What Would Ronald Reagan Do to Fix America Today? We face some of the same problems that beset the nation at the beginning of Reagan's presidency.
This article originally appeared in MarketWatch
Now that Donald Trump is the only Republican candidate left in the race, it’s worth asking what President Ronald Reagan, by some measures the most successful president in modern times, would say about America’s challenges today.
I was privileged to work for Reagan at the White House Council of Economic Advisers as a junior staff economist, and I was lucky to meet him, together with the rest of the CEA staff, the day before I became a U.S. citizen in November 1987. When Reagan heard that I was British, he told me that he was a big admirer of British Prime Minister Margaret Thatcher.
Coming to power in 1980, Reagan inherited economic and military crises that in some ways are similar to those we face today. The late-1970s economy suffered from high inflation and low economic growth. People had to wait for hours in lines just to get gasoline. I remember taking a lunch break from my office at the Center for Naval Analyses in Alexandria, Va., to fill up with gas, hoping the lines would be shorter in the middle of the day. America had lost the world’s respect, and Iran held Americans hostage without consequence.
Today, total federal government spending has risen from 19% of GDP in 2007 to 21% of GDP in 2015, primarily from entitlement programs such as Social Security and Medicare, veterans’ benefits and welfare. Together, those programs accounted for 12% of GDP in 2007 and 15% in 2015.
In the first days of Reagan’s presidency, cutting spending was a big priority. At the Council of Economic Advisers, staffers were allowed to study and hold meetings on anything that would reduce spending. No subjects were off limits. We held inter-agency meetings on selling national parks, privatizing the Post Office and Amtrak, and other ideas that are too politically incorrect to be mentioned here.
For Reagan, attempts to cut spending started on Day One. On Inauguration Day, he issued a memorandum directing a hiring freeze on federal workers. He explained that the budget was out of control, and reducing the federal workforce and revising the 1981 and 1982 budgets would “[begin] the process of restoring our economic strength and returning the Nation to prosperity.”
Two days later, he released a memorandum directing cuts in federal spending.Speaking from the Oval Office, he reduced government travel, government consultants and expensive contract studies. He also announced a halt in procurement and spending decreases for political appointees.
The same day, he announced a Task Force on Regulatory Relief to review pending regulations and revise existing ones, saying that “government regulations impose an enormous burden on large and small businesses in America, discourage productivity and contribute substantially to our current economic woes.”
Economics was of paramount importance to President Reagan. The first nomination that he announced personally was the appointment of Murray Weidenbaum as chairman of the Council of Economic Advisers, on Day Four of his administration. Reagan said: “[Weidenbaum] has advised me economically for over five years. Now, a good share of that time he didn’t know he was advising me, but I was following his writings and his utterances and many times referred to them and referred to him in my own weekly radio broadcast.”
The military situation was also vital. Reagan received the news that the Iranian hostages were in the air, coming back home to America, during the Inaugural Parade, and a week later he welcomed them at the White House. If he were alive today, he would be troubled at how America’s defenses have been weakened. Defense spending has declined from 20% of total federal outlays in 2007 to 16% today. The Navy has shrunk to 271 deployable battle-force ships from 278 in 2007.
Building up the defense sector was one of Reagan’s priorities. During his tenure, it increased from 23% to 27% of federal spending — over 10 percentage points more than today. In 1988, the Navy had 573 deployable battle ships, more than twice as many as today.
Reagan would be the first to admit that he was not as successful as he would have liked to be in cutting spending. Federal government spending declined from 22% of GDP in 1981 to 21% in 1988. Spending on entitlements declined from 12% of GDP to 10% over that period. But he had to compromise to move forward his agenda because the House of Representatives was in Democratic hands for the entirety of his term, and the Senate stayed Republican only until 1987. Compromise was not the dirty word that it is today, but the way the game of politics was played.
As we approach another fork in the road for America, it’s worth remembering how prior successes were achieved.
Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter here.
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