The Politics of Bad Ideas: The Curse of Reaganism

The Curse of Reaganism hangs over America. Far too many people still believe in Reaganism which proclaims that the federal government's heavy-handedness blocks economic progress. The solution is deep tax cuts targeted on the rich and draconian deregulation that will free American business to produce strong economic growth

Yet Reagan's tax cuts and deregulatory policies failed to produce the claimed results. As we show in our recent book, The Politics of Bad Ideas, Reaganism did much greater damage in the presidency of George W. Bush, because he pursued those goals without limit. The latter's failed policies yielded weak overall economic growth, rapidly rising national debt, falling housing prices and increasing foreclosures, and the widest distribution of income since the 1920s.

What America must come to realize is that Reaganism is the philosophical underpinning of our woes. They are certainly due to George W. Bush's mismanagement, but more fundamentally they are caused by the nation's slavish worship of a fundamentally flawed political philosophy.

America in 2008 is staggering toward second class economic status because of Reaganism. Yet Republicans hold strongly to the same economic tenets that George W. Bush employed in his failed economic policies.

The Curse of Reaganism arises from the disconnect between the downfall of Bush from following the principles of Reaganism and the continued deification of Reagan who made the same principles central to Republicans. An historical perspective is useful in asking how the disconnect arose.

Our history starts with the OPEC oil price increases in 1973 and 1979 that slowed the economy and produced double-digit inflation by 1979. Federal Reserve chair Paul Volcker attacked and crushed the inflation by the early years of Ronald Reagan's presidency, but brought the worst postwar recession. America went into a deep funk.

That changed with the ever optimistic, charismatic Reagan. He told the American people that the economy would recover quickly, despite the dire predictions of professional economists, because his record tax cut and massive deregulation had freed the mighty business sector. Lo and behold, economic growth returned quickly. Reagan appeared to have found the secret to economic growth. Republicans began the deification of Reagan and the claim that Reaganism was the answer in restoring high economic growth.

This was not the case. The huge 1981 tax cut brought large yearly budget deficits that generally stayed high until 1995. The national debt as a percent of the gross domestic product had been declining sharply before the Reagan presidency, but it up until 1995. Reagan's economic growth looked suspiciously like it had come from good old deficit spending, not from an economic miracle.

Moreover, the economic growth rate of 3.4% in the Reagan years equaled that of Jimmy Carter. Bill Clinton had a growth rate over eight years of 3.6% after raising tax rates on the rich. The yearly budget deficits became surpluses and the debt ratio fell. Reagan and tax cuts do poorly compared to Clinton and tax increases.

George W. Bush used the same tools of Reaganism and did even worse. After he slashed tax rates in 2001 and 2003, the Bush administration experienced both a lower rate of overall economic growth and a lower growth rate in capital investment, employment, and wages than in the 1990s.

The middle class really suffered during the Bush presidency. Limited income growth, a below zero savings rate, an increase in credit card and mortgage debt, the end of the housing boom, and big price increases led by gasoline and food, have pushed the middle class to the wall. Not in the postwar years has the middle-class living standard been in such jeopardy--not even close.

We need to be clear that other factors, not the flawed policies dictated by Reaganism, were more important in the economic outcomes. In the case of Bush, however, the tax cuts that fueled the debt increase and shifted benefits from the middle class to the wealthy and the misguided deregulation that led to the subprime mortgage meltdown had a major impact.

How can Reaganism, and particularly the assertion that tax cuts are the best cure for economic woes, survive when both overwhelming statistical evidence and the misery of the middle class make its failure so clear? We need to look at both the sellers of Reaganism and the buyers.

A critical aspect of selling Reaganism came from the successful effort to deify Reagan after he left office. The syndicated columnist Richard Reeves wrote: "More than nine hundred books have been written about Ronald Reagan since he left the White House....Many are subsidized, principally by the Hoover Institution at Stanford University and the Heritage Foundation in Washington. Both institutions could be described as devoted to promoting the idea of Reagan as one of the great Presidents."

Some of the sellers are what social scientists call true believers. Once these people come to believe in the idea, neither reasoned argument or contradictory evidence can shake them from complete commitment to it. In the early thinking about the power of tax cuts, true believers had a big role and some of them are probably still around. However, it appears that the sellers during the Bush years have primarily been those who sought to gain either political or monetary benefits from the claims.

Even though the Bush administration has been strikingly inept in developing and managing policies, it established the most powerful propaganda operation since the end of the Second World War. That latter effort began immediately in selling the 2001 tax cut with secrecy and deception including misinformation as the critical means. Republican politicians in Congress employed similar tactics.

Republican propaganda never slowed down with the Republican politicians, including President Bush and some of the Budget Committee chairs in both Houses, continuing to claim that tax cuts paid for themselves by generating sufficient new tax revenues to offset the initial tax cut. If that were not enough, the Bush administration claimed that any tax increase would bring a deep recession. That fear rose as the middle class living standard came under increasing threat.

The final reason the public has bought into the tax cuts is the lack of knowledge about the economy generally and federal taxation specifically. Most people are struggling to make a living and hardly have time to acquire the needed knowledge. Even so, such ignorance strengthens the hand of the propagandists seeking to mislead and frighten the public.

Cornell University economist Robert H. Frank wrote in December 2007: "Given the effectiveness of the anti-tax rhetoric, presidential candidates are understandably reluctant to tell voters what must be done to put the fiscal house in order." That has been the case so far. Alas, time is running out on saving the United States from declining into a second class economic power and keeping the middle class from a precipitous fall in their standard of living.

These grim outcomes seem almost certain unless a presidential candidate takes on the risky task of informing the American people of what must be done, wins the 2008 election, and can lead the nation in addressing the real economic problems. A critical task for the presidential candidate in leading the nation is to find the silver bullet that ends the Curse of Reaganism.

Walter Williams is Distinguished Fellow, Center for American Politics and Public Policy and Professor Emeritus. Bryan D. Jones is Donald R. Matthews Distinguished Professor of American Politics and Director, Center for American Politics and Public Policy. Both are at the University of Washington, Seattle. They are coauthors of The Politics of Bad Ideas (Pearson Longman, 2008).

Comments

[swift goat pet for truth]

"What America must come to realize is that Reaganism is the philosophical underpinning of our woes."

America knows about American Idol and football.

Corporate Media is the one that worships Reagan. Corporate Media is the promoter.
Americans only agree, then turn to "Dancing with the Stars".

[mamacat]

Very good blog. Thank you.

One thing about Reagan, is that he had more common sense than the lot running things from the White House today. Bush/Cheney seem totally removed from reality, while Reagan could do something right now and again, like get our marines out of Beirut when he saw it wasn't worth keeping them there, or appointing a decent pro-choice Supreme Court Justice. Reagan wasn't all bad. The policies done in his name have been disastrous.

A little bit like Christianity. Christ never started a religion that launched crusades, or conducted pogroms, or tortured people in the name of the Inquisition. Christ never started any religions, whatsoever, and yet how many Christian sects are there today? People twisted what he did and said into their own failed policies. Not to suggest that there is any comparison between J.C. and Ronnie Baby, but I don't think Reagan was a neo-con. Personally, I think that if Reagan were alive today, Rove wouldn't let him into the Republican Party - he would be too moderate for the likes of the lunatic fringe neo-cons.

[dadw5boys]

Regeanism= PREDATORY CAPITALISM = ONLY THE WEATHY SURVIVE.

[KillTheMessenger]

Reagan wrong? NEVER! The man was a B movie actor! That totally beats winning the Nobel Price (peace and economics).

[olephart]

HuffPost's Pick

The devotion to Reagan is the classic example of the innate relationship between ignorance and bliss. When discussing the tax cut, debt and growth scenario no mathematical arguments, no irrefutable data and quantity of logic will stay his followers from their course. Those who have succumbed to the myth are immune to reason. They are like the man, standing on an overpass, dropping fragments of paper on the freeway below. When queried about what he was doing he responded “I’m keeping the elephants off of the freeway”. When told there were no elephants on the freeway he replied “see, it works!” Thus so it is, no matter how far removed may be the cause and effect, to those who will not see light is no different from dark.

[dadw5boys]

Like the relationship of PRISONER TO GUARD!!!!!!!!

[walk0nwalls]

Hey, I'm just gonna throw this out there but in terms of a correlating Democratic "Big Figure" wouldn't Bill Clinton fulfill that role?

Just stuff to think about.

[iratior]

While it is putting it very mildly to say that I didn't like much of his agenda, I think that demonization of Reagan is just as inappropriate as deification. I believe in giving credit where credit is due, and at least one of Reagan's revisions of the tax code deserves a compliment: he sought to eliminate the phenomenon known as "bracket creep". Bracket creep occurred because as people's salaries rose (though only because of inflation), they had to pay more income tax. I can remember how badly my parents got ripped off by this during the Carter years. Their annual income may have been around $15,000, but the tax code treated that amount as if it were still back in the 1930's, when at $15,000 a year, somebody could live like a king. The tax code was not fair in that respect; Carter and the rest of the Democrats should have done something about it. While we can look back in time and have it seem as though the Carter years were great compared to now, a closer look will show that troubles were already brewing.

[noamjunior]

your last two sentences are a complete misread of the article.
Anybody can deficit spend, but when Reagan just gave away the difference- rather tha reinvesting in social programs, he basically took a huge chunk of the money in circulation ad froze it at the top- a bad idea to say the least

[iratior]

So it is your contention that Carter and the Democrats needn't have done anything about bracket creep? How on earth did you get the idea that I approved of Reagan's awful policies of cutting social programs?

[dadw5boys]

DUDE THE RESTRUCTURE OF THE TAX CODE WAS TO STARVE SOCIAL SECURITY OF FUNDS!!!!!!!

[Rmtns]

Now this post ( and the Book) should be required reading in all high schools and most especially in college economics classes. Even if you disagree with the premise of this book, you should be apprised of the facts and have a point of view this important to temper the call for Reaganism. Are you listening Sean Hannity?

[WisconsinLiberal]

What does the "stimulus" checks tell us? To me it proves that if you give the people on the lower rung of the economic ladder, they wil spend it, and get the ecomony going. If you give to much to the upper end, the economy stalls.

When the good manufacturing jobs left, the economy had to stall. When you manufacture something, you add VALUE, you take something that is worth less, assemble it turn it into something that people want or need, you create wealth. When you move something around and pay those people over and above what it is truly worth, shouldn't that be considered inflationary? Our economy is built on a house of cards and China who is manufacturing the stuff we "can't" live without, is growing. But that takes hard work something we seem to not want to do, because we are to "good" to do that.

Not everyone is cut out for college and we have to help people get good paying jobs to help them and the economy.

[mbaty]

People don't like paying taxes to a government that is horribly irresponsible with money. On top of that, when wages are stagnant, more taxes can mean the difference between Eating food or Paying the irresponsible government. If an economic transparency occurs in government with checks and balances and a sense of accountability, people may be able to look at the numbers and rationalize that taxes are beneficial. As it stands, most people feel like they're throwing their money down a hole that simultaneously lines the pockets of several CEO's and many more unnaccountable business executives, while situations like Katrina remain unsolved and unheard. We can change all of this, but it's very difficult to do when there is so much resistance to anything and anyone that gets in the way of profits and money-motivated schemes (like Iraq.)

[FogBelter]

Was it Reagan, or Milton Friedman? I read somewhere that American Capitalists were more concerned with Keynes than Marx ... Resurrect Keynes.

[BethStuart]

Very sadly, I'm reminded of H.L. Mencken's famous statement.

"Nobody every went broke underestimating the intelligence of the American public."

[Rockyman]

Reaganism is proof that "spin" can trump facts and reason. He "sold" us a fallacy and because of his photogenic and amiable qualities he became "teflon". Americans seemed to like him as our figurehead. Too bad his economic policies continue to haunt us as the unpaid deficits he created continue to grow with interest unpaid!

[Robert59]

I'm going to do two things. The first is to send this link to all my Republican coworkers. The second is to buy your book.

There might be a third. If it's a really good read I'll practice more Reagonomics, wrack up the credit card, and buy every Republican I know a copy.

[phasechange]

HuffPost's Pick

Your accurate analysis suggests that the Democrats should take two steps. First, institute a countervailing effort to set the record straight about Ronald Reagan. In the same way that Rove has shown you must go after your opponent's strength, Reagan's false claim to having defeated communism should be at the heart of the effort. It was Carter's Brzezinski-inspired Afghanistan plan, coupled with Gorbachev's failed gamble that he could balance an internal relaxation of economic and political restraints, that led to the downfall of the Soviet Union. In addition, it should be emphasized that Reagan committed treason by interfering with Carter's negotiations to bring home the Iranian hostages and illegally selling weapons to the Iranians. The list could go on... Second, the Democrats should "rehabilitate" Jimmy Carter's record on national security. Carter wasn't weak on defense. One of the examples used to discredit Carter was his decision to cancel the B-1 bomber. Carter knew that stealth technology was in the wings and the B-1 was obsolete. Republicans who knew about stealth and counted on Carter not disclosing national security information cravenly attacked him on this phony issue.

[noamjunior]

reagan
1) subverted congress to give money to El Salvadoran killers of nuns and priests
2) created a greater deficit than all previous deficits combined
3) turned the US airline industry from world class to unworkable
4) funded Osama Bin Laden
5) sold weapons to Iran