Thirty years ago today, on November 4, 1980, Ronald Reagan was elected president of the United States. He garnered 50.7 percent of the popular vote and 489 of 535 electoral votes.
The Republicans came to power in the Senate with a 53-47 majority. The House of Representatives remained in control of the Democrats, who held 243 seats to the Republicans’ 192.
The country elected new leaders because of problems both at home and abroad. The economy was in trouble -- high unemployment, high inflation (double-digit consumer price increases in 1979 and 1980) and high interest rates. Abroad, 52 hostages were being held at the U.S. Embassy in Iran, and the Soviets had invaded Afghanistan in December 1979.
As President Obama looks at the Congress elected two days ago, his situation is strikingly similar to Ronald Reagan’s after the 1980 election. The economy remains in trouble and the Congress is divided, in the same way it was then: The president’s party holds the Senate, the other party controls the House.
Reagan’s first priority was a vital and growing economy, because that made everything else possible -- including his ultimate goal -- peace without surrender. A revitalized U.S. economy --and with it, a revitalized national defense -- would bring the Soviets to the bargaining table and give Reagan the cards he needed to negotiate with them.
Reagan had been talking about economic problems for five years before he was elected president. Taxes were too high. Federal spending needed to be controlled. Bureaucratic regulations were sapping economic creativity. And the country needed a stable monetary policy to bring inflation under control. These were the principles of his economic program.
The transition to the new administration began the day after Reagan was elected, and he lost no time. Major revisions in the budget the outgoing president, Jimmy Carter, had sent to the Congress were under way almost immediately -- control of domestic spending and increases for national defense. Across-the-board cuts in marginal tax rates (10 percent a year for three years) and business tax reductions were on the drawing boards, as were plans to reduce regulations. Within days of taking office on January 20, 1981, Reagan issued an executive order decontrolling energy prices and met with Paul Volcker, chairman of the Federal Reserve Board, to communicate his support for the Fed’s efforts to control inflation.
And Reagan reached out immediately and continually to members of Congress from both sides of the aisle in 53 separate meetings during his first 70 days in office. Still, the economic program was going nowhere.
And then, on March 30, 1981, he got shot. On April 22, a recovering Reagan -- just 10 days out of the hospital -- called Tip O’Neill, Speaker of the House, and asked to speak to a joint session of Congress. The country’s admiration for its wounded president -- his grace under pressure -- was so great that Tip could hardly say no. On April 28 Reagan addressed the joint session, to standing ovations, and laid it to them:
It’s been half a year since the election that charged all of us in this government with the task of restoring our economy . . . . Six months is long enough. The American people now want us to act and not in half measures. They demand and they’ve earned a full and comprehensive effort to clean up our economic mess. . . .the budgeting actions taken by the Congress over the next few days will determine how we respond to the message of last November 4th. That message was very simple. Our government is too big, and it spends too much.
Reagan continued to focus on his economic program. His personal diary, in which he wrote virtually every night, expresses his frustration with congressional action -- they didn’t want to cut taxes, they didn’t want to cut (or control) domestic spending and they didn’t want to spend money for national defense. On May 22 he wrote:
Dems finally have come up with a counter proposal to our tax program. They want to include a reduction of the income tax rate on unearned income from 70 per cent to the 50 per cent top rate on earned income. We wanted that in the first place but were sure they'd attack us as favoring the rich. Several of their other proposals are things we wanted. Decision is, I'll reluctantly give in provided they'll accept the three years across the board which will be 5, 10 and 10, instead of the 10-10-10 we originally proposed. I'll hail it as a great bipartisan solution.
H—l, It’s more than I thought we could get.
Both Reagan’s tax and budget bills were approved by the Congress (Reagan calls it in his diary “the greatest political win in half a century”) and signed at his California ranch on August13, 1981.
The economic program was finally under way, but the economy had taken a turn for the worse --at the time the worst recession since the Great Depression. Reagan was under continual pressure to reduce the deficit by increasing taxes, but noted in his diary on November 2, 1981, “I will not give in and raise taxes.”
The economy hit a low in November 1982, and then started to improve. On December 4, 1982, Reagan’s diary notes: “Meeting on economic policy. Question is how to make people and Congress understand that our program offers the best chance to get out of the recession. Signs
are all there -- inflation falling, interest rates dropping, Fed discount rate down to 12.”
From the November 1982 low, the economy grew at almost 5 percent a year, for 92 straight months. New jobs -- 19 million while Reagan was in office -- were created. After a brief recession in the early 1990s, the economy grew for another 102 months.
Reagan struggled throughout his presidency with the Congress and, sometimes, with his own staff to keep taxes low, control spending and provide enough for defense. He regretted not balancing the budget, but low taxes and the defense buildup were more important. By the time he left office, the budget deficit was declining in relation to the economy and so was defense spending. And Reagan did a remarkably good job controlling domestic program spending -- both discretionary and entitlements -- reducing it by 2 percentage points of GDP.
On October 6, 1983, Reagan wrote a letter to Bob Tyrrell, editor of the American Spectator, disavowing supply-side economics and expressing his own view: “It’s always seemed to me that when government goes beyond a certain percentage of what it takes in people’s earnings we have trouble. . . . I think we’ve learned that government’s wants are unlimited.”
The message of the election this year is not very different from the message in 1980: The government is too big, and it spends too much. Whether President Obama and the new Congress will be able to find a path from that message through the unlimited wants of government is the question.
Annelise Anderson is a fellow at the Hoover Institution. She and her husband, Martin Anderson, are authors of Reagan’s Secret War: The Untold Story of His Fight to Save the World from Nuclear Disaster (Crown, 2009).
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