by Henry Olsen
Reagan’s record in office revealed what people should have seen all along. In what he did and in what he did not do, Reagan showed that his view of the proper role of government involved much of what had been done in the post-Roosevelt era. He would raise taxes rather than seek to repeal the programs that made taxes high. In many cases, he would expand spending on popular items like K–12 education much faster than his liberal predecessor had. He would expand regulation when he thought doing so would help protect the environment. In short, he would interpret rather than oppose the New Deal legacy.
This did not mean he was a liberal. Democrats, who controlled the state legislature for most of his tenure, always wanted to spend and tax more and cut less than he wished. They would often characterize his economies or reforms as heartless cuts that endangered the welfare of the poor and middle class. They would continue to try to cast him in the role they wanted him to play, that of the conservative antigovernment extremist.
Most conservatives never wavered in their support for him. Taxes and spending went up, but the legions of California conservatives whose devotion had made him governor loved him as much on his last day in office as they did on his first.
Most, but not all. Some conservatives were firmly committed to Goldwaterite principles and thought their leader was too. By the end of his first year in office, they had become disillusioned with him and sought to warn conservatives in the rest of the country that Reagan wasn’t who they thought he was. But these warnings went unheeded, suggesting they were irrelevant to the real concerns most conservatives had. Reagan’s popularity among the average rank-and-file conservative voter in the nation grew throughout his time in Sacramento. By the time he left office voluntarily in early 1975, these voters wanted to see more of their hero. Later that year, they would get their wish.
In January 1967, however, all that was in the future. Reagan may have already had his eye on the Oval Office, and it is certain that some of his staff and backers did. But first, he had to show he could govern. The challenges he faced were daunting.
California’s looming budget crisis was well known during the 1966 campaign. Reagan’s opponent, the incumbent governor, Pat Brown, and the Democratic-controlled legislature had hiked state spending quickly without increasing taxes. The state had met its constitutional obligation to run a balanced budget only by using time-honored “one-shot” techniques such as delaying payments and accelerating when taxes were due. All observers knew that those shots had all been fired: whoever won would have to put the state budget on course to be structurally balanced by midyear 1967.
Reagan was expected to try to do this by cutting spending, and his first budget cut spending a lot. Submitted in late January, the document was sparse on details—most budget items had notations of “last year’s spending minus 10 percent”2—but was long on cuts. The $4.6 billion budget was smaller than Brown’s budget from the prior year. Even this budget, considered radical and draconian, would not have balanced the budget. From the beginning, all parties involved recognized that some tax increases were necessary.
The new governor had alluded to this in his first inaugural address. Despite the deep budget crisis, he told Californians that he would “turn to additional sources of revenues only if it becomes clear that economies alone cannot balance the budget.”3 He detailed no program for elimination; even when it came to welfare he emphasized that the state would help the aged, the disabled, and those who must depend on others. “The goal,” he said, “will be investment in, and salvage of, human beings.”
Reagan’s first budget was widely considered to be unrealistic because of its lack of detail. The state was legally bound to protect state grants to local school districts, community colleges, and welfare programs that were shared with federal government such as Medi-Cal (the Golden State’s version of Medicaid, the federal-state program to pay for health insurance for the poor and medically needy) and Aid to Families with Dependent Children (cash grants to mothers, mainly unmarried, with children). Balancing the budget without increasing taxes would have required the Democratic-controlled legislature to change these laws, something that clearly would have required a great deal of political effort from the newly elected governor. Reagan did not indicate he was willing to do that in either the budget or in any of his public pronouncements. Indeed, all Reagan told Californians he would do was “cut, squeeze, and trim” to reduce “the cost of government”; he never indicated he wanted citizens to tighten their belts and expect less from the state.4
He seemed to be relying on a commission of businessmen that he had convened to review state management practices to find inefficiencies in management and service delivery that could reduce spending significantly without cutting the services themselves. Reagan had long championed the belief that “economies”—what we now call “waste, fraud, and abuse”—were responsible for much of government’s cost.5 The commission did find changes in management practices that could save a significant amount of money. But by the end of March, it was clear that these changes would come nowhere near to balancing the budget on their own.
This discovery forced Reagan to submit a second budget in late March, one that offered significantly higher spending levels than those he had proposed just two months before. This $5.06 billion budget replaced the “10 percent reduction” rule with specific recommendations.6 It also scaled back proposed cuts to spending not protected by law, such as state grants to the University of California and the state university system. The remaining cuts included eliminating 3,700 jobs in the state’s Department of Mental Hygiene—the department in charge of state mental hospitals and community treatment centers—and continued trims in the higher education budget. It also required the University of California and the state university systems to adopt formal tuition charges for the first time, a highly controversial move in a state that had long prided itself on funding top quality, tuition-free public universities. But most important, Reagan’s second budget was deeply out of balance.
Reagan followed this new budget with a proposal for what was at that time the largest state tax hike of any state in history. The $946 million proposed hike increased all sorts of taxes: sales taxes, personal income taxes, corporate taxes, and a host of other, smaller taxes all went up.7 The effect was quite progressive: most of the increased burden would fall on businesses and the well to do.8
Today such a proposal would be decried by the Republican right, primarily on what would be called Reaganite grounds. “No new taxes” is a mantra for the modern conservative. But back then the proposal met with very little resistance. Democrats shrewdly insisted that all Republicans vote for the tax hike before any of their members supported it, and Reagan gamely rounded up the few GOP votes that weren’t on board. In the end, every Republican member of the lower house, the state assembly, and all but one Republican state senator—Orange County freshman John Schmitz, the legislature’s only avowed member of the John Birch Society—went along. Reagan’s cuts, efficiencies, and tax hikes became law.
Throughout his life Reagan would present this as a victory, a small step in reining in the size of government. He championed the small property-tax-relief component of the tax bill (effectively, he increased taxes on the well off to fund property tax cuts for middle-and working-class homeowners) and the slower rate of government spending growth as the beginnings of the “prairie fire” revolt of average people who wanted government “to be fair, not waste their money, and intrude as little as possible in their lives.”9 He castigated Schmitz as the sort of person who “jumps off the cliff with the flags flying” while saying that he, on the other hand, was “willing to take what he could get.”10 In short, he characterized his differences with Schmitz as tactical rather than principled in nature.
There is some truth to this explanation. Reagan was a skilled negotiator from his years as president of the Screen Actors Guild. He would refer to those days frequently during his political career, often describing a negotiation over this or that a
s being not as difficult as dealing with studio bosses. Schmitz, in contrast, was a flamboyant showboat who loved media attention and never pulled his punches. He went on to become a congressman in 1970, but lost renomination in 1972 after spending two years attacking President Nixon for being a liberal. He then ran for president himself that year on the American Independent Party ticket, the party founded in 1968 as a vehicle for the segregationist governor George Wallace. Political realities never affected John Schmitz’s thinking.
Reagan’s tactical explanation for his budget behavior, however, obscures the degree to which he was being consistent with the principles he had long laid out for public consideration. His fiery speeches in the late 1950s and early 1960s, for example, had always included statements expressing agreement with most of the programs that had been enacted in the post–New Deal era. As we saw in chapter 2, Reagan supported public housing, medical aid for the needy, public universities, and a host of other programs opposed by the intellectual conservatives of that day. He had even said that these programs represented “social progress” and that he would choose not to repeal them “at any cost.” He had argued that reducing waste and inefficiency could make big changes in the level of taxation. Reagan’s budget challenge put to the test his thesis that waste, not the programs themselves, gave rise to expensive government. It forced him to confront the conflict between attacking high taxes and supporting many then-new programs. In the end, when the “waste and inefficiency” argument was shown to be wanting, he chose to hike taxes rather than cut or eliminate programs he by and large supported.
Reagan could have argued that he would have had to fight the legislature tooth and nail to change the laws that placed most spending out of bounds, and that such a fight was bound to fail. He never made that argument, however. In hindsight that is not surprising, because Reagan often was willing to fight tooth and nail for things he really cared about. The battle over imposing tuition in the University of California system was a contemporaneous example of how he could fight cleverly and tenaciously to get what he wanted.
The UC system is and was governed by a board of regents. The regents were appointed by different entities at different times, so in early 1967 Governor Reagan—who was automatically a regent by virtue of his office—did not control a majority of the appointments on board. To get tuition adopted, he would need to persuade many people appointed by his liberal predecessor or who had no ties to him.
Reagan took on this challenge with relish. Over and over he tried to get the regents to adopt a charge and call it tuition so that some of the people who used the UC system paid for some of its costs. Finally, the issue came to a head at a regents meeting in August 1967. Reagan had insisted that the charge be labeled as tuition as a matter of principle, but lost a vote on his proposal early in the meeting. As the meeting broke for lunch, he was heard to mutter to one of his staffers that “you never leave the stadium at the half.”11 During the break, Reagan found that he could get the charge approved if he simply dropped his demand that it be labeled “tuition.” When the regents reconvened, Reagan indicated he was willing to drop his demand. In return the regents backed a $200 annual charge for attending the university.12 Liberals like Assembly Speaker Jesse “Big Daddy” Unruh, who was also a regent, were outraged. They knew that a rose by any other name would smell as sweet: tuition was tuition no matter what it was called. So did Reagan. Once the charge was approved, it was only a matter of time before the name was changed. By 1970, the UC system was formally charging tuition. In 2016–7, the amount for tuition and mandatory fees had risen to nearly $13,500 a year for California residents.13
This battle, seemingly over how to balance the state budget, was actually a statement about Reagan’s principles of government. Reagan had said that there is no such thing as free college, there’s only the question of who will pay for it.14 Many UC students came from families earning well above the average income for that time.15 Reagan had long argued that government should help people who needed help, but not financially help those who didn’t. The UC tuition debate was an excellent place to make his point: average taxpayers should not have to bear the full cost of educating a person whose families could afford to pay part of the cost themselves.
Indeed, Reagan’s tuition proposal was tied to an increase in state scholarships for students whose families could not afford it. He also rejected his budget chief’s recommendation to adopt tuition for the state’s community college students, as those people came largely from families with average or below-average incomes.16 Reagan’s lifetime commitment to helping people in need, but only people in need, was on full display here.
Reagan’s philosophy of government was also on display in how he sought to address the state’s Medi-Cal program. This program had been created only in 1965 as part of Lyndon Johnson’s Great Society. The program established the government as the insurer for welfare recipients and other categories of medically needy people the state chose to insure. If hard-core opposition to government social programs had been part of Reagan’s agenda, the budget shortfall and the relatively recent adoption of this program would have provided perfect cover for a push to return to California’s pre-1965 reliance on county-financed public hospitals to pay for medical care for the poor.
Despite Democratic charges to the contrary, Reagan never even contemplated doing that. In minutes from an early cabinet meeting, Reagan approvingly cited Medi-Cal as “help” for people who otherwise could not afford their medical bills.17 Before that help, he said, hospitals charged clients who could afford to pay more to cover the costs for those who could not.18 Now, the state would ensure that poor people would have a predictable source of funds to cover the care they needed.
As we saw in the previous chapters, Reagan had long said he supported government provision of medical care for those who couldn’t afford it themselves. He reiterated that commitment in a 1968 letter to his longtime pen pal, Lorraine Wagner. “My philosophy about medical care for the poor can be stated very simply,” he wrote. “No one in this country should be denied medical care because of a lack of funds, and no one will be denied such help in California.”19
Reagan did try to cut back Medi-Cal’s coverage of certain procedures and populations, but his principle for doing so was consistent with his longstanding philosophy. He argued that Medi-Cal coverage was more generous than that available in the private sector for many workers. It struck him as unfair that people could do better on the public dime than they could by working, so he attempted to pare back the program by executive order. This effort was blocked by the courts, which said such changes could be made only by legislation.20 Reagan dropped the issue in 1967 only to revisit it in his second term, when he made welfare reform his top priority. That later effort would again show that when Reagan wanted something, he would fight tooth and nail to get it.
He faced another time for choosing with regards to efforts to repeal the state’s open housing law, the Rumford Act. That act had outlawed a property owner from discriminating against a potential buyer on the basis of race. It had been repealed by popular vote in 1964 only to be reinstated by the California Supreme Court. Reagan had called for its repeal during his campaign, and advocates of repeal in the legislature took up the challenge when it convened.
Despite his call, Reagan never exerted political capital on behalf of the repeal efforts. Instead, at a key moment in the legislative battle, Reagan let it be known he was satisfied with a compromise reform measure that would simply have exempted owners of single-family homes from the act’s requirements.21 This compromise satisfied neither those who wanted full repeal nor those who backed the law to begin with. The center did not hold, and the legislature adjourned without changing the act at all.
Meanwhile Reagan was meeting with leaders of African American groups and communities. Perhaps for the first time in his life, Reagan had to confront the realities stemming from centuries of formal and informal racial prejudice. He began to see what he had missed when
he opposed the Civil Rights Act of 1964, that blacks had been excluded from full participation in American life by the direct and indirect effects of prejudice. He pledged later that year that he would work to give blacks an “equal place on the starting line” so they could fulfill the American dream that anyone can become what he or she wants.22 By 1968, Reagan had completely abandoned his prior stance. He told the California Association of Realtors, the prime financial backer of the initiative that had tried to repeal the Rumford Act, that he now opposed full repeal. After meeting with minority group leaders, he said, he had learned that the act was an important “symbol” of the principle of nondiscrimination, and as such it should be retained.23
The Rumford Act debate again showed how Reagan dealt with the conflict between two competing principles. On the one hand, Reagan had always believed that the government should stand with average people in their quest to live full lives of their own choosing. From his earliest days he had included members of any race, ethnicity, or sex in that group; nondiscrimination was a deeply held ideal for him. On the other hand, he cherished liberty. A law that circumscribed one person’s liberty could be justified only if it gave another person a chance at living a self-chosen life that he or she would otherwise not have. Once Reagan learned the full measure of feeling in the black community, his strong instinct in favor of nondiscrimination took hold. In the end, he took the same position on civil rights measures in 1968 that he had believed in as a New Deal liberal in 1948.