The recession of 1981–1982 was a watershed in America’s social history. High interest rates and a strong U.S. dollar devastated the economy’s manufacturing sector and turned the “Rust Belt,” a region stretching from New York to Wisconsin, a deep garnet. Americans became familiar with the awkward term “deindustrialization,” as a plague of shuttered manufacturing plants, facilities once associated with the nation’s economic might, spread across the Great Lakes region. Communities where, since World War II, young men had expected to take high-paying union jobs “on the line” in automobile plants and other mass-production factories found this security gone. The U.S. economy lost about 1.9 million jobs during the Reagan recession.1 In 1982, the nation’s unemployment rate reached the 10 percent mark for the first time since the Great Depression of the 1930s. In cities like Detroit and Flint, Toledo and Gary, Youngstown and Milwaukee, the recession seemed endless. The jolting shifts of these years marked a turn to an economy weighted more toward sales, finance, and other services, and less toward the production of tangible goods. It would be an economy in which households relied more than before on debt, dual incomes, and cheap imports to maintain or improve their standards of living.
These were long-term trends—the plant closings, for example, erased more than 5 million jobs between 1979 and 1984, and had started earlier—but they took on a new, more severe aspect after Reagan became president.2 Reagan’s recession was the intended result of a conscious policy, driven by the decisions of the Federal Reserve and supported without stint by the White House. Carter and the Democrats, in the 1970s, had had little idea what to do about deindustrialization, and Carter appointed Volcker, who orchestrated both the Carter and Reagan recessions, to lead the Fed.3 But Carter’s ambivalence about Volcker’s harsh medicine was replaced, under Reagan, by a deep faith in the treatment. With President Reagan, the government’s unresponsiveness to economic turmoil and transformation was a matter of principle. To conservatives, this was nature at work and must proceed.
The Reaganites, who stood and watched as wealth drained from the economy under a withering regime of high interest rates, were ideologically committed to rejecting pleas for government aid to the distressed. And they went further. Reagan’s administration took steps, in its historic first budget, to curtail assistance to the poor and jobless. In 1982, when the recession was at its worst, only about 45 percent of jobless Americans received unemployment insurance (UI), because the administration had toughened the eligibility rules. In 1975, a comparable recession year, the proportion receiving UI had been 76 percent. Terminations of benefits from Social Security Disability Insurance quadrupled between 1980 and 1982, as government employees pored over the rolls for recipients newly defined as undeserving.4 The official poverty rate rose from 11.7 percent to 15 percent during the recession; about half the increase was due to Reagan’s cutbacks in aid to the poor.5 In the decades since the New Deal had established a role for the federal government in maintaining a social safety net, the government had never actually reduced assistance to the needy during a major recession.
Just as the recession was beginning to bite, early in August 1981, President Reagan intervened personally in a labor conflict national in scope, and his action landed like a thunderbolt. His stance toward labor-management relations would forever afterward be linked to the acronym PATCO (for the Professional Air Traffic Controllers Organization). Ironically, PATCO had been one of the only unions to endorse Reagan’s candidacy in 1980. As U.S. government employees, they were forbidden by law to go on strike, or to bargain collectively over wages. Reagan’s team quietly consented to the latter of these forbidden practices, offering the controllers more money. But PATCO’s militancy, the result of a decade’s discontent over pay and working conditions, overrode any temptation to accept these new terms, and a strike commenced. Exclaimed one controller, “Fuck the president. We’ve done it. Let’s stand by it. Let’s see what the outcome is.” Leaders of other labor unions were disconcerted by PATCO’s maximalism. “This could do massive damage to the labor movement,” warned Douglas Fraser, leader of the United Automobile Workers.6
Reagan gave the controllers two days to end the walkout. When, on August 5, these forty-eight hours ran out, the president decreed that the more than eleven thousand of PATCO’s members who had failed to return to work had quit their jobs. Taking questions from reporters at the signing ceremony for his budget and tax-cut laws in California on August 13, Reagan commented, “There is no strike. There is a law that Federal unions cannot strike against their employers, their employers being the people of the United States.” In his view, the air-traffic controllers “terminate[d] their own employment by quitting. . . . And I just don’t see any way that it could be expected that we could now just go back and pretend that they weren’t breaking the law or breaking their oath.”7 Supervisors and others would fill in for the fired controllers on an emergency basis. Months later, the administration officially decertified PATCO as the controllers’ representative; Secretary of Transportation Drew Lewis, who had tried to avert the showdown, asserted, “There is no PATCO.” Reagan never allowed any of the controllers back to work for the Federal Aviation Administration (FAA), whose chief summed up the mood in the administration—and among a majority of the American public—when he said, “They made their bed and they can sleep in it.”8
Lane Kirkland, head of the nation’s main labor federation, denounced the firings as “massive, vindictive, brutal.”9 However, the public, reacting to what had become a dramatic confrontation between Reagan and the controllers, sympathized more with the president. Many saw PATCO as a group of well-paid professionals with secure jobs in a time of rising insecurity for most American workers. The White House initially received thirteen phone calls supporting Reagan’s action for every one against it. In the month following the firings, the FAA received more than one hundred thousand applications from those eager to replace the old controllers.10 Most Americans took this episode as the harbinger of a new era, even though Reagan presented the affair in narrow terms, carefully affirming the right of private-sector workers to strike. Many brushed aside such distinctions. One corporate lawyer needed to explain to his overeager clients, who felt inspired by Reagan’s example, that they could not simply do as the president had done—no law forbade their employees to go on strike. Donald Rumsfeld, once Gerald Ford’s secretary of defense and, in the early 1980s, the head of the G. D. Searle pharmaceutical company, later remarked of Reagan’s action, “It struck me as singular. . . . It showed a decisiveness and an ease with his instincts” that Rumsfeld clearly admired.11
In fact, a new day was dawning in American labor relations. In the 1980s, a decision to strike was, increasingly, tantamount to forsaking a job—and an entire industry, as strikers were easily tracked and blacklisted—just as it had been for PATCO members. The legal specialty of union-busting expanded in the early 1980s, as did the use of strikebreakers, who were now called, euphemistically, “replacement workers.” “In the 1980s, prominent employers saw strikes not as conflicts to be avoided, but as opportunities to break or tame unions,” observes labor historian Joseph McCartin. The same drama played out in one conflict after another: with Phelps Dodge copper miners in Arizona in 1983, with Greyhound bus drivers that same year, with Hormel meatpacking workers in Minnesota in 1985–1986. In each instance, strikes turned out disastrously for unionized workers. Automation, eager replacement workers, and newly flexible supply chains and production networks made corporations realize that they did not need to woo strikers back to the bargaining table. Companies pressed government forces into service on their behalf, as state governments in Arizona and Minnesota—under Democratic governors Bruce Babbitt and Rudy Perpich, respectively—dispatched the National Guard to keep workplaces open and operating with skeleton crews. These trends lasted well beyond the return of national prosperity, as the new ensemble of strikebreaking techniques and the bipartisan hostility of political elites toward labor militancy made for a permanent change in workplace dynamics. Workers absorbed the lesson: striking meant quitting. From the early 1980s onward, as McCartin writes, “The United States never again saw the annual number of major work stoppages reach even one-third of pre-PATCO levels.”12
The broad meaning that many Americans assigned to the PATCO drama in its immediate aftermath reflected the nation’s darkening economic picture. By November 1981, the Fed’s “Red Book” or “Beige Book,” which summarized observations from the twelve regional Reserve Banks around the country, noted, “Chicago indicates the demand for workers may be at the lowest level since the 1930’s, and many employers are seeking substantial concessions when renewing labor contracts.”13 By March 1982, “In response to widespread layoffs and reduced job opportunities, unionized workers have been increasingly willing to grant concessions.”14 Macroeconomic conditions produced union flexibility. The phenomenon of givebacks, in which unions agreed to wage freezes, to shifting healthcare costs from employers to workers, to the elimination of vacation and other benefits, and to the introduction of new, lower wage scales for new workers, began to spread. This trend extended from troubled manufacturing enterprises into the relatively healthy service sector, even after the recession ended. Management had become newly assertive, and unions were scared and dispirited. By 1983, Reagan appointees to the NLRB—for the first time comprising a majority of the Board—affirmed business tactics previously in question, such as closing unionized factories and moving production to nonunion locales while a collective bargaining agreement was in effect. The Board allowed its case backlog to increase from four hundred in 1981 to seventeen hundred three years later.15
Although no serious candidate for elected office would dare endorse the policy of recession in the heat of a campaign, Reagan understood and accepted it. In 1978, he predicted, “I’m afraid this country is just going to have to suffer two, three years of hard times to pay for the binge we’ve been on.” In 1980, he ran against Carter as the candidate of optimism, and kept such comments out of his campaign speeches. Yet close advisers knew that Reagan, schooled in economics by conservative professors at Eureka College and then by his mentors at General Electric in the 1950s, responded positively to the idea that good times could become too good and must then be followed by a lean winter. As David Stockman put it, “The purgatory view of inflation was out of sight, but not out of mind.”16 Reagan stubbornly resisted acknowledging that recessionary policy had caused a recession. In a radio address in September 1982, he labeled “the most cynical form of demagoguery” the charge that anti-inflationary policy and rising unemployment were linked.17 But he knew better. As Paul Craig Roberts, the supply-side economist, noted in disillusion after he left the government, “The Republican establishment . . . believes in fighting inflation with unemployment. . . . In principle the administration was supply-side, but in practice its faith still rested in the traditional pain-and-suffering approach to the economy.”18
Reagan’s mind was a rag-bag filled with pieces of conservative wisdom acquired over the years. Intellectual coherence or consistency was no particular virtue to him, although, paradoxically, he could be highly dogmatic. There were many kinds of economic conservatism; they often conflicted. Reagan could, under the right circumstances, embrace any of them wholeheartedly. When, as president, he first met with Volcker, Reagan astounded the Fed chairman by asking why the nation needed a Federal Reserve Bank at all. Hostility to the Fed’s existence found a home in certain quarters of both the right and the left, and someone who read Human Events as regularly as Reagan did—this magazine, a favorite of Reagan’s, offered a conservatism so severe that Baker and Deaver conducted a running battle with the president to try to keep it out of his hands—would not have been shocked by the question. Reagan also believed in the wisdom of returning the U.S. dollar to the gold standard and sometimes derided his country’s currency as worthless fiat money. When Volcker recovered his composure and gave a brief defense of the institution he led, Reagan dropped the matter and subsequently assured Volcker that he enjoyed the president’s confidence.19
In 1981, Volcker resumed the squeeze on the economy that the Fed had begun in 1979 but had relaxed in 1980. Traditionally, the Fed set the pattern for short-term interest rates in the economy by adjusting its own lending rate to banks (the Discount rate) and by indirectly manipulating the rate banks charged one another for overnight transfers (the Federal Funds rate). But in October 1979, Volcker steered the Fed into an experiment in monetarism, setting money-supply targets instead of interest-rate targets. If the money supply shrank, interest rates would rise; interest is the price of borrowing money, and if there is less money, those who have it will command a higher price for it. The new method merely put the Fed one step further back from responsibility for its impact on interest rates. “The rhetoric of monetarism cast an obscurantist cloak over the harsh reality: we were ‘targeting monetary aggregates,’” economist Paul Krugman describes this episode, “not throwing people out of work so that those still holding jobs would reduce their wage demands.”20
Although rising interest rates, by making it harder for businesses to borrow and invest, would indeed throw people out of work by inducing a recession, this was the policy’s intention and its effect. In May 1981, the targeted money supply dropped by more than 11 percent, and short-term interest rates jumped from the April level of 13.7 percent to 16.3 percent. Meanwhile, long-term interest rates, which are set in the bond market, were climbing higher, past 13.5 percent and toward the 15 percent range.21 Reagan’s expansive fiscal program, which might fuel inflation by pumping money into the economy, was making investors uneasy—exactly the opposite of what the supply-siders had predicted. “No one wants to buy bonds yet,” said one banker. “There is a buyers’ strike because investors don’t like the outlook on inflation.”22 Inflation is good for borrowers, because they can pay back loans in dollars that are more plentiful and cheaper than the ones they borrowed, but equally bad for lenders—like bond investors. Long-term interest rates indicated what lenders charged borrowers, and lenders demanded a high enough rate that even substantial inflation would leave them with healthy returns.
Choking off businesses’ access to credit worked wonders. In July 1981, the recession began, ending the briefest period of economic expansion in post–World War II American history, one of only twelve months’ duration.23 In October 1981, the inflation rate dropped like a stone, from 13.2 percent to 4.8 percent, a level not seen since Nixon’s presidency. The unemployment rate—always a “lagging indicator,” in economists’ parlance—climbed to 8 percent, modestly higher than the 7 percent range it had occupied for seventeen months. The jobless rate would climb past 9 percent by March 1982, and above 10 percent in September 1982—where it would stay for ten excruciating months. Inflation was licked, reaching negative territory in March and remaining in the 3–4 percent range on a yearly basis in the mid-1980s. The bond market finally responded to this enduring trend, bringing long-term interest rates down to the 10–12 percent range in late 1982 and 1983. Sustained economic expansion began in late 1982. But the unemployment rate did not dip below 8 percent until February 1984, fifteen months, by economists’ reckoning, after the recovery began. Layoffs and plant closings in manufacturing continued.24
The Fed’s Beige Books in 1981 and 1982 told the story of an economy whose industrial sector was suffering, and whose scarce bright spots—due to oil wells and military contracts—were concentrated in the South, the Southwest, the Boston area, and some parts of the West Coast. September 1981: “Boston attributes the weakness in manufacturing to the strong U.S. dollar making U.S. goods uncompetitive overseas. Minneapolis, St. Louis, Atlanta, and San Francisco attribute the weakness to the soft homebuilding industry. . . . Cleveland and New York attribute it to cutbacks in capital spending; St. Louis attributes it to poor auto sales; and Chicago attributes it to both of these developments. Oil field equipment is the only product that has enjoyed strong orders and production.” November 1981: “Deteriorating economic conditions appear to be spreading.” December 1981: “No improvement in automobile sales was evident, and dealers in cleveland were prepared for one of the worst months ever.” January 1982: “Retail sales . . . have sagged again, and prospects for a quick recovery are not widely perceived. . . . In the manufacturing sector . . . unwanted stock piles up and leads to production cutbacks. Finally, reports from the agricultural sector indicate falling commodity prices, with farmland prices dropping too, as many farmers find it impossible to stay in business.” “The residential housing market is universally depressed. . . . Only houses in the highest price brackets are selling.” March 1982: “Price inflation continues to slow. With a downturn developing in oil and gas development, defense procurement becomes the principal expanding sector. . . . The Chicago and Cleveland districts with their emphasis on hard goods continue to present the blackest pictures. . . . Layoffs in the Fourth District included workers from the last auto passenger tire plant in Akron. . . . Richmond reports a rise in demand for cigarettes.”25 Surely this last item was a sign of grim and stressful times, particularly for working-class Americans.
The political climate began to sour for the president as early as September 1981. His budget cuts coincided with the worsening recession, sparking outrage.26 The issue that broke through to public consciousness was the effect of reduced federal funding for the National School Lunch Program (NSLP). This program had defrayed the cost of meals since 1946; 90 percent of America’s schools participated, and its positive impact on child nutrition had been significant. Reagan cut the funding by 40 percent, saying that children of comfortable families were having their meals subsidized needlessly. One effect of the reduction was to limit the caloric goal for all children served from one-third of a recommended daily intake to 18 percent at most. Milk servings would shrink from six ounces to four. To allow schools to put the best face on the new regime, the Agriculture Department would let them count tomato ketchup and pickle relish as vegetables. Eggs used in cakes could be counted as meat substitutes, cookies as bread.27
The ridicule was vehement. Columnist Russell Baker wrote, “This is an idea by one of Oliver Twist’s workhouse bullies, isn’t it? Sure it is. No fellow who smiles so easily and likes jellybeans would tell a moppet that two ounces of milk make him a welfare bum.”28 (News stories about the White House regularly noted the presence of a jar of jellybeans on the table at cabinet meetings.) Senate Democrats publicly sat down to meals “consisting of a meat-and-soybean patty, a slice of bread, a few French fries, ketchup, and a partially filled glass of milk.” Senator John Heinz, Republican of Pennsylvania, heir to a gigantic ketchup-and-relish fortune, affirmed, “Ketchup is a condiment.”29 This fracas gave added impetus to the “Solidarity Day” rally, planned for September 19 by labor leaders and others to protest Reagan’s budget and tax policies. This mammoth gathering, whose name was intended to evoke comparisons to Poland’s labor-based Solidarity movement, drew about a quarter-million people, roughly the size of the famous 1963 March on Washington for Jobs and Freedom. Lane Kirkland (a staunch supporter of anticommunist trade unions like Polish Solidarity) assured the crowd, “If you do not embrace the proposition that this president has a mandate to destroy the programs that feed the roots of a decent society, look about you. You are not alone.”30 Although it would be little remembered, as such huge political assemblies had become more common since the 1960s, 1981’s Solidarity Day was a sign of a shifting mood. Richard Cohen of the Washington Post wrote scornfully, “The spirit of Marie Antoinette infuses the administration of Ronald Reagan. The president wears $1,000 cowboy boots. His wife sets the table with china worth over $200,000. The . . . secretary of Health and Human Services poses for a magazine cover in white tie, tails and moronic grin. He is shown sitting down at a banquet table the same week the administration says that the size of school lunches will be shrunk and condiments will now be considered vegetables.”31
Reagan backpedaled on NSLP, but he aggravated matters by denying responsibility. “I don’t know whether it represented bureaucratic sabotage or not,” he told reporters, mysteriously. “This is a regulation change that was made or advocated . . . by departmental [employees] we didn’t know about, and I’ve canceled it.” These remarks angered Secretary of Agriculture John Block, who knew Reagan’s explanation was not true. The new regulations were Reagan’s policies at work. At Block’s insistence, a White House spokesman later that day stated, “It’s safe to say he [Reagan] no longer feels it was sabotage.” Reagan still justified the scale of the cuts. “There are programs that are being abused by people, who . . . are getting benefits they are not entitled to,” he said.32 But, as the New York Times pointed out in an editorial, the NSLP was intended to help the nation’s children as a whole. Reagan wished to make the program “a welfare project, and a badly funded one at that,” the paper charged. Ketchup would not be labeled a vegetable, but some funding cuts remained in place.33
Reagan, stung by the new criticism, became less visible, but he could not remain out of the public eye forever. In March 1982, with the country seven months into the recession, he again showed a face his advisers would have preferred to keep private. Joblessness had reached an official rate of 8.8 percent in February, and the number of part-time employees was higher than ever. The unemployment rate among African Americans was 17.3 percent.34 Reagan sat for an interview with reporters from the Daily Oklahoman, known for its conservative editorial policy. Perhaps at ease in supportive company, the president complained about the attention paid to spiking unemployment levels. News reports on such matters were “entertainment” rather than serious news, Reagan said, suggesting that television reporters and producers were interested in the sensational rather than the informative. “Is it news,” he asked, “that some fellow out in South Succotash someplace has just been laid off, that he should be interviewed nationwide?”35
With his impatience regarding stories of misfortune, Reagan was in danger of forfeiting the healthy level of blue-collar backing he had won in 1980. His job-approval rating dropped sharply, into the mid–40 percent range, from a high of two-thirds in April 1981 (after Hinckley shot him), and his support among unionized households tracked that overall trend closely.36 A majority of Americans favored canceling the last 10-percent installment of Reagan’s signature tax-rate reductions (although, interestingly, those with less income were more likely to favor going through with the rate cut).37 During the 1980 campaign, and in Reagan’s early legislative successes as president, some critics had lamented that he seemed coated with “Teflon,” a nonstick surface for cooking pans.38 His gaffes had seemed to do him little harm. But by the spring of 1982, the Teflon had worn thin. Howell Raines of the New York Times wrote that Republicans detected “a general antipathy to what one consultant called ‘the regal Presidency,’” and he reported critically on Reagan’s trip to Fort Wayne, Indiana, a city besieged by river flooding and by a 13.7 percent unemployment rate. Raines portrayed a president out of touch with general conditions and awkward with the residents of a working-class city. The only aid Reagan offered Fort Wayne was “a rambling anecdote about a speech he once made as a company spokesman in a General Electric Company plant. . . . The connecting link in Mr. Reagan’s mind was the fact that in the G.E. plant and in the flood victims’ shelter, he spoke from atop a cafeteria table.”39
Opposition to Reagan’s leadership found a new voice, in April 1982, when the CBS television network aired a one-hour evening news special hosted by Bill Moyers, once a press secretary to President Lyndon Johnson. The program, called People Like Us, showcased the stories of individuals hurt by Reagan’s budget cuts. Larry Ham was afflicted with cerebral palsy, but new eligibility standards pushed him off government assistance. Cathy Dixon, with a disabled daughter, suffered reduced Medicaid payments and felt compelled to institutionalize her child for fear that she could not afford to care for her at home. Frances Dorta, despite her poverty, lost her federal welfare benefits under the new rules because she had a job; when her son needed back surgery that she could not afford on her wages, she quit her job in order to reacquire Medicaid assistance. Moyers’s narration charged that Reagan’s budget “falls most heavily on the poor” and “the weak.”40 The program’s title served to rebuke a perception that liberals feared was rampant among the general public: that those dependent on government spending were not “like us,” meaning that their attitudes or values were defective. Conversations about whether the poor and dependent were or were not “like us” also carried a tense racial undertone. The White House criticized the show as distorted and merely anecdotal. The irony was lost on few: these adjectives often described Ronald Reagan’s speeches.
In the attenuated political discourse of the era, the question of Reagan’s attitude toward the distressed became known as “the fairness issue.” The issue was, indeed, fairness to those lacking social advantages, and it had a cutting edge. Descriptions like the one cultural critic Mark Crispin Miller offered of “those unremarkable men, like Caspar Weinberger and Donald Regan, who simply look like Republicans, i.e., as if their one desire in life is to repossess your house,” found a readier audience now that home foreclosures and business failures were rising to painful levels.41 Twenty-four thousand American businesses vanished in 1982, the biggest number since 1933.42 Yet Americans learned to talk about the spreading heartbreak of the early 1980s as one from a menu of political “issues.” This classified it as not a national crisis but, rather, the concern of a sector of the electorate with a special interest in such matters. The language of political consultants, which operated at one remove from social reality, had infiltrated civic life in general.
Still, the president’s political capital, as 1981 gave way to 1982, was much diluted. The next full budget Reagan sent to Congress, in the spring of 1982, was notable, remarks historian Gareth Davies, for “how little the administration changed course in response to [the] deterioration in its political standing.” This new budget proposal “placed the principal burden for deficit reduction on a fresh round of cuts in Medicaid, AFDC [Aid to Families with Dependent Children, the country’s main welfare program], and the food stamps program.”43 Republican senator Robert Dole of Kansas, sensitive to “the fairness issue,” said that “somebody else is going to have to start taking a hit besides welfare recipients.” Senator David Durenberger, Republican of Minnesota, asked plaintively, “Does this administration—does my party—care about the poor?” This was “the big question of this election year,” he declared.44 “More and more of us are starting to think it’s every man for himself,” remarked one House Republican, dismayed over the White House’s apparent lack of concern about the backlash that GOP congressional candidates might suffer over Reagan’s new proposed spending reductions.45 However, when Reagan shifted course and switched from more spending cuts to new tax increases as his way of showing fiscal discipline, in TEFRA (see chapter 3), he split Republican ranks in Congress, as he enraged conservatives, who voted against the measure. Reagan needed both Democratic and Republican votes to pass TEFRA.
Reagan sought to placate conservatives, unhappy about TEFRA’s tax increases, by supporting efforts, led by Senator Jesse Helms of North Carolina, to strengthen restrictions on government support for abortions and to strip the U.S. Supreme Court of its right to review state and local laws permitting prayer in public schools. But these efforts ruptured the president’s party anew, as a passel of Republican senators who had supported Reagan’s economic program opposed this “new right” social agenda. Successful filibusters against these measures were led not by Democrats but by Republicans Lowell Weicker of Connecticut and Bob Packwood of Oregon (who headed the Republican Senate Campaign Committee). Barry Goldwater’s constitutional scruples led him to side with them. “I don’t like being called New Right,” the Arizonan said. “I’m just an old, old son of a bitch. I am a conservative.”46 Helms, hailed by one Christian conservative activist as “the generalissimo of our movement,” was a firebrand who excelled in raising money for conservative candidates. But he earned a reputation for untrustworthiness among his Senate colleagues and proved unskilled at parliamentary procedure.47 The filibusters against Helms’s measures lasted from August 16 to September 23, and even conservative Republicans such as Dan Quayle of Indiana and S. I. Hayakawa of California tired of the battle and finally abandoned him.
Many questioned how strongly Reagan pushed for Helms’s proposals. Reagan made a series of public statements about abortion and sent a letter to wavering senators urging they support the antiabortion proposal as a “responsible statutory approach to one of the most sensitive problems our society faces—the taking of the life of an unborn child.” But the White House proclaimed itself neutral on the school-prayer measure, which the Justice Department considered unconstitutional, and preferred a constitutional amendment, which had no chance of passage.48 “My view is Reagan doesn’t have his heart in it,” Democratic senator Max Baucus of Montana said. “It is a token appeasement of the right wing.”49
The Democrats enjoyed a happy Election Day in November 1982. They expanded their U.S. House majority by twenty-six seats, running on the slogan, “It’s not fair, it’s Republican,” and emphasizing Republican efforts to trim Social Security outlays. The Democrats increased their majority of the nation’s governorships by seven and netted control of nine additional state legislative chambers. Five gubernatorial swings to the Democrats came in the country’s hard-hit north-central tier: Ohio, Michigan, Wisconsin, Minnesota, and Nebraska.50 Reagan’s party showed little of the strength in the Southeast that his performance there in 1980 had seemed to portend. The president made a point of campaigning against five Democratic House incumbents in North Carolina who had declined to support his economic program, but all five won, and two Republican incumbents in the state were ousted.51 The unemployment figure for September, 10.1 percent, was released the Friday before the election, and evening news broadcasts emphasized it.52 Some Democrats who had supported the Republican slate in 1980 “came home.” One unemployed Baltimore man, James Willders, had appeared as a Democrat in a Republican campaign commercial in 1980. In 1982, he was featured in a Democratic advertisement. “Remember me?” he asked. “I’m a Democrat, but I voted Republican once—and it’s a mistake I’ll never make again.”53
However, despite Democratic euphoria, the returns, in light of the recession’s severity, easily could have been more punishing for the GOP. Since 1900, the average loss of House seats for the party that, two years before, had taken control of the White House was twenty-five, almost exactly the 1982 figure. Yet, when the economic conditions and the president’s job-approval ratings of 1982 were considered in historical perspective, close students of such matters would have predicted a Republican loss of perhaps twice as many House seats.54 In the Senate, the Republican majority was unchanged, at 54–46.
Perhaps most important in buoying Republicans in 1982, as the political scientists Thomas Mann and Norman Ornstein explained, was the reality that “the predicted referendum on President Reagan was clouded by the public’s confusion and uncertainty over which party to blame for and how best to deal with the nation’s economic problems.” In one Election Day poll, 53 percent of voters said they thought Reagan’s economic program would eventually lead to prosperity, and the Democrats received a bigger share of blame for the nation’s economic ills than the president did.55 While Democrats believed economic concerns now worked in their favor, research in political science indicates they were wrong about this assumption. The GOP enjoyed an advantage in voters’ minds on such questions, an advantage damaged only partially and temporarily by the pain of the recession. The conservative economic perspective that had triumphed in 1980, emphasizing tax cuts and battling inflation, remained powerful.56 By some measures, Reagan’s job-approval rating, while not robust, had stabilized before the 1982 elections. The last 10-percent installment of the marginal tax-rate reductions came into effect on July 1, enhancing voters’ disposable income in the months before the election, always a help to incumbents.57
The Democrats’ new stance as champions of deficit reduction was not particularly alluring to voters. They had won tactical victories by letting Republicans take the lead on the 1982 tax increases. But the tax increases were not popular—they were aimed to please Wall Street, not Main Street—and the Democratic leadership supported them. Democrats had helped divert Reagan from his tax-cutting agenda of 1981. But in doing so, they began to pitch their tent on the hard ground of fiscal austerity, even as they struggled to protect social welfare spending from the budget ax. Still, the Republican losses in the House were enough to prevent the return of the conservative working majority the White House had enjoyed in 1981, in part because the Democrats’ emerging fiscal conservatism helped to bring the conservative members of their caucus back into the party fold.
Some Americans were doing well. The costs of the recession were far from equally shared. The financial sector enjoyed high profits during the recession, as creditors collected on high–interest rate loans with dollars that became ever more valuable as the inflation rate fell. Large banks, according to the Fed, enjoyed a return on their equity of 13.66 percent in 1981—“a banner year . . . far better than anything the major banks had enjoyed in the 1950s or 1960s.”58 Older Americans who depended on investments earned nice returns; between 1980 and 1984, the disposable income of families headed by those sixty-five and older rose 9.5 percent, almost triple the average increase for all American families across that period.59 Unemployment remained high, as did real interest rates, which was good for lenders. By 1983, nominal rates had dropped by about one-third from their peak. But inflation had plummeted, decreasing by about two-thirds. Therefore, real interest rates—nominal rates minus inflation—were actually higher once the recession ended.60 Lenders continued to collect hefty premiums.
If the numbers still were not good for many in 1983, the direction of the trends was better. Americans increasingly felt they had touched bottom. Contrary to supply-side theory, the blossoming recovery was led by consumer demand, not by enhanced capital investment. In March, the Fed’s Beige Book reported, “In most areas the recovery is being led, in many cases exclusively, by personal consumption expenditures and residential real estate sales and construction.” However, “Capital goods . . . remain severely depressed in most areas.” In December, “The 1983 Christmas season looks to be the best for retailers since 1978. . . . With striking uniformity the twelve Federal Reserve Districts report very strong growth in retail sales. Apparel, home furnishings, and home appliances are most frequently mentioned as the fastest moving items, and automobile sales continue to increase,” aided by low gasoline prices caused by increases in global petroleum supplies. Yet, as late as March 1984, the Fed reported that “unemployment remains disturbingly high, especially north of the Ohio [R]iver. Cleveland reports that cautious employers are increasing use of overtime and part-time help in preference to permanent increases in force.” In the capital goods sector, “Investment is frequently oriented toward controlling costs and enhancing productivity, rather than adding to capacity.”61
The country’s manufacturing heartland remained a trauma zone, a terrain of despair memorialized in popular culture through the songs of Bruce Springsteen’s uncompromising album of 1982, Nebraska. It was populated with characters like “Johnny 99,” a laid-off automobile-plant employee who, after drunkenly killing a store clerk, asks the judge at his trial to sentence him to die, and with the doomed losers of “Atlantic City,” desperate for a piece of the action in a rebuilt casino town whose new patina of glamour did not conceal the seediness beneath. In earlier recordings, Springsteen had made himself a working-class champion of immediate gratification and youthful male self-assertion, celebrating the joy of romance in a New Jersey landscape of motorcycles and epic partying. He became known as “the Boss,” an ironic nickname for a singer who railed against social authority. “I hate bosses,” he once said.62 Now, with his back-up band gone, accompanying himself almost solely with an acoustic guitar and harmonica, singing in a narrow vocal range marked by repetitious, mirthless rhythms and guttural shouts, Springsteen painted a scene of blasted hopes and stacked decks. Some of his songs referred to possibilities of rebirth and perseverance, but the overall tone of the record made these refrains sound foolish or sarcastic. A sense of entitlement to a happy, fulfilled life had died inside blue-collar America.63
The irony of the Reagan recession was profound. Ronald Reagan had castigated Jimmy Carter in 1980 for, Reagan charged, telling Americans they were living too well. Yet this was exactly what Reagan thought about many Americans. When he spoke of the purge that would have to follow the “binge” of high living and big spending that supposedly had occurred during the years of liberal ascendancy, he did not mean that everyone had lived too well or that all need suffer. Reagan subscribed to the classically conservative view that if the poor and the working class lived too well, inflation would run riot. Generous government spending on the poor worsened the problem. Just as clearly, he believed that what was good for creditors and investors in the short term would strengthen the economy in the long term and thus benefit all social classes. It is often said that Reagan changed American conservatism by bringing to it a sunny, optimistic visage. Reagan’s economic conservatism, however, was in truth deeply traditional and administered harsh medicine—but not to all.