The Real Reagan Economy

Budget of the United States Government: Fiscal Year 1989

US Government Printing Office, 616 pp., $18.00

Economic Report of the President, Transmitted to the Congress, February 1988, Together with The Annual Report of the Council of Economic Advisers

US Government Printing Office, 374 pp., $10.00


Mr. Reagan’s Council of Economic Advisers asserts that the administration’s economic program “has become a blueprint” for worldwide growth. Recent US economic growth, they write in their 1988 Annual Report, “was shaped by government policies explicitly directed toward fostering the inherent dynamism of the private sector.” “Our proven market-oriented policies”—the words here are Mr. Reagan’s in the accompanying Economic Report of the President—“are being adopted in more and more countries around the globe, as they recognize the high cost of big government and the harmful effects of stifling the entrepreneurial spirit.”

The Council of Economic Advisers’ claim that “market-oriented policies” have been shown to cause (or to “shape”) economic recovery has momentous implications. There were about 30 million people unemployed in OECD economies in 1987, as there have been every year since 1982.1 While the United States is not the only country in which employment has boomed during this period, it is the largest and the most conspicuous. It is also conspicuous for the consequences of its public policies, such as in the number of people who are homeless; in the rate of infant mortality (a little higher, in parts of New York City, than in Malaysia, or a little lower than in Guyana); in the rate of deprivation (12.3 million children living in poverty, and 31.3 million people without any health insurance); and in the level of underdevelopment (28,000 people without running water in parts of El Paso, and 53,000 without sewers).2

The US economic record has been used to justify right-wing policies around the world. There are international conferences about the “American model,” and about growth through the “structural reform” (or repression) of the public sector. In some countries, such as the UK and other high-unemployment economies of the EEC, Reagan-inspired policies have attracted popular support. In others, such policies have been imposed by international institutions, including the International Monetary Fund; in Mexico, for example, public investment in schools and health clinics has been reduced in response to international pressures, and Sri Lanka has deregulated its food subsidies.3 “From continent to continent,” Mr. Reagan writes in his introduction to the report, “the benefits of privatization and deregulation are becoming appreciated.”

Mr. Bush has proposed more of the same policies for the United States. His campaign statements say that he “strongly supported the 1981 tax cut, which has been the primary engine for…the tremendous economic recovery we have had in our Administration.” He wants further tax cuts, notably in the “tremendous burden” of the capital gains tax (from 28 to 15 percent). There should be “more deregulation,” of transport, energy, health care, and environmental protection. The “first priority,” still, “is to control spending.”4

Even Mr. Bush’s opponents accept much of the Republican blueprint. Mr. Dukakis and Mr. Jackson object, convincingly, to the costs of the Reagan policies: for the poor, and for US “competitiveness,” and for the people who will be obliged in the 1990s and 2000s to repay the debts of the last…

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