Authors: Kurt Andersen
We had no idea. Almost nobody foresaw fully the enormity of the sharp turn America was about to take. Nobody knew that we’d keep heading in that direction for half a lifetime, that in the late 1970s big business and the well-to-do were at the start of a forty-year-plus winning streak at the expense of everyone else.
Partly as a result of various kinds of liberal
liberals were ill-prepared to appreciate or cope with what was about to happen. The energized economic right was led by corporations and the rich as well as zealots who’d been shut out of real power for decades—whereas liberals found zealotry vulgar and, although they’d been broadly empowered for decades, didn’t have big money riding on the outcome. The New Democrats were more like journalists and academics than traditional political types, more inclined to be polite than tough. Modern liberals prided ourselves on
being ideologues, on entertaining all sorts of disparate policy ideas for improving the world, whereas the economic right really has one big, simple idea—do everything possible to let the rich stay rich and get richer.
That last difference is the crucial one. Most Americans, even those to the left, have been reluctant to subscribe fully to Marx’s basic big idea, that modern society is shaped by an endless struggle between capital and labor, owners and workers, the rich and powerful versus everyone else. Our special American reluctance to go there has several different sources. We’ve never been a classless society, of course, but at the start we were a lot closer than most of the rest of the world. In 1830 the richest 1 percent of Americans received less than 10 percent of all the income, just half the share taken by Britain’s richest 1 percent at the time.
Slavery made factory owners look good compared to Southern plantation owners, and we fought a war to prove the point. The American Dream, in which a plucky individual moved up in the world and even turned from a worker into a boss, actually came true often enough to make people believe it might happen to them. For most of a century, the Soviet Union and the other countries that called themselves Marxist were terrible advertisements for anything from that lineage. For a long time, Americans did a good job using the government and other means—persuasion, threats, shame, honor—to level up workers’ and citizens’ shares of money and power, and to limit the shares taken by big business and the rich. As the wealth was distributed more equally, it grew faster than ever, which also disinclined most people to think of America as a place run by a minority of greedy, cheating self-dealers at the expense of a large majority.
So most liberals, like most Americans, preferred not to regard capitalists as categorically rapacious and amoral, or to imagine the U.S. political economy as a never-ending class war in which everyone must ultimately choose between two sides. That seemed crude. They didn’t vote for Reagan, but most didn’t
him, certainly not at first, because in their way they shared his dreamy faith in the 1940s Frank Capra movie vision of America. It was during the 1970s that
It’s a Wonderful Life
was rediscovered and made an icon—by liberals. And to some degree, most succumbed, like most Americans, to a new form of economic nostalgia that was being revived and popularized—the notion that market forces are practically natural forces with which we dare not tinker or tamper too much. Finally, upper-middle-class liberals didn’t want to think badly of all their friends and neighbors and classmates who happened to work at banks or in real estate or the vicinity of C-suites.
Starting in the 1970s, the Friedman Doctrine and its extrapolations freed and encouraged businesspeople and the rich to go ahead and conform to the left-wing caricatures of them, to be rapacious and amoral without shame. Indeed, the new economic right even encouraged them to wage class war—explicitly against the affluent “New Class” of (traitorous white) liberal professionals and the (black) “underclass,” more discretely against the (white) working class they were enlisting as political allies. Meanwhile liberals clung to their strong preference to see both sides, meet halfway, seem reasonable. Such a colossal irony: after socialists and Communists in the 1930s and then the New Left in the 1960s had tried and failed to achieve a radical class-based reordering of the American political economy, the economic far right took its shot at doing that in the 1970s and succeeded beyond anyone’s wildest hope or fear.
A bumbling, ineffectual strike by Time Inc.’s one thousand editorial employees, the first ever, had taken place a few years before I got there; its big demand had been that raises be exactly the same for everyone in percentage terms. After editors and managers successfully produced the next issues of the monthlies and three issues of the weeklies on schedule, the strikers gave up. The big problem, according to the head of
’s Newspaper Guild, was the “large number of members new to the idea of a union, let alone a strike.”
I’ve been an enthusiastic dues-paying and voting member of the Writers Guild, the union for TV and film writers, for three decades.
There’s a long etymology here. In the 1930s, when anti–New Deal economic libertarians were called liberals, as they still are outside the United States, some became known as “neoliberals.” By the 1970s the term was occasionally used to describe the radical New Left, then the wonky-moderate-Democrat self-definition came and went, supplanted around 2000 by today’s expansive everyone-from-Milton-Friedman-to-Elizabeth-Warren meaning.
Outsize influence then and now: a quorum of its writers and editors from the early days remain big-deal journalists and commentators, including Jonathan Alter, James Fallows, David Ignatius, Mickey Kaus, Michael Kinsley, Nicholas Lemann, Joe Nocera, and Walter Shapiro. Other prominent staff from later years include Katherine Boo, Nick Confessore, Gregg Easterbrook, Suzannah Lessard, Josh Marshall, Jon Meacham, Timothy Noah, Nicholas Thompson, Steven Waldman, and Benjamin Wallace-Wells.
As it happened, his antitrust experience had been entirely in private practice, representing corporations, as an attorney at the law firm of Lewis Powell before and after he wrote the Powell Memo and became a Supreme Court justice.
By the end of the 1970s, we’d gotten the 1 percent’s share back down to that egalitarian early American level, but since then it has more than doubled, so U.S. economic unfairness in 2020 is similar to British economic unfairness in 1830.
By the time the election came around in 1980—after Iranians took over the U.S. embassy in Tehran and kept fifty-two Americans hostage for a year, and a brief economic recession sealed the deal—it wasn’t a big shock when Ronald Reagan won. But exactly what was that election’s “mandate” concerning the political economy?
The campaign had run a TV ad with an excellent supply-side-for-dummies voice-over. “Ronald Reagan believes that when you tax something, you get less of it. We’re taxing work, savings, and investment like never before. As a result we have less work, less savings, and less invested.” See, if
pay less in taxes—and
if you pay less in taxes—America’s economic prosperity and stability will be restored. It’s not selfishness, it’s
. It’s not sleight of hand, or what Reagan’s vice president had derided during his primary campaign against him as “voodoo economics.” It’s the miraculous invisible hand of the market.
So what if millionaires would start paying a little less too? So what if big business was relieved of some of the government red tape everybody hates? And as for cutting government programs, people understood that Reagan was only going to get rid of the things that didn’t benefit
—all the waste and fraud, all the foreign aid, all the giveaways for all the lazy bums and welfare queens.
But the 1980 election was not really a popular mandate to reorient the political economy permanently to give big business and the well-to-do more wealth and power. In fact, in 1980 fewer than 51 percent of the electorate voted for Reagan; a total of 48 percent voted for the moderate Democrat and the liberal ex-Republican third-party candidate John Anderson.
election over the dull old-fashioned Democrat Walter Mondale was indeed a massive landslide, 59 to 41 percent. But look at Congress, and compare what happened starting in 1980 to what happened starting in 1930. The Congress elected before the Crash of 1929 consisted of large Republican majorities in both the House and Senate. Six years later, during the Depression, Democrats controlled the Senate by
75 to 17
and the House by
333 to 89
. That was a holy-smokes mandate on a scale unseen since. During the entire 1980s, on the other hand, the most Republican Senate of all was unexceptional, 54 seats out of 100, while the Democrats never got close to losing a majority in the House, and they won back the Senate in 1986.
That meant two things for liberals and Democrats in general. Politically and psychologically, they never felt utterly overwhelmed, the way Republicans felt in the 1930s. Yes, in three presidential elections in a row during the 1980s, Democrats lost thirty-eight states. But every time they had nominated an uninspiring tool, losing twice against the exceptional, probably unbeatable Ronald Reagan, and then against a moderate Republican incumbent vice president, George H. W. Bush.
More fundamentally, continuing Democratic dominance in Congress during the 1980s meant the economic right could use the federal government to remake the political economy only to the extent that Democrats
them. As the 1980s approached, even liberal Democrats were already cooperatively moving right—-more skeptical of unions and government oversight of business, open to lower taxes on the rich—so when the time came, Democrats definitely did let them. Too many confused the singular appeal of Ronald Reagan personally with massive popular approval of pro-business, pro-rich Reaganism, and their reaction was to cower, essentially disavowing their New Deal social democratic past.
As Reagan settled into office and became
liberal dread concerning domestic policy was reduced by the nature of his appointees—who mostly were, like his vice president, moderate Establishment types, normal Republicans, not crazies.
In addition, Democrats had taken their eyes off the ball of the political economy and focused more of their dread of what this old-school anti-Communist president would or could do abroad—fund death squads and counterrevolution in Central America, upset the precarious nuclear balance with the USSR, trigger World War III.
Reagan was also very lucky very quickly in ways that made him more popular. The very day he was inaugurated, Iran released their American hostages. Two months later he was shot by a movie-mad would-be young assassin—and survived, unlike any president who’d ever been shot before. The normal honeymoon period intensified.
Reagan also lucked out right away with the month-to-month, year-to-year economy. As soon as he took office, the tough tight-money regime of the new Federal Reserve chairman—who’d been appointed by Jimmy Carter in 1979—was finally cooling inflation down. A providential global oil glut suddenly and precipitously drove down the price of gasoline and other energy. Americans felt as if Reagan were working magic. A recession kicked in right away, a year of pain that came with bringing down inflation—but that timing was also lucky, politically best to get it over as early as possible.
While the economic turmoil of the previous decade—the high inflation, the quintupling price of oil, the multiple recessions—was seriously unpleasant, as I’ve said, it didn’t come close to Depression-level cataclysm. Throughout the 1970s, however, the economic right had pretended otherwise. “The United States,” Jude Wanniski’s 1975 article introducing supply-side economics began, “has been passing through an economic nightmare.” The new president stuck to that script in the 1980s, telling Americans they’d just barely gotten off the road to dystopia, and that the big bad federal government itself
until the moment he was inaugurated
had been to blame. “In this present crisis,” he said in his first inaugural speech, “government is not the solution to our problem; government
the problem.” During his first couple of years, he said on various occasions that “when this administration took office, we found America in the worst economic mess since the days of Franklin Roosevelt,” with the “government careening out of control, pushing us toward economic collapse, and quite probably, the end of our way of life,” but that already “we’ve pulled America back from the brink of disaster.”
An exaggerated sense among Americans that they’d just barely escaped a death spiral, along with the actual relief of an improving everyday economy, made it easier for Reagan and his comrades to move to the next level in their project of restructuring the political economy and rewriting its premises.
Most of the big corporate titans had not started the 1970s as Reaganites, and even at the end of that first decade of intensified, systematic corporate political activism, their favorite candidates had been the more familiar Establishment guys. Charls Walker, who was one of the best-connected lobbyists of the era and a former deputy treasury secretary, wrote a memo early in the 1980 campaign to the top corporate CEOs granting his imprimatur to Reagan—another history-changing memo to the capitalists! A little later he claimed that he had thereby closed the deal for their support.
The Business Roundtable didn’t know Reagan, and they tend to identify him with right-wing positions and extremism. But the publicity that me and these “moderates” are in there makes them feel a lot better. None of us who started working on [this project] in the early 1970s thought the consensus would come along this fast.
As president, Reagan immediately and totally delivered for the CEOs and the rest of the rich. In addition to Reagan himself, the administration official most important to executing on that was David Stockman. Stockman was Reagan’s director of the Office of Management and Budget (OMB), an intellectual two-term congressman in a job previously done by technocrats, economists, business guys. He was neither a crazed New Deal–hating libertarian nor a cynical corporate lobbyist but an idealistic, old-fashioned young conservative who wanted a smaller, cheaper federal government and a balanced budget. He’d gotten into politics in 1970 as a protégé of John Anderson, the moderate who’d just run as a third-party candidate against Reagan.
Stockman didn’t entirely buy the supply-side notion—wishful fantasy or disingenuous con?—that giant tax cuts alone would restore golden-age American prosperity. But he played ball. In the movie version of this story, you’d definitely include scenes of the winter day and night he spent in New York City just before he started the big Washington job with the new administration. First he and former NFL quarterback Jack Kemp, a fellow House Republican and the leading supply-sider in Congress, visited the big investment banks for meetings to reassure them. Even after Reagan was elected, the head of the Chamber of Commerce called the first big supply-side proposal, a gigantic 30 percent tax cut, “a most dangerous experiment.” That day on Wall Street, according to Kemp, “we told them we weren’t for scaring the market. Dave’s credibility is extremely important.” After reassuring the captains of finance that they and Reagan were not in thrall to some cabal of reckless wing nuts, Stockman and Kemp drove uptown to celebrate victory at the grand old private clubhouse of the Century Association with
cabal of supply-side ultras—including
Wall Street Journal
’s Bartley and Wanniski, Kristol, and Greenspan, whom Reagan would appoint to run the Federal Reserve.
As OMB director, Stockman looked for ways the government might spend less, apart from reducing foreign aid and help for the poor, to accommodate the largest tax cuts in U.S. history. For instance, he suggested saving billions by reducing tax breaks for business and for rich people with mortgage loans, and by increasing fees paid by owners of private planes. The president told him no. During that first year, Stockman gave a series of interviews to the journalist William Greider, who turned them into a long cover story for the
When it was published at the end of 1981, the article got enormous attention because the OMB director, who’d been a Harvard theology grad student before he got into politics, was astoundingly honest. The Reagan administration had managed that summer to convince Congress, including the Democratic House, to make the richest Americans’ top tax rate lower than it had been anytime in the previous half-century. Stockman admitted in the article that that had really been the entire point. Because politically it would’ve been “hard to sell ‘trickle down,’ ” he explained, “the supply-side formula was the only way to get” that. The massive cuts were
cynically, he admitted, “a Trojan horse to bring down the top rate” on the wealthy and taxes on business. As for Laffer’s supply-side theory, Greider said Stockman conceded it “was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine.” In fact, Stockman told him, “Laffer sold us a bill of goods….Whenever there are great strains or changes in the economic system, it tends to generate crackpot theories, which then find their way into the legislative channels.”
Greider said that Stockman was dispirited by the “final frenzy of trading and bargaining” in which he’d just participated—the “special tax concessions for oil-lease holders and real-estate tax shelters, and generous loopholes that virtually eliminated the corporate income tax.” This was Reagan’s frontline economic main man talking, just nine months into the administration:
Do you realize the greed that came to the forefront? The hogs were really feeding. The greed level, the level of opportunism, just got out of control….The power of [big business and the rich] turned out to be stronger than I realized. [They] know how to make themselves heard. The problem is, unorganized groups can’t play in this game.
Stockman’s reaction might seem disingenuous, but the extent and power of organized greed were new in the modern era. In the spring of 1981, three months after Reagan’s inauguration, for instance, the first sentence of a
story about lobbyists’ salivating excitement referred to “K Street, where the equivalent of a new branch of government is thriving among the glass and steel buildings.”
was about to become the standard metonym for Washington’s suddenly huge and growing lobbying establishment.
So in addition to earnest liberals acting in good faith to compromise with conservatives, a few earnest conservatives such as Stockman were also trying to act in good faith and also becoming useful idiots for big business and the rich. Another of them was Martin Feldstein, the conservative Harvard superstar who became the new president’s chief economic adviser—but only nominally, because Reagan ignored him. Feldstein actually hated deficits, as true conservatives did, and called his supply-side colleagues “extremists.” Stockman’s chief economist at the Office of Management and Budget—who left in 1983 to earn a fortune on Wall Street, then become a cocaine addict and TV pundit—said that Feldstein “has failed at making the transition from academic economist to political economist.” That was thirty-six-year-old Larry Kudlow, defining
to mean not an expert on political economics but an economist willing and eager to dissemble and lie to suit his political masters, thirty-five years before he returned to government work as Trump’s director of the National Economic Council.