Path: bloom-picayune.mit.edu!enterpoop.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: \TITLE Date: Tue, 24 Nov 92 12:40:58 EST Message-ID: <13.1992Nov24.124058@AmeriCast.com> Lines: 278 11/24/92 TITLE WHAT IS REAGAN'S REAL LEGACY? Bush's Failure Lets Revisionists Write Off '80s First of two parts Paul Sperry In Houston Four years after the end of his two terms in office, President Reagan's economic legacy is still hot- ly disputed - and, some would say, distorted. Reagan's record has been incessantly picked at and torn apart by some media since he entered office in 1981. All that remains is a skeleton of largely ignored facts: an unprecedented 96 months of peacetime economic growth and 18 million new jobs. Somehow, the media, in a frenzy of revisionism, have been able to discard those numbers as irrelevant. "Ultimately, Reaganomics was a failure," the Los Angeles Times proclaimed in a recent business story. "It produced big political dividends for the Republicans, and it may have contributed to rapid economic growth during the 1980s. But it was . . . based on a deeply flawed economic no- tion." That report added to other recent criticism of Reagan's supply-side policies on the heels of President-elect Clinton's victory. It's hardly the first harsh post-mortem - although it's probably the safest, considering the Bush recession and voters' return to the Democratic fold. Like the emperor's clothes, the history rewrite has created a kind of national denial: People who actually prospered from the Reagan revolution now must pretend it didn't happen. The minority of economists who still try to dispel the growing myths warn against learning false lessons from histo- ry. For one, some scholars will erroneously teach future think- ers and leaders that supply-side economics was intrinsically flawed, an illusory policy, those economists say. Meantime, Reagan supporters say, the public will continue to buy into poli- ticians' quick-and-easy solutions of redistributing wealth in- stead of creating it. Some reporters were heaping blame on Reaganomics as early as 1983. In a prominent example, ABC News' Sam Donaldson gave Reagan an 'F' for the recession and warned of two more years of the same under Reagan's seemingly illogical re- cipe of government tax and spending cuts. Of course, the economy shortly thereafter exploded out of the recession and into a pro- tracted expansion. Even in the heart of the boom, when the econ- omy reached full employment, the media were skeptical. CBS' Charles Kuralt and Connie Chung, then with NBC, emphasized analysts' concerns about the inflationary danger of low unemploy- ment. Their pessimism paid off in October 1987 - or, so it seemed. "What crashed was more than just the market," reported a Time magazine cover story. "It was the Reagan illusion: the idea that there could be a defense buildup and tax cuts without a price, that the country could live beyond its means indefinitely." To the chagrin of naysayers like economist Allen Sinai and the Time author, the predictions of another Great Depression never materi- alized. WHAT IS REAGAN'S REAL LEGACY? Indeed, the market recovered rather quickly, moving back to new- high ground, and the economy continued to grow for nearly three more years. And, despite a $1.2 trillion defense buildup and the much-feared "twin towers" of debt, inflation and interest rates held steady. Generosity In The 80s But that didn't stop the negative reviews of the "decade of greed" in 1989 and 1990. USA Today's decade wrap-up issue re- flected: "The '80s were years of excess. We swaggered through the portals and grabbed as much as we could. We were greedy and glut- tonous." One recurring image from the "decade of greed" is that of self-centered Americans wallowing in material excess while others suffered. But an examination of the facts reveals that Americans were unusually generous in the 1980s. It's a fact that never got headlines. "Charitable giving went up faster than spending on jewelry and furs," noted Stephen Moore, an analyst at the Cato Institute, a libertarian think tank. "It peaked in 1989 and has since hit a six-year low." Between 1980 and 1989, total charitable giving in real dollars jumped 56% to $121 billion, compared with a 6% rise in the 1970s. Bush's "kinder, gentler" appeal and "thousand points of light" program couldn't overcome the 1990-91 recession, which dried up charitable donations. The recession also gave birth to a new media line: It was Reaganomics coming home to roost - albeit nearly two years after its keeper left office. Although many economists agreed that Bush's poli- cies, not Reagan's, triggered the recession, no earnest attempt was made by the mainstream press to isolate cause and effect. Instead, reporters wove the two administrations together, refer- ring frequently to the "Reagan-Bush years" and blithely ignoring two glaring historic events that left clearly separate imprints on the economy over the last 12 years. Reagan signed the Econom- ic Recovery Tax Act of 1981, one of the biggest across-the-board tax cuts in U.S. history. The move energized the economy into a spurt of uninterrupted growth second only to the 106-month boom that coincided with the Vietnam war. Bush, on the other hand, signed the Omnibus Budget Reconciliation Act of 1990, one of the biggest tax increases in U.S. history. That tax flip-flop proved poisonous to an economy that was slowing but still humming along nearly two years after Bush inherited it. Re-Regulation With Bush Aside from that, Bush distanced himself from Reagan in other overt ways that could hardly escape a reporter covering both ad- ministrations. For one, Reagan called for a moratorium on new regulations and rescinded many enacted during the last days of the Carter ad- ministration. The costs of regulations, he reasoned, would absorb the gains from his tax cuts. Bush, in contrast, re-regulated the economy, adding tens of thousands of pages to the Federal Register. ronald One of the first major pieces of legislation Bush signed was the costly Clean Air Act. The Disabled Persons Act and the Civil Rights Act of 1992 followed. Both place big costs on businesses. Bush, faced with the savings-and-loan debacle, also placed strict controls on lenders, which is why borrowing is still difficult despite historically low interest rates. He also agreed to two increases in the minimum wage. Reagan, moreover, raised domestic spending only 4% in real terms during his eight years. Bush over- saw a 25% increase in spending - double the rate during the Car- ter administration and the highest since John F. Kennedy's term - though defense spending on Bush's watch is down. All that in mind, Reagan turned around a crisis economy. And Bush doused a record expansion. No Help From Pundits Most pundits, for their part, haven't helped the media to sort things out. "When professors from Princeton and Harvard and MIT distort the Reagan economic record, it is not surprising that many in the media get it wrong," said Martin Anderson, a senior fellow at Stanford University's Hoover Institution and one of Reagan's early economic advisers. Some contend there is a man- gled chain of information that starts with the Congressional Budget Office and filters its way to the venerable academic in- stitutions and then to the most influential newspapers, such as the Washington Post, The New York Times and Los Angeles Times. And most universities still stress Keynesian demand-management - not supply-side - policy in their macroeconomics courses. "The people at the MITs, Harvards and Brookings (Institution) are the people who are training the minds of financial writers," ex- plained John Rutledge, chairman of Rutledge & Co., a merchant bank in Greenwich, Conn., and one of the authors of Reagan's ori- ginal economic plan. "It's difficult to throw off the mantle of their professors." Studies by the Congressional Budget Office charging the rich benefited at the expense of the poor in the 1980s were widely reported by the mainstream press and have since been debunked by more analytical publications. But the CBO's data are, for the most part, a "crock," according to Christopher Frenze, senior economist for Congress' Joint Economic Committee. He complains of fighting an ongoing battle against CBO's numbers, which he claims are massaged in favor of Democratic economic pro- grams. Others say the media are directly to blame for not both- ering to question such numbers. Average Incomes Rise "A lot of the time reporters challenge authority," said Brent Baker, a research analyst at the conservative Media Research Center in Alexandria, Va. "But if someone says, 'The rich got richer and the poor got poorer,' it's A-OK. They don't go to (supply-siders) for their numbers." For example, the CBO studies - and initial media reports - failed to note that most of the poor had moved up into higher income brackets during the sample period. Oddly, they also failed to mention an unprecedented number of poor entered the work force in the 1980s, thereby di- luting income averages, or that the CBO studies included part- time students. In fact, average real incomes for all families rose by 15% during the decade, compared with an increase of 8.3% in the 1970s, according to the Census Bureau. Of course, like most families during the decade, the rich got richer. But they also paid for a bigger share of entitlements for the poor. By the end of the decade, the top 1% of taxpayers alone were paying about a quarter of all federal income taxes. The top 5% paid more than 40% and the top 10% paid 55%. That said, however, scandals and conspicuous consumption only helped to feed misconceptions about Reagan's economic legacy. Unfortunately, it was not the broader benefits of Reaganomics that stole the headlines, but the misdeeds of a few individuals: overbilling defense contractors, insider traders, junk-bond bilk- ers and S&L executives who paid for prostitutes with depositors' money. Some lament that the analytical resources of the media were spent on such dark, isolated cases and not on the construc- tive legacy of Reaganomics, such as disinflation, lower interest rates, higher productivity rates, a record-high stock market and a low tax burden. Ugly Scandals The scandal stories put an ugly face on the 1980s. Many non- investors now associate Wall Street with Ivan Boesky and Michael Milken. "The weird thing now is, if you made money in the stock market, it's dirty," said Cato's Moore. He argues that by paint- ing such a negative picture, and with such broad strokes, the media have moved many of the same people who prospered in the 1980s to turn their backs on that success. "It's almost like our Puritan instincts take over whenever we do well," he said. Add a recession on top of that guilt, a recession the media blame on Reaganomics, and people are even more willing to abandon a philo- sophy they voted for - twice with Reagan and once with Bush. In winning, the Clinton campaign mined that insecurity. "The battle to define the Reagan-Bush years is a critical political arena where Democrats have the opportunity to disrupt the Republicans' hold on the middle class," Stanley Greenberg, a Clinton political consultant, said before the election. "Clinton's a terrific salesman," added Rutledge. "He sold this election by working off people's fears." Voters' Concerns Most exit polls established that the top concerns of voters in the election were the weak economy, health care and the national debt, in that order. Ostensibly, Clinton best addressed these issues. He was eloquent at convincing voters that their problems were not just a result of the incumbent administration's errors but Republican policies dating back to Reagan's first term. It wasn't a Bush recession, Clinton and his handlers argued. It was a Republican recession, a result of "trickle-down" ideas that favored the rich and ignored the poor and middle class. Largely, the media agreed. But few complained about health care in 1988, when jobs were still plentiful. The pivotal issues during that presidential campaign were patriotism and crime. Michael Dukakis, in fact, promised to mandate that employers provide health in- surance - not wholly unlike Clinton's "play or pay" scheme. Yet Dukakis lost in a landslide to Bush, who, voters polled after- wards agreed, "would do a better job of keeping the economy strong." They were wrong. So, why is Reagan being maligned? The conventional wisdom spun by pundits insists that Reagan dumped a huge budget deficit and pent-up demand for government spending in Bush's lap. Indeed, Bush staffers like Budget Director Richard Darman complained early on about being hobbled by the Reagan (and then-vice president Bush's) debt and the S&L bailout, which was a direct result of the 1986 tax reform -one of Reagan's few low points. That's why they agreed to raise taxes. The same pundits, however, avoid telling the media that the debt peaked in 1986 and that the deficit as a percentage of GDP was coming down by the time Bush grabbed the reins. Bush, despite his tax increases and major defense cuts, managed to run up the debt twice as high as Reagan. He also grew government faster than the economy - the reverse of supply- side motives. "No one ever explained to anyone that Bush abandoned supply-side policies and reinstated Keynesian programs," said Baker. "If you took a poll of Americans, they'd think Bush continued Reaganomics." Baker says he's convinced many swing voters who voted for Clinton were hoodwinked into believing that the last 12 years formed a seamless period of economic policy, that a new economic agenda was needed and not just a change from Bush. One Ranking Don't expect historians to shed light on the subject. In 1991, the Murray-Blessing update survey on presidential performance ranked Reagan 28th - "below average" - among the 40 presidents, and behind Carter. The study, started by Harvard's Arthur Schles- inger Sr., gave Reagan little credit for ushering in a new era of prosperity. Rutledge calls such off-base subjectivity a "traves- ty." "Once we get past the smoke and mirrors of the early Clinton years, the Reagan years will be looked upon more favorably," he predicts. "The numbers will still be there. And the Bush years will be seen as a hiatus." +++zcW~sM This article is copyright 1992 Investors Business Dai- ly. Redistribution to other sites is not permitted except by ar- rangement with American Cybercasting Corporation. For more in- formation, send-email to usa@AmeriCast.COM