TCS Daily
January 20, 2006
At noon on January 20, 1981, Ronald Reagan took the oath of office as President of the United States. Minutes later, the remaining hostages who had been held captive for 444 days at the American embassy in Teheran were freed.
The Iran hostage crisis, which began on November 4, 1979, gripped the nation. Our impotency in the face of some thugs in a Third World country symbolized the decline of America. During the previous decade, we had been defeated in our longest war, gone through two energy crises, seen our economy tumble to its post-Depression worst, and lost all trust in our political institutions.
That all changed in that one hour.
In the next decade, the economy was booming, the military rebuilt, the Communists were defeated, and public confidence was restored. Bravado in the face of a would-be assassin’s bullet, a firm stance against the illegally striking air traffic controllers’ union, declaring the Soviet Union an “Evil Empire,” and bold military action against the likes of Muammar Qaddafi made Reagan an iconic figure. His admonition, “Mr. Gorbachev, tear down this wall,” was heeded much more quickly than any dared hope.
Reagan was derided by his critics as a “cowboy.” He did not shy from that label. Indeed, made sure to appear on camera in his boots and cowboy hat, riding his horse on his ranch, as often as possible. He understood the power of symbolism in word and deed. He knew that Americans liked to think of themselves as the rugged individuals of our Western movies. He proclaimed the following during that first inaugural speech:
“We have every right to dream heroic dreams. Those who say that we’re in a time when there are no heroes, they just don’t know where to look. You can see heroes every day going in and out of factory gates. Others, a handful in number, produce enough food to feed all of us and then the world beyond. You meet heroes across a counter, and they’re on both sides of that counter. There are entrepreneurs with faith in themselves and faith in an idea who create new jobs, new wealth and opportunity. They’re individuals and families whose taxes support the government and whose voluntary gifts support church, charity, culture, art, and education. Their patriotism is quiet, but deep. Their values sustain our national life.”
Within a couple years of uttering those words, they came true. Partly owing to massive tax cuts, economic privatization, and other reforms he initiated, partly because of superb management of the money supply by the Federal Reserve Board, and partly because of the natural business cycle, the economy was booming. The so-called Misery Index, the sum of inflation and unemployment, went from 20.7 in 1980 to 11.9 by the end of Reagan’s first term.
The Misery Index (1980-1989)
|
1980 |
1981 |
1982 |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
|
| Inflation1 |
13.5 |
10.3 |
6.2 |
3.2 |
4.4 |
3.6 |
1.9 |
3.6 |
4.1 |
4.8 |
| Unemployment2 |
7.2 |
7.6 |
9.7 |
9.6 |
7.5 |
7.2 |
7.0 |
6.2 |
5.5 |
5.3 |
| Misery Index |
20.7 |
17.9 |
15.9 |
12.8 |
11.9 |
10.8 |
8.9 |
9.8 |
9.6 |
10.1 |
|
Source: 1U.S. Department of Commerce. 2Bureau of Labor Statistics |
||||||||||
The comparison gets even starker when one factors in the cost of borrowing money, which declined almost as sharply as inflation. The “real” misery index created by this dropped from 42.2 in 1980 to 27.4 at the end of 1982.
“Real” Misery Index (1980-1989)
|
1980 |
1981 |
1982 |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
|
| Inflation |
13.5 |
10.3 |
6.2 |
3.2 |
4.4 |
3.6 |
1.9 |
3.6 |
4.1 |
4.8 |
| Unemployment |
7.2 |
7.6 |
9.7 |
9.6 |
7.5 |
7.2 |
7.0 |
6.2 |
5.5 |
5.3 |
| Prime Rate3 |
21.5 |
15.8 |
11.5 |
11.0 |
10.8 |
9.5 |
7.5 |
8.75 |
10.5 |
10.5 |
| “Real” Misery Index |
42.2 |
33.7 |
27.4 |
23.8 |
22.7 |
20.3 |
16.4 |
18.6 |
20.1 |
20.6 |
|
Year-end prime lending rate from Mortgage Information Services |
||||||||||
Certainly, Reagan’s presidency was far from perfect, even from the perspective of his supporters. While he talked a lot about cutting the size of government, the deficit skyrocketed during his tenure. He gave substantial lip service to social issues like abortion but made little effort to do anything about it. Of his Supreme Court appointments, only Antonin Scalia was a hit with conservatives (although Robert Bork, had he been confirmed certainly would have been). Certainly, Sandra Day O’Connor and Anthony Kennedy were a disappointment to those who wanted to see the Court reverse some of the excesses of the 1960s and 1970s.
Ironically, the lowest points in Reagan’s presidency involved Iran. We high tailed it out of Lebanon shortly after 241 Marines were killed by a Hezbollah truck bomb. More seriously, much of his second administration was haunted by the specter of the Iran-Contra affair, in which he ignored his own pledge not to negotiate with terrorists at great price. While Ayatollah Khomeini is long dead, the mullahs still rule Iran and sponsor anti-American terrorists. A quarter century later, a president who thinks of himself as Reagan’s heir has to struggle with the potential for that regime being armed with nuclear weapons.
Still, at the end of the day, Reagan was a transformational figure in American politics. As his political soulmate, former British Prime Minister Margaret Thatcher, remarked at his funeral,
“Others prophesied the decline of the West; he inspired America and its allies with renewed faith in their mission of freedom.
“Others saw only limits to growth; he transformed a stagnant economy into an engine of opportunity.
“Others hoped, at best, for an uneasy cohabitation with the Soviet Union; he won the Cold War — not only without firing a shot, but also by inviting enemies out of their fortress and turning them into friends.”
Reagan accomplished less than his admirers would have wanted — yet much more than we could have dreamed in the ways that mattered most.