Reagan and the Reinvention of American Conservatism

By 1980, the United States was in a bad mood. Inflation had been running in double digits. The economy was mired in stagflation — the combination of high inflation and high unemployment that Keynesian economics had said was impossible. The Iran hostage crisis had entered its second year with no resolution in sight. America's standing in the world seemed diminished after Vietnam, after Watergate, after years of relative decline. Jimmy Carter gave a televised address about a national malaise that encapsulated the spirit of the moment, and it did not help him politically.

Ronald Reagan ran against all of that, and he won forty-four states.

Reagan's political achievement rested on several pillars. The first was economic: he articulated supply-side economics — the argument that cutting taxes, especially on high earners, and reducing regulation would stimulate investment, growth, and ultimately benefit everyone — with a conviction and clarity that his economists sometimes struggled to match. The Economic Recovery Tax Act of 1981 cut the top marginal income tax rate from seventy percent to fifty percent, and later cuts reduced it further to twenty-eight percent.

The second pillar was anti-communism. Reagan was morally serious about the competition with the Soviet Union in a way that sharply differentiated him from the détente approach of Nixon and Kissinger. He called the Soviet Union an evil empire. He supported the Reagan Doctrine — providing support to anti-communist movements and insurgencies around the world. He invested heavily in military buildup, including the Strategic Defense Initiative, which his critics called Star Wars and which the Soviets took seriously enough to worry about.

The third pillar was cultural. Reagan understood that a significant portion of the American electorate felt that the cultural upheavals of the sixties and seventies had gone too far, that institutions had been weakened, that elites had lost touch with ordinary American values. He spoke to that feeling without indulging its ugliest expressions. His optimism was genuine and contagious. His morning in America narrative gave people permission to feel good about the country again.

The Reagan years produced outcomes that are still debated. Economic growth accelerated. The Cold War ended with the Soviet collapse in 1991. But income inequality began its long rise during this period. Deregulation of the savings and loan industry produced a crisis that cost taxpayers approximately 130 billion dollars. The social safety net was trimmed and reconfigured in ways that fell disproportionately on the poor.

What Reagan did to American political culture proved more durable than any specific policy. Government is not the solution to our problem, government is the problem — the line from his first inaugural address — redefined the terms of political debate for decades. The Democratic Party moved significantly rightward in response. Bill Clinton declared that the era of big government is over. The Reagan political settlement, built on tax cuts, deregulation, and anti-government rhetoric, held the center of gravity in American politics from 1980 until at least 2008, and arguably longer.