and within the domestic market as well.

The enormous deficits were in large measure holdovers from Lyndon Johnson's commitment to both "guns and butter" (the Vietnam War and the Great Society) and the growing competition from other G7 nations after their postwar reconstruction, but it was the Reagan administration that chose to let the deficits develop.

While Reagan was in office, charges of an executive "power vacuum" and a low presidential attention span were probably not entirely partisan in nature. Some fiscal conservatives and Democrats criticized Reagan for the extent of deficit spending, often focusing on the lack of oversight of defense expenditures. In January 1985 prominent conservative columnist William Safire, alluding to George H.W. Bush's charges that Reagan was advocating " voodoo economics" in the 1980 race for the GOP nomination, stated in The New York Times Magazine that "Reaganomics is giving voodoo a bad name" and that the "United States has lost control of its financial markets to foreigners."

4 Reagan and the world

4.1 Intervention in Latin America, Africa, and the Middle East

Reagan's National Security Advisor, John M. Poindexter (above), was convicted on multiple felony counts on April 7, 1990 for conspiracy, obstruction of justice, lying to Congress, defrauding the government, and the alteration and destruction of evidence pertaining to the Iran-Contra Affair.

With Reagan's promises to restore the nation's military strength, the 1980s saw massive increases in military spending, amounting to about $1.6 trillion over five years. A new arms race would develop as superpower relations deteriorated to a level not seen since the 1960s.

Enormous deficits to pay for the growing defense budgets, inducing high levels of government borrowing, resulted in high interest rates and an overvalued dollar, which stifled economic growth, resulted in a very unfavorable balance of trade, and depressed the U.S. steel and automotive sectors.

The Reagan administration favored a hawkish approach to the Cold War, especially in the Third World arena of superpower competition. In the wake of the Vietnam debacle, however, Americans were increasingly skeptical of bearing the economic and financial cost of large troop commitments. The administration sought to overcome this by backing the relatively cheap strategy of specially trained counterinsurgencies or "low-intensity conflicts" rather than large-scale ground wars like Vietnam and Korea.

The Arab-Israeli conflict was another impetus for military action. Israel invaded Lebanon to destroy the Palestine Liberation Organization (PLO). But in the wake of the 1982 Sabra and Shatila Massacre, which provoked a political crisis in Israel and international embarrassment, U.S. forces moved into Beirut to encourage Israeli withdrawal. Previously, the administration stood by Israel's invasion of Lebanon in mid-1982 to maintain the support of Israel on one hand, but also to quell the influence of Israel's pro-Soviet enemy Syria in Lebanon. However, U.S. intervention in the multi-sided Lebanese civil war had disastrous consequences. On October 23, 1983, the Marine Barracks Bombing killed 241 American troops. Shortly afterwards, the U.S. withdrew its remaining 1600 soldiers.

Two days after the Beirut barracks bombing, the U.S. conducted Operation Urgent Fury - the invasion of Grenada. On October 19th, the small island nation had undergone a coup d'état by Deputy Prime Minister Bernard Coard, a staunch Marxist-Leninist seeking to strengthen the country's already firm ties with Cuba, the Soviet Union, and other Communist states. The Reagan administration's pretext for the invasion was the protection of 500 U.S. and Western medical students from Coard's government. The success of Operation Urgent Fury boosted American morale following the devastating suicide bombing in Beirut. Grenada would serve as a model for later "low intensity conflicts." The U.S. later attacked Libya in a similar manner, after its de facto leader, Colonel Moammar Qaddafi, was accused of connections to the bombing of a German discotheque frequented by many U.S. servicemen, which resulted in three fatalities.

The Reagan administration also supplied funds and weapons to heavily militarily-influenced governments in El Salvador and Honduras, and to a lesser extent in Guatemala, which was ruled by right-wing military autocrat General Efraín Ríos Montt from 1982- 83. It reversed ex-President Jimmy Carter's official condemnation of the Argentine Dirty War junta for human rights abuses. Central America was the administration's primary concern, especially El Salvador and Nicaragua, where the Sandinista revolution brought down the formerly U.S.-backed Somoza family rule. Leftist and Marxist revolutionary leaders in both countries had won increasing support from the peasantry, due to extreme conditions of poverty and socioeconomic inequality that were not successfully addressed by each country's respective government.

In 1982 the CIA organized and financed right-wing paramilitaries in Nicaragua, known as the Contras. The tracing of secret funds for this scheme led to the revelations of the Iran-Contra Affair. In 1985 Reagan authorized the sale of arms in Iran in an unsuccessful effort to free U.S. hostages in Lebanon; he later professed ignorance that subordinates were illegally diverting the proceeds to Central American contras.

In sub-Saharan Africa, the Reagan administration, with help from apartheid South Africa, also put heavy pressure on the substantially Cuban and Soviet-backed FRELIMO and MPLA Marxist-Leninist dictatorships of Mozambique and Angola during those countries' civil wars. The administration intervened on the side of insurgent groups RENAMO in Mozambique and UNITA in Angola, supplying each group with covert military and humanitarian aid.

In Afghanistan, Reagan massively stepped up military and humanitarian aid for mujahadeen fighters against the Soviet proxy government there, providing them with Stinger anti-aircraft missiles. Though General Secretary Mikhail Gorbachev reduced and eventually ended his country's commitment to Afghanistan as Soviet troops there were bogged down in guerrilla war, the mujahadeen formed the Islamist Taliban government there following the collapse of the Soviet Union and subsequent civil war. As the Taliban is known to have sheltered al-Qaeda leader Osama bin Laden, in the wake of the 9/11 attacks some have argued that U.S. Cold War policy in Afghanistan was extremely shortsighted; the U.S. did not seem to mind that instead of a democracy, a repressive Islamist government took root after the Soviets withdrew.

Reagan also expressed opposition to the Vietnamese-installed regime of Heng Samrin in Cambodia, which had ousted the genocidal Khmer Rouge government after Vietnam invaded the country. Because of this, some have accused the U.S. of supporting the Khmer Rouge; opposition to Heng, though, was made up of more than just former Khmer Rouge elements, although they did make up a substantial part of it.

4.2 The end of the Cold War

The Reagan administration adopted a hard-line stance toward the USSR. Early in his first term, the president attacked the rival superpower as the " evil empire." While it was Jimmy Carter who had officially ended the policy of Détente following Soviet intervention in Afghanistan, East-West tensions in the early 1980s reached levels not seen since the Cuban Missile Crisis. The Strategic Defense Initiative (SDI) was born out of the worsening U.S.-Soviet relations of the Reagan era. Popularly dubbed "Star Wars" at the time, SDI was a multibillion dollar research project for a missile defense system .

While the Soviets had enjoyed great achievements on the international stage before Reagan entered office in 1981, such as the unification of their socialist ally, Vietnam, in 1976, and a string of socialist revolutions in Southeast Asia, Latin America, and Africa, the country's strengthening ties with Third World nations in the 1960s and 1970s only masked utter weakness next to the United States. The Soviet economy suffered severe structural problems. Reform stalled between 1964- 1982 and supply shortages of consumer goods were becoming notorious.

East-West tensions eased rapidly after the rise of Mikhail Gorbachev. After the deaths of three elderly Soviet leaders in a row since 1982, the Politburo elected Gorbachev Soviet Communist Party chief in 1985, marking the rise of a new generation of leadership. Under Gorbachev, relatively young reform-oriented technocrats rapidly consolidated power, providing new momentum for political and economic liberalization, and the impetus for cultivating warmer relations and trade with the West.

Focused on perestroika, Gorbachev struggled to boost production of consumer goods, which would be impossible given the twin burdens of the Cold War arms race on one hand, and the provision of large sums of foreign and military aid, which the socialist allies had grown to expect, on the other. Under Gorbachev, Soviet policymakers increasingly accepted Reagan administration warnings that the U.S. would make the arms race a huge burden for them. The result in the Soviet Union was a dual approach of concessions to the United States and economic restructuring (perestroika) and democratization ( glasnost) domestically, which eventually made it impossible for Gorbachev to reassert central control. Reaganite hawks have since argued that pressures stemming from increased U.S. defense spending was an additional impetus for reform.

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