Reagan and the End of Malaise
It was against a background of social and economic uncertainty that Ronald Reagan was elected to the presidency. This country was suffering from what Jimmy Carter called "a malaise," a sickness of spirit. Countries are founded on ideas, or central beliefs which define their characters and aspirations. In this country, that belief was individualism; it was the defining element of America, and just as importantly how its citizens viewed their country. In the seventies, individualism and what it represented seemed to be under attack from every side, internationally and domestically, and even economically. Eventually people had begun to question the rightness of the belief in individualism.
Ronald Reagan was proudly individualistic, and he did not apologize for this. He struck a chord in Americans, who were not ready to give up on their beliefs. Here was a defender of individualism who stood up for what Americans had always believed. He reaffirmed their belief in individualism and their faith in this country. America was reborn, breaking the malaise; once again people were proud of its ideas and aspirations. He restored respect for self and country.
During his campaign Reagan had told voters that if the government were to cut taxes and limit spending, the jump in private demand would give the economy a boost. The tax cut would increase the budget deficit, but would stimulate the economy to the point where our country could grow out of the deficit. Although Reagan called this "Supply Side Economics," he was essentially proposing a new bout of Keynesian economics; government would increase demand using fiscal policy.
Reagan's talk of supply side economics brought an amazingly hypocritical response from the Washington establishment. Democrats who for years had voted for Keynesian policies and supported the government's efforts to use fiscal policies to control the economy, suddenly decided Keynesian economics was a heinous affront to humanity, an evil tool which could only bring evil results. When Roosevelt had tried it, he was a savior. When Kennedy did it, he had vision. But now that Ronald Reagan did it, it was a crime.
Nonetheless, Reagan was able to get the tax cut passed. From an economic standpoint, the effect of the tax cut was negligible; the actual amount of money put in peoples hands was small. However psychologically the tax cut was very important. For years Washington had increased the size of government and pursued policies which were clearly detrimental to the interests of business. The tax cut marked an end to this trend. To let businesses know that Reagan was intent on working with them and not against them. America had entered the decade with a pro-business atmosphere.
The recession also brought a psychological change in businessmen and women. It had shocked them out of the stupor years of inflation had brought, causing them to once again examine exactly what was needed to sell their products in the extremely competitive world marketplace. After the recession ended, the U.S. entered into a period of prosperity and the economy once again grew. Even as our basic industries were contracting, other segments of the economy were expanding.
The economic makeup of the country was changing. Manufacturing jobs were disappearing as plants shut down due to their inability to compete with inexpensive and frequently better made foreign products. These manufacturing jobs were being replaced with jobs in the bureaucratic and developing high-tech and service segments of the economy. The tendencies of the government's economic policies were manifesting themselves; manufacturing was more expensive and less competitive.
The economic transition had an effect on the country's social makeup as well. People in demand, those with college degrees in the high-tech, bureaucratic, and service segments of the society, saw their wages increase. Those without college degrees were competing for increasingly fewer low- paying industrial jobs, with that competition keeping wages down for those lucky enough to find work. America was becoming a two tiered society, with the gap between the rich and poor widening. Government policies which had been designed to insure the average citizen a job and a decent living had instead cost many people both.
At the bottom of the lower tier a permanent underclass was developing, a group of people who were completely dependent on the government for food and shelter. Because the Great Society programs were based on the view that people were a reflection of their environment and not responsible for themselves, government had attempted to help people by changing their surroundings, raising their socio-economic status (SES) until they caught on and came to reflect their new surroundings, at which time they would no longer need government aid. However, people are not a reflection of their socio-economic status; rather their SES is a fair reflection of a person's ability to operate in society. The people the government was trying to help were at that low economic level, in part, because they lacked the responsibility and skills to operate at a higher economic level. The government, in taking responsibility for feeding and housing people, was not imparting the skills people needed to maintain a higher level; one does not teach responsibility by taking responsibility for people. If anything, the governments programs achieved just the opposite - they taught people to be irresponsible. By not allowing people to assume the responsibility they needed, the government made it impossible for them to move off welfare and become self-sufficient.
What the government needed to provide was the basics of individualism, self-control and responsibility. However, even if the government had taken the path of teaching individualism, it would have been of limited effect. More than anything else, jobs were needed. The number of lower level industrial and light manufacturing jobs which are at the bottom of the economic structure was decreasing. The jobs for people with limited education, who were coming off welfare were disappearing, driven overseas by the inflating costs facing manufacturers in the United States.
Throughout the late sixties and seventies, the amount of aid people were receiving was increasing due to inflation. Soon the money to which they were entitled from the government was more than they could make in an entry level job, if they could have found one. To go off welfare would mean a drop in real income. Instead of government help making these people self-sufficient, it made them permanently dependent on the government to feed and house them. Johnson had hoped to restructure society to end the problems of poverty, but instead he had laid the groundwork for the eventual creation of a permanent poverty.