Conservatism Resurgent: Ronald Reagan
and the 1980s
Ronald Reagan, a Republican, won the election
of 1980 by promising to end the “tax and spend” policies of his
liberal predecessors and to revive the patriotism needed to win
the Cold War. These two goals would dominate his presidency.
Ronald Reagan’s economic program, dubbed Reaganomics,
was founded on the belief that a capitalist system free from taxation
and government involvement would be most productive, and that the
prosperity of a rich upper class would “trickle down” to the poor.
He pushed a three-year, 25 percent tax cut through Congress in 1981,
as well as a $40 billion cut in federal spending on school lunches,
student loans, and public transportation, among other services.
To curb inflation, the Federal Reserve Board hiked interest
rates in 1981, plunging the country into a severe recession. Unemployment
soared to 10 percent, and because of Reagan’s cut in social spending
the impoverished found themselves without social programs. Along
with unemployment, trade and federal deficits skyrocketed (the federal
deficit rose because the government offset its cuts in social spending
with huge increases in military spending). Recession, however, gave
way to a rebound in early 1983, when inflation stabilized and consumers
began to spend in great amounts.
From 1983 to 1987, the economy boomed, spurred by speculation
in the stock market. The bubble burst, however, on October 19, 1987,
when 20 percent of the stock market’s value was lost, the largest
single-day decline in history. The crash exposed the economic problems
concealed by the four boom years: a high trade deficit and the widening
gap between rich and poor. These problems were still unresolved
when the economy began to recover in 1988.
The “Evil Empire”
Reagan began issuing anti-Soviet statements soon after
coming to the White House, referring to the USSR as the “evil empire.”
His administration’s central Cold War strategy was military buildup.
The Pentagon’s budget nearly doubled during Reagan’s first term
in office, paralleling an increase in nuclear weapons and alarming
the nation about a seeming increase in the likelihood of nuclear
war. In March 1983, responding to vast domestic protest of nuclear
weapons proliferation, Reagan proposed an antiballistic missile
defense system known as the Strategic Defense Initiative (SDI),
or “Star Wars.” Though “Star Wars” never came close to completion,
because technology lagged behind the program’s defensive aims, some
historians argue that the massive arms buildup proved to be the
ultimate Cold War defense system by forcing the USSR to spend itself
into demise in the late 1980s. Other historians counter that internal
elements had more to do with the Soviet Union’s eventual collapse.
The Reagan administration’s enmity for the Soviets and
all Soviet allies led it into a scandal known as the Iran-Contra
affair. In 1982, the CIA organized a force of 10,000 men in
Nicaragua, who called themselves “Contras,” to fight against the
Sandinista regime, which had military ties to the Soviet Union and
Cuba. Reagan hoped to establish a democratic government in Nicaragua
friendly to the United States, but Congress voted to ban aid to
the Contras. The administration, however, maintained secret support,
organized from within the White House by Oliver North,
a member of the National Security Council. A series of 1987 investigations
uncovered the government’s machinations: the U.S. had been selling
arms to the anti-American government in Iran and using profits from
these sales to secretly finance the Contras in Nicaragua. Although
there was no evidence that Reagan himself had known of the plan,
the Iran-Contra scandal rekindled the American public’s distrust
of the U.S. government.
In 1987, investigations revealed that the Reagan
administration had been selling arms to anti-American forces in
Iran and using the profits
to finance the Contras in Nicaragua, an act specifically prohibited