Ronald Reagan served as 40th President of the United States from 1981-1989 and many remember him today as a conservative that supported limited government, freedom, personal responsibility, and conservative fiscal policies. Many Republicans today believe that this Nation should return to the roots of the Reagan Presidency. The 2008 Presidential Campaign made it more than clear that Republicans try to align their platform with that of President Reagan in an attempt to gain votes and promise the Nation a return to small, conservative, and fiscal responsible Government.
WTF Finance very much agrees with the importance of fiscal conservatism, balanced budgets, small Government, personal liberty and responsibility. What we disagree with is the notion that Reagan represented any of the above.
Here’s Ronald Reagan speaking at the 1964 Republican National Convention. He stresses the importance of limited Government, fiscal conservatism, and freedom.
During his Inauguration speech in 1981 he promised to deliver a new era of limited Government and reduced spending. He went as far as to state that
“Government is not the solution to our problem, Government is the problem”.
WTF Finance agrees with much of this speech, however, Ronald Reagan was not the solution, the Reagan administration was a continuation of the problem. As with most politicians, what Reagan promised and what he delivered were very different. With a recession that started during the Carter administration, the pressure was on him to fix the economy. While it is neither the President’s nor Congress’ job to interfere with the economy, throughout US history administrations always make it their priority. With high unemployment, Reagan set out to increase the size of the government in order to decrease the number of unemployed. Obama used this same tactic when he took over office by creating over 16000 new IRS jobs, 1000 Department of Homeland Security, etc continuing a long standing tradition of using a distressed economy to increase the role and cost of government.
We don’t disagree that President Reagan cut taxes significantly during his first year in office. However, as he grew the role, size, and deficit of Government he implemented many tax increases that weren’t in line with a conservative platform. In 1983 Reagan signed the Surface Transportation Assistance Act of 1982 which more than doubled the tax on gasoline from 4 to 9 cents per gallon. Keep in mind that a gallon of gas cost around $1.25. While many Republicans complain about the Alternative Minimum Tax (AMT), it was President Reagan that signed the Tax Reform Act of 1986 which would ensure that more people qualify for this additional tax. In addition, the tax act of 1983 increased payroll taxes for corporations further encouraging companies to outsource their workforce. Acknowledging that Government is in the way of economic prosperity during his campaign, Reagan proved his point not by solving the problem but by implanting policies that perpetuated it. As a result the productive manufacturing base severely declined and left for more business friendly nations.
Proclaiming to be a conservative, Reagan promised to cut the size and spending of Government while stating that Government should stay out of the lives of individuals. In 1964 Reagan held a speech at the Republican convention in which he criticized big government and deficit spending. “We haven’t balanced our budget 28 out of the last 34 years.” In that speech Reagan further criticized the Nation for debasing the US Dollar, a consequence of deficit spending policy and a practice that once in office he himself not only mimicked but took to new heights.
With a career as an actor Reagan delivered his speeches well and sold the idea that he was an advocate of limited Government when nothing could be further from the truth. As an outspoken proponent of liberty, limited government, fiscal conservatism and free markets he directly contradicts his promises. The war on drugs not only is a direct attack on personal freedom but also comes at an enormous expense and expansion of government. The war on drugs and the regulation of natural and synthetic substances is also anti-free market. A conservative view would prohibit the Government from taking a position limiting or regulating what substances can and cannot be consumed whether or not they would be a user. As a direct result of the criminalization and increased persecution of drug users during the Reagan administration, the prison population greatly increased leading to the privatization and profiteering of the prison system. This greatly increased the number of law enforcement, DEA, public sector lawyers and judges hired by the Reagan administration which is also a contradiction of his promise to reduce the size and scope of the Government.
Another market interventionist policy enacted by the Reagan administration was executive order 12631 whose stated function is as follows:
Sec. 2. Purposes and Functions.
(a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence, the Working Group shall identify and consider:
(1) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987, and any of those recommendations that have the potential to achieve the goals noted above; and
(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.
(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.
(c) The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and, if appropriate, its views on any recommended legislative changes.
Sec. 3. Administration
(c) To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.
This working group, sometimes referred to as the Plunge Protection Team (PPT), was established to directly interfere with the markets effectively destroying any notion of the US having a free market economy. The four members selected were the Secretary of the Treasury (currently Geithner), the Chairman of the Governors of the Federal Reserve System (currently Ben Bernanke), the Chairman of the Securities and Exchange Commission (currently Mary Schapiro), and the Chairman of the Commodity Futures Trading Commission (currently Gary Gensler). This working group is able to manipulate the markets and is given access to unlimited resources in order to maintain the president’s agenda. To state that Reagan was a conservative who supported capitalism and free markets is completely ignorant, as no one who believes in the purity of the free market would implement such a direct attack on it.
Nostalgic romanticizing of Reagan as the father of modern conservatism and the model for the Republican Party to emulate is popular within the current GOP. Saying the Republican Party “lost its way” and needs to go back to its conservative roots is a key talking point among the Republicans hoping to draw up an emotional response in the build up to Presidential Primaries. WTF Finance would argue that the current crop of Republicans, exemplified by Rep. Paul Ryan, is following right along the path laid out for them by the Reagan administration. To decry the current spending, even distancing themselves from the Bush administration in the hopes of gaining political points is interesting given that they also dwell on Reagan as the example they wish to bring back to the White House.
If indeed a Republican is elected to replace the Obama administration in 2012, we can only assume that the status quo will remain in tact. Spending will hit record highs, the deficit will increase, the debt ceiling will be raised, the Government will expand further into our lives taking away more rights and freedoms in the name of “protecting” the population, more regulation will be embraced further crippling an already diminished manufacturing and production sector etc.
Whichever party is in charge the trend is clear: blame the previous administration for the woes of the economy, promise to reign in government control and budgets, promise to change the direction the government has been taking only to continue along the same path of increasing the size, role, and cost of the government.