Editor’s note: this is adapted from Dean Baker’s new book, The United States since 1980 (The World Since 1980).
The welfare state in the
Reagan’s election changed the political reality. His agenda was rolling back the welfare state, and his budgets included a wide range of cuts for social programs. He was also very strategic about the process. One of his first targets was Legal Aid. This program, which provides legal services for low-income people, was staffed largely by progressive lawyers, many of whom used it as a base to win precedent-setting legal disputes against the government. Reagan drastically cut back the program’s funding. He also explicitly prohibited the agency from taking on class-action suits against the government — law suits that had been used with considerable success to expand the rights of low- and moderate-income families.
The Reagan administration also made weakening the power of unions a top priority. The people he appointed to the National Labor Relations Board were qualitatively more pro-management than appointees by prior Democratic or Republican presidents. This allowed companies to ignore workers’ rights with impunity. Reagan also made the firing of strikers an acceptable business practice when he fired striking air traffic controllers in 1981. Many large corporations quickly embraced the practice. Also, his high dollar policy in the mid-’80s was a severe blow to manufacturing unions, who suddenly had to compete against low-cost imports that were essentially subsidized by an overvalued dollar.
The net effect of these policies was that union membership plummeted, going from nearly 20 percent of the private sector workforce in 1980 to just over 7 percent in 2006. Inequality soared, as the vast majority of the gains from economic growth over the next quarter century went to high-end wage earners (e.g., doctors, lawyers, CEOs) and profits. The wages of typical workers increased little from 1980 to 2006.
On the international side, Reagan followed through on his campaign promise to reject the arms control agreements that previous administrations had negotiated with the Soviets. He insisted on going back to the drawing board and negotiating proposals for arms reduction, not just freezes. While Reagan eventually found a more accommodating enemy than he had anticipated when Mikhail Gorbachev came to power in the Soviet Union, his belligerence towards the
Reagan was also willing to act aggressively, and often alone, in other foreign policy matters. For example, throughout his presidency he sustained a guerilla war against the democratically elected government in
But, the right-turn path may be reaching a dead end. In terms of the economy, we have had a quarter century of top heavy growth in which the vast majority of economic gains have gone to the richest 10 percent of the population. While the economy has generally been boosted by a virtuous cycle in which productivity growth lead to wage growth, which in turn lead to consumption growth and then further productivity and wage growth, the key stimulus for growth in the last decade has been financial bubbles, first in the stock market and more recently in the housing market. With the latter bubble beginning to unwind, the economy’s prospects do not look bright.
Internationally, the days when the
Even barring any military conflict with
This is a bad situation for a bully to be in. After a quarter century of not caring about the concerns of other countries, the
Dean Baker is co-director of the Center for Economic and Policy Research.