The Atlantic and Its Enemies (67 page)

‘Conservatives’ in the American case needs inverted commas. In England, to which the word properly belonged, the Conservative Party was indissolubly associated with Church and State; its leaders spoke with a different accent, ate at different times, and had institutions to defend that had no equivalent in the United States. If anything, the Conservative Party was by far the earliest and most successful version of continental-European Christian Democracy, but since this closely involved the Catholic Church, there was a huge difference. In economic matters, the Christian Democrats were not necessarily free-marketeering at all, and the British Conservatives had operated a Welfare State, with a great deal of nationalization, without demur until Margaret Thatcher’s ascent in 1975. The American ‘conservatives’ were unavoidably different: far more inclined towards the free market, hostile to big government, generally keen on decentralization to the level of the American states, and radically opposed to the welfare system that had developed since Johnson’s ‘Great Society’. In the 1980s, they had their hour: they had the presidency, controlled the Supreme Court and the Senate, and were close to control of Congress generally. But as events were to show, the American Right was very divided. Tax-cutting and limited government were one cause; so was monetarism, the campaign to stop inflation; but so too was moral resentment, a feeling that the country was disintegrating; and there was also an element that disliked the moralizers, whereas, on the question of free-marketing or abandonment of regulation, it agreed with them. Keeping this coalition together was very difficult and in the 1990s it fell apart.

Reagan somehow kept it together. He had simple answers, in what was known as ‘The Speech’. It was easy enough to show example after example of government wastefulness and inefficiency, or Communist wickedness, and in 1980 ‘the little man’ generally felt that he was being penalized whereas he was working normally to bring up his family decently. This was also a moment when the Right recovered its intellectual energy: no longer was it the apologizing me-too Republicanism of the Eisenhower era. In the sixties, there had been powerful books of the J. K. Galbraith type, on the evils of unregulated capitalism and the virtues of Keynesianism. Now, there were powerful books on the other side. Richard Perle and Jeane Kirkpatrick had been firm Democrats, consulted by Carter. After seeing how he ran his administration, they went over to Reagan’s side, and so did a further cohort of New York Jews, originally of the Left. In 1980 that side was winning the arguments. Keynesianism as understood in the sixties had produced ‘stagflation’, and an alarming fall in American productivity (as Joseph Stiglitz concedes in the preface to his
Roaring Nineties
of 2003). There was more than room for a return to older economics, for which Milton Friedman was the chief spokesman. The
Wall Street Journal
under Robert Bartley displayed panache in this cause. Later on, in 1996, he produced
The Seven Fat Years
, a sparklingly written account of this time. In the later seventies, he commissioned economists - and considerable ones - to write in derision of the Carter era. The school became known as ‘supplyside’, useful shorthand but no more than that: the ‘supplysiders’ were arguing perfectly seriously that taxes were too high, and were having perverse effects; that if they were lowered, the government would in fact get more money, because taxpayers would not refuse work or avoid tax in complicated, expensive accounting devices. They might even use the money for productive investment. Stiglitz and many others now dismiss these ideas, but in the short term they proved, as Bartley shows, quite right. Then there was the extraordinary deterioration of the conditions in which big-city Americans lived: squalid housing, grotesque crime rates. Myron Magnet, a scholar of English literature who knew his nineteenth century, wrote (in 1993)
The Dream and the Nightmare
and it was easy for him to catalogue the failures of the ‘Great Society’: as Reagan said, ‘We declared war on poverty, and we lost.’ There was also a failure, though a more complicated one, as regards America’s racial problem. ‘School bussing, more public housing projects, affirmative action, job-training programs, drug treatment projects . . . multi-cultural curricula, new textbooks, all-black college dorms, sensitivity courses, minority set-asides, Martin Luther King Day, and the political correctness movement at colleges’ had only led, all in all, to rather greater apartheid than before. Magnet went too far in ascribing all of this to the culture of the sixties: it all followed in a pattern of social engineering that had longer origins. However, his facts were incontrovertible: something had gone very badly wrong, and the bleakness could easily be extended as far as education was concerned. Here again, progressive ideas obviously failed. Charles Murray (
Losing Ground
) spelled it all out, tellingly and uncomfortably. In 1965 Daniel Patrick Moynihan had foreseen the problem; and twenty years later, three of five babies born in central Harlem were illegitimate. Welfare payments made this possible, and girls became pregnant while men refused to marry. The wisdom of the ages knew perfectly well what the family was for; there was a more complicated wisdom, developed in medieval Christianity, that considered the harm that charity might do. ‘Blessed are the poor’ was one line; but clergymen who considered the matter knew how charity could be abused and become counter-productive. At any rate, by 1980 it was clear enough that the ‘Great Society’ had gone badly off the rails. The same considerations were of course well-known in Britain, but not to nearly the same extent, and, there, the immediate problems confronting Margaret Thatcher were to do with the trade unions. At any rate, by 1979 the pendulum had swung firmly towards the Right, and the interesting books reflected this.

Reagan was of course helped, as ever, because his opponents underrated him. Carter was even quite pleased at the nomination of a washed-up actor with eccentric political views. But it was Reagan who won the exchanges. Carter mocked him, saying the economy was in depression; what he meant was ‘recession’ but did not know the difference. Reagan was quick off the mark: ‘A recession is when your neighbour loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.’ Of course the establishment - what Vladimir Bukovsky calls the new American elite - did not like this but, in the event, the election gave Reagan a comfortable victory. Carter then went off to obscurity, subsequently returning in the 1990s to inform the world that North Korea would agree not to develop nuclear weapons or that Haiti would turn into a proper democracy, announcements very rapidly falsified by events. With this hapless figure, the sixties came to an end.

In January 1981, as he took over, Reagan announced that there should be tax cuts and a reduction in domestic spending; he promised prosperity. However, as with Margaret Thatcher though for different reasons, he ran into problems. There were severe enough limitations on his power but in any case the ‘conservatives’ were implicitly divided and this showed, after initial reverses. Reagan had pledged to cut public spending, and blamed it for many ills, including inflation; at the same time he had promised to cut taxes. There was a difficult context, because interest rates (at almost 20 per cent) were so high. Private enterprise could no doubt take up slack that came from a reduction of public spending, but not if credit were so expensive: any small business would need it to keep going. Besides, Reagan was not the only wielder of power: there was a Democrat-majority Congress, there were separate states with spending rights, and there was a legal system of fabulous interferingness. Public opinion was a constant concern, and the media thereby seemed to have enormous importance - the maker and breaker of presidencies. Besides, any President would inevitably find himself dealing with foreign affairs - one complication after another, with vociferous lobbies attached. Not an easy set of cards to play.

Divisions emerged rapidly enough. Jack Kemp especially had been arguing that tax cuts would more than pay for themselves. This was a popular enough cause. The average family income in 1970 was under $10,000, and as that figure, on paper, rose, the tax rate went up by 20 per cent, though the average income in 1980 was buying about 20 per cent less than in 1970. In, say, Germany, the high taxes at least bought decent public services. Not, for the most part, in the USA. However, there was a vast constituency for social security, especially Medicare and Medicaid, the costs of which went up and up (while also leaving millions of people without health insurance). There were also endless lobbies for this or that subsidy, especially the farmers: a cow cost $2 per day, before it had even started to chew the cud or be milked. A very tortuous campaign went ahead, through a Democrat-dominated Congress (with a slight and unreliable Republican majority in the Senate). Reagan turned out to be a very astute manager. His style was less than hectic: he refused to do early-morning meetings. The team that he had chosen spoke with different voices: a James Baker, more or less in conventional mould, could, as Chief of Staff, talk lobbyists’ language, whereas a David Stockman, managing the budget, addressed fears as to deficits. Reagan could also use television as a professional, and outflank Congress in that way, with an appeal to public opinion. Above all, he did not preach or offend, and his relations with the Democrat Speaker, Thomas ‘Tip’ O’Neill, were friendly. In 1981 legislation brought a tax cut of 25 per cent, in slices - 5 per cent at once and 10 per cent for the next two years. The top rate of tax fell from 70 to 50 per cent and by 1985 tax was supposed to be indexed against inflation. By 1988 the top rate had fallen to 28.5 per cent. There were concessions elsewhere, for retirement savings and the like. So far, so good. Reagan was also shown to be right as to the effects: the better-off did not avoid tax, and income from them went up, not down. In 1986 a new tax law brought the marginal rate down from 50 to 28 per cent but cut out some loopholes, and there were only three tax brackets. However, business and other taxes did in effect rise.

David Stockman, at the Office of Management and Budget, was a man of fiscal rectitude, and he could see an immediate problem: a deficit. It stood at $50bn in 1980, and under Reagan, by 1986, reached $200bn. When he left office, the overall debt had increased by $1,500,000,000,000 (1.5 ‘trillion’, though the word is not correct). Stockman was a free-market convert (originally from the radical Left) and set himself to attack ‘forty years . . . of promises, entitlements and safety nets’,
i.e.
the welfare state as it had grown up since Roosevelt’s time. The problem here was not just the poor, for whom the welfare state had been designed. There were many middle-class ‘entitlements’ as well, and the health schemes were notoriously prodigal. There were also arrangements to subsidize the buying of houses on mortgage - great federal institutions, quite strictly regulated. Meanwhile, Reagan himself had encouraged the Defense Department to put up its budget, and according to Stockman, its Secretary, Caspar Weinberger (one of Reagan’s Californians) in effect dictated government finances. Stockman talked to congressmen with a view to having taxes put up, not down, because of the deficit and ‘leaked’ news that he had sabotaged the tax cuts, but Reagan did not dismiss him until 1986, when Stockman went on to Wall Street. His memoirs are a long statement of contempt: both for the endless political subsidization (‘pork barrel’) that went on, sometimes by small-print subterfuge, and for Reagan’s own management, which he thought very weak and even reckless. Military spending took priority, and from 1981 to 1987 went up from under $200bn to nearly $300bn. But it was not just defence: Stockman catalogues case after case of special pleading, as each congressman expected a favour or two in return for his vote. His was a curiously unstable career - Harvard theology, the anti-Vietnam Left, free-marketeering, money on Wall Street and, in 2007, an indictment for fraud.

At any rate, he could not convince the powers that be, and became a fifth wheel. The Reagan administration went along with social spending. There were ‘cuts’ - in 1981 $35bn, as food stamps and student loans were cut back. A redundant employment agency was closed down and fuel prices were freed. These ‘cuts’ were overall rather trivial, but, as ever in this period, there were dramatic howls. Even Daniel Moynihan talked of ‘devastating cuts’ and a well-known liberal economist, Robert Reich, said that it was ‘the return of Social Darwinism’ - the same hysteria as appeared in Britain. But Reagan could not cut back significantly: he went on spending, and could afford to do so because the GNP rose by a third - equivalent to the entire German economy. David Frum (
Dead Right
) is scathing. He notes that Reagan’s old Californian associate Edwin Meese, though supposedly overseeing the entire administration from the ‘conservative’ angle, and subsequently Attorney-General, wasted time, ran an office of legendary confusion, and protected spending programmes from Stockman’s axe - orange-growers, for instance, who were very firmly regulated as to how much each could produce. In February 1981 he trumped Stockman by announcing that all the chief programmes (Medicare, etc.) would be safe. In the same way, the despised Department of Education was not closed down, as had been, to wide enthusiasm, promised. Carter had rewarded his teacher allies with it, and the Reagan allies regarded it as pernicious. But on it went, to a budget of over $20bn in 1989: it was a useful field for patronage, particularly its Civil Rights side. William Bennett, an interesting thinker, was put in charge, and went around making speeches that electrified audiences, but his department blithely went on as before, with bussing schemes and federal instructions as to how schools should teach. The budget went up from 1981 to 1989 and the rise accounted for three quarters of the 50 per cent increase in federal education spending. Yet America’s educational performance went down, at any rate as far as schools were concerned. Literacy was barely above the level of poor countries, although spending was considerable. Perhaps the worst case occurred with farmers. They had borrowed to buy land in the 1970s and then faced high interest rates, with declining prices for land and crops. The government offered credit to a maximum of $2.5m per farm, and even forgiveness, and the extra $20bn farmers received in 1986 was three times the federal contribution to families with dependent children. Overall, spending rose from $808bn to $1,114bn. Reagan’s own record looked somewhat better, in terms of government share in GDP, only because some big bills - the savings and loan debacle - came in after he had gone. He had said that he would try to undo, not the New Deal, but the Johnson Great Society. However, an essential part of that had been Medicare, which paid most of the health costs of the elderly, over sixty-five, even when they were not at all poor. This had cost $64m when it began in 1966, and reached $32bn in 1980 and over $200bn by 1997. The usual explanation for this was that medical technology and drugs had a higher inflation rate than anything else, although quite why was not easy to see: usually, technology depressed costs. Reagan had begun by denouncing socialized medicine as likely to end up with problems of this sort, but, once in office, he of course could not attack such a large and powerful constituency, and, as happened with variations anywhere else, was reduced to tinkering with cost caps. By 1993 Medicare alone took 11 per cent of all federal revenue, having grown at 12 per cent per annum. Besides, the huge inflow of Medicare money made every other form of health care more expensive, and employers were paying more into the system instead of raising wages and giving people money to spend directly, which might have caused them to question costs. Here was a monster out of control.