As the 1982 elections approached, Ronald Reagan’s Presidency was unpopular. The unemployment rate was 9.7%, about the same as it is now. Interest rates were high: a 6 month CD paid about 13% interest, which was good for those who had savings but terrible for small business owners who had to work extra hard to pay the 20% interest rate banks were charging for business loans. The dead carcasses of 17,000 businesses littered the economic and social landscape, one of the highest failure rates since the 1930s depression. The stock market was in the doldrums – why bother investing in stocks when bonds and CDs paid such generous interest rates? GDP had grown an anemic 2.2% the past year. The national debt had gone up by 14% that year. In short, the Reagan Presidency was promising to be one of the worst in American history.
In 1982, the voters realized that they had traded in a bumbling governor from Georgia, Jimmy Carter, for a bumbling governor from California, Ronald Reagan. After the election, Democrats, already in control of the House of Representatives, were given another 25 seats and a commanding majority. The Republicans continued to hold a slim majority in the Senate.
Shortly after the election, Reagan launched his “Star Wars” or Strategic Defense Initiative (SDI), long on imagination and his willingness to further bankrupt this nation, but rather short on any actual ability to employ such a grandiose scheme. In the first year of Reagan’s reign, tax rates had been cut but the Social Security tax had been raised so, for most of us working for a living, it was pretty much of a wash. Inflation was killing us.
If you are an older Republican, you may have forgotten those years. They have been conveniently hidden under the party mattress by the Republican campaign machine and the retelling of the “Reagan legacy.” In the seventies and early eighties, there was so much distrust in the judgment and morality of elected representatives that it was a strategy by some disaffected voters to pull alternate levers in the voting booth, voting Democrat on one row, then Republican on the next row, in order to gridlock the government.
Reagan kept on borrowing on the taxpayer’s credit card. By the time he left office, the national debt had tripled.
Midterm elections often are a vote on the Presidency and the dominant party. The Democrats may have to give up most of the 30+ Congressional seats they won in 2008, making it even more difficult for President Obama to get his agenda enacted. In 30 years, how will the story of the Obama presidency be told? Will it be altered or swept under the table by the Democratic campaign machine just as the Republican machine has retold the Reagan years? Probably.
Both Reagan and Obama had monumental tasks in their first few years, burdens so great that neither of them could achieve their goals in a short two years. However, voters focus on the present, throwing hindsight, history and perspective out the window as they drive down the rutted road of the present. The political machines of both parties know this and play to that short attention span. Unemployment is high, just as it was in Reagan’s 2nd year. Obama can only hope that, by 2012, the unemployment rate gets down to the 7.4% rate it was in 1984, when Reagan came up for re-election.
Traditionally, the political campaigns get into gear after the Labor Day holiday. There is one thing we know for certain: we will be entertained by a lot of lies and half truths for the next few months. If you listen to talk radio, both conservative and liberal, you are accustomed to this kind of entertainment year round.
(Side note 9/8) Here is a CNN review of some of the tax policies and their effects during the Reagan administration.