American Experience

The recession of 1981-82 resulted in record unemployment, bank failures, and farm foreclosures. Critics charged that such dire circumstances were the result of "Reaganomics" -- substantial reductions in government assistance and services, coupled with tax cuts. For his part, Reagan maintained that the faltering economy was the legacy of excessive government growth and spending on the part of his predecessors. He urged the nation to "stay the course," and promised that better days were just around the corner.

Ronald Reagan was a firm believer in the "wisdom of the marketplace." Early in his administration he said, "We who live in free market societies believe that growth, prosperity, and ultimately human fulfillment, are created from the bottom up, not the government down." In Reagan's estimation, the less involved the government was in the affairs of businesses and individuals, the more prosperous the nation as a whole would become. Reagan lobbied Congress to enact significant tax cuts, while he drastically scaled back government spending. As federal funding for many social services programs were cut, responsibility for efforts such as Aid to Families with Dependent Children and school lunches was shifted to individual states. Reagan called this the "new federalism." His critics called it cold-hearted Hooverism.

Reagan was taken aback by charges that his economic program deliberately targeted the underclass. On many occasions he would respond to a letter from an individual in dire straits with a handwritten note of encouragement and a personal check. Reagan never forgot the difficult conditions of his own youth when hearing of the hardships of others. Still, he vigorously maintained that what the downtrodden needed was not a government handout, but a thriving private sector that would provide them with an opportunity to help themselves.

Midway through his first term, economic conditions did improve. Reagan's stimulus package resulted in decreased inflation and increased employment. Wall Street responded robustly to the upturn in the economy. Beginning in late 1982, the nation enjoyed the longest economic peacetime expansion since World War II. By 1984, a majority of Americans were feeling better about their economic situation, and credited Reagan for making it possible. Few gave serious consideration to an exploding federal deficit, fueled by tax cuts and record spending for defense, and an increasing disparity between the rich and poor.

The rising economic tide of the 1980s did not lift all boats. By 1984, thirteen million children lived below the poverty line. Conditions in the inner cities grew more desperate as relief services were cut off. While corporate executives enjoyed record profits, legions of blue collar workers saw their jobs shipped to other countries where wages were lower. Observers used the term "social Darwinism" to describe an economy where only the strong survived. But Reagan believed that these people, too, would benefit from a "trickle-down" economy where increased wealth would find its way into every facet of society.

Reagan applauded nothing more enthusiastically then he did tales of everyday Americans succeeding through hard, honest work. He extolled and promoted an array of conservative social policies that he felt engendered "American values." He successfully courted the newly powerful religious right by speaking out against abortion and for school prayer. While few elements of his social agenda resulted in laws being passed, the nation, as a whole, took a more conservative turn. Those who didn't subscribe to Reagan's social outlook accused him of giving license to intolerance and prejudice.

The economic exuberance of the mid-1980s came to an abrupt halt on October 19, 1987 when the stock market fell more than 500 points. The tumble was seen, in some quarters, as a result of fiscal recklessness encouraged by the Reagan administration. As the national deficit approached $3 trillion, the wisdom of Reaganomics was very much put into question.

Far into the 1990s, debate continued over the legacy of Ronald Reagan's domestic agenda. Supporters pointed to the 118 million new jobs that were created, and increased trade with other nations. Detractors assailed what they saw as irresponsible deregulation resulting in threats to public health and safety.

Ronald Reagan: hero or villain? In large part, people's perceptions of the man's domestic initiatives depended on how they were affected by them. One fact appeared indisputable: for better or worse, Reagan made a lasting impact.

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