Ronald Reagan’s lucrative anarchy

“All in all, I think we hit the jackpot.”
- Ronald Reagan, signing the law deregulating the S & L’s in 1982.

(part four of my version of the Reagan Legacy Project) 

Big government was Ronald Reagan’s bête noire, the focal point of rage for thousands of his speeches, and the dragon he rode into Washington promising to slay. It was the dark background he set himself against, and the one domestic issue for which is most remembered.

That’s a remarkable feat of revision, since, by any conceivable measure, he was an abject failure at reducing the size of government.

He tripled the national deficit. Federal spending as a percentage of GDP grew under his watch. The percentage of national income devoted to federal taxes went from 19.4 all the way down to – wait for it – 19.3. Reagan took America from being the largest creditor nation to the largest debtor nation, and yet somehow, conservatives can still praise him as a paragon of small government and keep a straight face.

But by their unique definition of small government, he was a resounding success. He slashed taxes on the rich and benefits for the poor. Wages for the middle class were stagnant while the bottom fifth’s bottomed out, dropping 7 percent. Yet the top 1 percent of the population went from holding 22 percent of the nation’s wealth to 39 percent of it. Reagan didn’t shrink government. He reordered it – its priorities, its expenditures, its very reason for existence. In the simplest, most vivid example, he took about 70 billion dollars once devoted to the poor and put it in the Pentagon.

Notice I said Pentagon, not the military -which would apply public interest. A crooked web of defense contractors and consultants and the officials who enabled them were siphoning something around $160 million dollars a day out of the budget for military procurement. This is where the infamous $600 toilet seats and $400 hammers come from, but it went much deeper and uglier than that. There were hundreds of tales of kickbacks, favors and gifts, and classified documents being funneled to the right contractors. It was an open invitation to incest between the Pentagon and big business – plunder under the guise of patriotism, war profiteering in a time of peace.

But such corruption wasn’t limited to the Pentagon. Every cabinet in the Reagan administration had an open-door policy to those long on wealth and short on ethics. Foreshadowing the George W. Bush years, posts were filled not by the qualified, but by cronies and incompetents whose main qualifications were their ideological loyalty and ability to pay back patrons and boosters. This led, predictably, to massive corruption, numerous scandals and precipitous decline in morale among federal employees. This was accompanied by massive deregulation across the board, a process started by Jimmy Carter. But where Carter cut fat, Reagan cut to the bone, gutting necessary protections and safeguards – and, in the case of the S & L scandal, left his predecessor and taxpayers to clean up the mess.

Ronald Reagan often said government was the problem, not the solution, and his administration did everything it could to prove that statement. As Thomas Frank points out in his book The Wrecking Crew, conservative cynicism about government naturally leads to sabotage of the state. If you think government is worthless, you will think it worthless to stop abuse of its offices. If you see no honor in public service, you will have no shame in exploiting it for personal gain. When government is an evil, undermining it must be a good deed. Lucrative anarchy becomes the order of the day.

But perhaps I shouldn’t speak in past-tense judgment. We appear to have learned nothing from the play-now, pay-later mentality of the 1980’s. Reading accounts of the Reagan years, written then, you hear about financial disasters spawned from new financial toys called “derivatives”, and how careless deregulation led to crises in the banking sector, forcing a taxpayer bailout. You read about consumers gorging on debt, and about how the astronomical incomes on Wall Street fueled an unwarranted confidence that led to a magnificent crash. Our country went through the period of ‘entrepreneurial government’ once already and survived somehow. From that, we took the lesson that we should double down and try it again. We’ll see if we’ll be so lucky this time around.