An American Life

by Ronald Reagan

  My memories of the Great Depression were too personal and too vivid for me not to feel great sadness and compassion for those Americans who were out of work; having experienced those devastating days during the 1930s, I knew what it was like to be deprived of a paycheck and the pride of earning one, to watch the pain on the face of a loved one who had lost a farm or a store.

  I prayed a lot during this period, not only for the country and the people who were out of work, but for help and guidance in doing the right thing so that I would be able to justify the faith Americans had placed in my hands the previous November.

  In my inaugural address, I’d said America was on the threshold of “a new beginning.” We had made the new beginning. Now, I believed, we had to stay the course.

  PART THREE

  Staying the Course

  51

  THERE WERE DIFFICULT TIMES AHEAD, both for me and for the country. But I never lost faith in my belief that the tax cuts would unleash a burst of energy that would pull us out of the recession and ignite an economic bonfire.

  As I look back on those times now, I realize that the turnaround took a little longer than I expected. But I always expected it to come. I believed the economic recovery program would work because I had faith—faith in those tax cuts and faith in the American people. I felt we were going to solve our problems because we had a secret weapon in the battle: our factory workers, our farmers, our entrepreneurs, and the others among us who I believed would prove once again that the American people were gifted with and propelled by a spirit unique in the world, a spirit tenaciously devoted to solving our problems and bettering our lives, the lives of our children, and our country—and if these forces could be liberated from the restraints imposed on them by government, they’d pull the country out of its tailspin.

  As I remarked at a ceremony in 1981 commemorating the two-hundredth anniversary of our victory over the British at Yorktown, “We have economic problems at home and we live in a troubled and violent world. But there is a moral fiber running through our people that makes us more than strong enough to face the tests ahead.”

  I was right. But it took longer than I wanted, there were a lot of things I wanted I never got, and I had some disappointments along the way.

  The economic recovery program was threefold: Cut tax rates, get government regulators out of our way, and reduce government spending. We made progress on the first two, far too little on the third.

  We cut about $40 billion in spending from the budget the first year, the biggest reduction ever. But that autumn, as I waited for the effects of the tax cuts to work their way into the economy, I realized how right I’d been when I’d said there wasn’t going to be a quick fix to our economic problems: The deficit went up instead of down, and I realized we weren’t going to balance the budget by 1984 as I expected. There was an ironic aspect to the situation: Because we had brought down inflation at a faster clip than we anticipated, federal tax revenues were smaller than projected, which made it more difficult to balance the budget.

  After a cabinet session on the 1982-83 budget in December 1981, these words in my diary expressed the sense of disappointment I felt:

  We who were going to balance the budget face the biggest budget deficit ever. And yet percentage wise, it will be smaller in relation to G.N.P. We have reduced Carter’s 17 per cent spending increase to nine per cent. The recession has added to costs and reduced revenues, however, so even with that reduction in govt, size, we have a large deficit.

  A few weeks before our meeting, I invited several of the country’s best-known economists to the White House to ask them why they thought the country was falling so deeply into the recession and what could be done to halt the slide. They all gave me a different answer, reminding me of something Harry Truman once said: “Find me a one-armed economist, because every one I know always says, ‘Well, on the other hand . . .’”

  I mentioned to one of the economists a story about three men who arrived in heaven at the same time. Saint Peter, realizing that he had room for only one newcomer, said that he would give the opening to the man who practiced the oldest profession. One stepped forward and said, “I guess that’s me, because I’m a surgeon; we all know the Lord made the earth in six days and then created man, and from Adam’s rib he created woman—and that took surgery.” But before he could move forward, the second man stepped up and said, “Wait just a minute, I’m an engineer; in those six days before the creation of man, everything was chaos and the Lord had to work six days and six nights to eliminate the chaos; that took engineering.” Before Saint Peter could respond, the third man stepped forward and said, “Well, I’m an economist, and where do you think they got all that chaos?”

  Thomas Jefferson once said about lawyers: “On every question the lawyers are about equally divided, and were we to act but in cases where no contrary opinion of a lawyer can be had, we should never act.” I think you could say the same thing about economists.

  One thing was absolutely clear: To reduce the deficit, we’d have to render fat which had worked its way into the federal budget over decades of mismanagement and ill-guided giveaway programs and persuade Congress to stop adding fat to the budget every year. But, just as it became evident that we needed more cuts, the coalition that had come together to pass the twenty-five-percent, three-year tax cut and the Gramm-Latta budget reductions began to disintegrate.

  The 1982 congressional elections were less than a year away. Many Democrats who had stuck their necks out and supported these bills returned to the party fold; Tip O’Neill and other Democratic leaders had brought them into line with warnings that they’d lose important committee assignments as well as the party’s financial help during the election.

  Even many Republicans, conservatives among them, feared a backlash at the polls because of the recession; without the faith I had that the tax cuts would recharge the economy, they began pressing me to raise taxes and increase spending. In short, as some reporters wrote, my honeymoon with Congress seemed over.

  We had to withdraw a plan to cut billions of dollars in waste and fraud from the Social Security system—among other abuses, we’d discovered monthly Social Security checks were being sent to eighty-five hundred people who’d been dead an average of eighty-one months—after the Democrats began accusing us of plotting to throw senior citizens to the wolves. (Later on, we worked out a bipartisan program that assured the system’s integrity for decades to come.) Then, The Atlantic Monthly published an article in which David Stockman, the director of the Office of Management and Budget, was quoted as criticizing the economic recovery program and saying it wasn’t going to work. Ed Meese and others on the White House senior staff (as well as Nancy) urged me to ask for Stockman’s resignation as a turncoat.

  I invited him for lunch at the White House. I ate my meal, he didn’t touch his. Stockman offered his resignation, but said that the author of the article was a friend of his who had published comments he had meant to be private; I refused his resignation. Although I do not necessarily regret my decision, he later wrote some things about our economic recovery program that weren’t true. In a book, he portrayed himself as someone who had been swimming upstream—sometimes against me—to reduce spending.

  During the early months of the administration, Stockman did a good job at the Office of Management and Budget, but he was one of the first on our team to begin clamoring for a tax increase, long before the tax cuts had had a chance to begin working their effect into the economy. Moreover, many times when I suggested that we push Congress to cut spending on a certain program, his response was that it was hopeless—or in his words, “DOA” (“dead on arrival”)—on Capitol Hill. Stockman, in fact, was one of those pushing me to abandon my program and raise taxes a few days before Christmas 1981 when I wrote in the diary:

  The recession has worsened, throwing our earlier figures off. Now my team is pushing for a tax increase to help hold down the deficits. I’m being stubborn. I think our tax cuts wil
l produce more revenue by stimulating the economy. I intend to wait and see some results.

  During the next three years, I was under almost constant pressure to abandon the economic program. Along the way, I made some compromises: To win congressional approval of additional spending cuts and show the financial community we were serious about reducing the deficit, I made a deal with the congressional Democrats in 1982, agreeing to support a limited loophole-closing tax increase to raise more than $98.3 billion over three years in return for their agreement to cut spending by $280 billion during the same period; later the Democrats reneged on their pledge and we never got those cuts. I also agreed to a slower pace than I wanted for the military modernization program. But with these few exceptions, I was determined to stay the course and did.

  Nancy sometimes calls me stubborn. Well, in this case, I was stubborn. I thought I was right. It was going to take time for the tax cuts to generate the kind of economic resurgence we needed to bring down interest rates, inflation, and unemployment. I believed we just had to wait it out.

  On the domestic front, it was largely a tug of war on this issue that dominated my first term in the White House. I said: Let’s wait until the tax and spending cuts have a chance to work their economic magic. The other side said: They aren’t working, they aren’t going to work, let’s raise taxes.

  Excerpts from my diary in 1982 will provide a view of the tug of war as I saw it from the Oval Office:

  Jan. 11

  Republican House leaders came down to the W.H. Except for Jack Kemp they are h—1 bent on new taxes and cutting the defense budget. Looks like a heavy year ahead.

  Jan. 20

  First anniversary [of inauguration]. The day was a tough one. A budget meeting and pressure from everyone to give in to increases in excise taxes . . . I finally gave in but my heart wasn’t in it.

  Jan. 21

  Met with U.S. Chamber of Commerce group. They made an impassioned plea that I not raise any taxes. They were touching a nerve when they said I would look as if I were retreating from my own program. That’s exactly how I feel. After meeting, told Ed [Meese], Jim [Baker] and Mike [Deaver] we had to go back to the drawing board. I just can’t hold still for the tax increases. We’ll go at it again in the morning . . .

  Jan. 22

  I told our guys I couldn’t go for tax increases. If I have to be criticized, I’d rather be criticized for a deficit rather than for backing away from our economic program. Left for Camp David to work on the State of the Union speech . . .

  Jan. 26

  I wonder if I’ll ever get used to addressing the joint session of Congress. I’ve made a million speeches in every kind of place to every kind of audience. Somehow there’s a thing about entering that chamber, goose bumps and a quiver. But it turned out fine. It was well received and I think the speech was a four base hit.

  Jan. 28

  . . . the press is trying to paint me as now trying to undo the New Deal. I remind them I voted for FDR four times. I’m trying to undo the “Great Society.” It was LBJ’s war on poverty that led us to our present mess. . . . I hope I’m not getting too optimistic but several economic indicators have turned upward indicating that maybe the recession has bottomed out. The market staged the sharpest rise since last March.

  Feb. 22

  Lunch on issues. I’m convinced of the need to address the people on our budget and the economy. The press has done a job on us and the polls show its effect. The people are confused about economic program. They’ve been told it has failed and it’s just started.

  Feb. 23

  Met this a.m. with our [Republican] Congressional leaders. They are really antsy about the deficit and seem determined that we must retreat on our program—taxes and defense spending. Yet they seem reluctant to go for the budget cutting we’ve asked for. . . .

  March 26

  Briefing on Soviet economy. They are in very bad shape and if we can cut off their credit they’ll have to yell “Uncle” or starve. We had cabinet meetings on our own economy. It is imperative that we get further budget cuts. So far the Dems aren’t budging. Our strategy is to move toward a bipartisan agreement on the entitlements, the only real savings must be found there.

  March 30

  News conference briefing. Family theater. Bunch of Congressmen came in for photos, one from Tampico area brought mementos from my birthplace and a picture that is eerie. The day before election day, Nov. 3, 1980, a photo was taken of a rainbow, the end came down exactly on the building where I was born. . . . Senators Bob Dole and [Russell] Long came up to the house to talk the deficit. I love Sen. Long and he’s a Dem. who has been with us all the way, but now he thinks only answer to deficit is a big tax raise. I just can’t go along . . .

  April 14

  Met with our team on the budget discussions. I think we’re coming close to a good negotiating position but it requires Cap W. to make a $5 billion cut, plus another $2 billion cut in a cap on salaries which would be applied to all salaries across the board, a 4 per cent increase for each of next three years. He’s not happy; neither am I but the stakes are too high to not do it.

  April 15

  Income tax day. People actually demonstrating against paying their tax and Dem. Congressmen are demanding that we rescind our tax cuts or at least part of them.

  April 19

  Met with Repub. Congressional leadership. The budget was the subject. I think they are relieved to learn that I’m willing to compromise some in return for a bipartisan program. I called Tip O’Neill. I’m not sure he’s ready to give. Tip is truly a New Deal liberal. He honestly believes that we’re promoting welfare for the rich.

  April 23

  . . . the group debating the budget seems unable to arrive at any kind of consensus. If we can’t get a bipartisan agreement to act together in the face of the projected deficit, then I take to the air—TV—and there will be blood on the floor.

  April 26

  . . . at 10:15 addressed 2000 delegates of the U.S. Chambers of Commerce convention. What a shot in the arm. They interrupted me a dozen times or more. I was talking about the budget and our economic program. [Later,] a budget meeting. The gang goes back at it with the Dems tomorrow. I felt they were tiring a lot and the Dems are holding out for more concessions. The Dems are playing games—they want me to rescind the third year of the tax cuts—not in a million years!

  April 27

  Well, it looks like the three weeks of budget talks got nowhere. The Dems are after a campaign issue and from Tip’s words to the press and Jim Wright’s, I think it will be that my recovery plan failed [it hasn’t started]. Well, I’m meeting Tip tomorrow afternoon.

  April 28

  The big thing today was a meeting with Tip, Howard Bohling, Jim Wright, Jim Baker, Ed Meese, Don Regan and Dave Stockman. The result of my call to Tip. The “gang of 17” had come fairly close together on the budget and revenue package. Their combination of cuts and revenue increases came to $60 billion on the R. side and $35 billion on the D. side. It should have been straight haggling especially since our original budget package called for $101 billion. I didn’t try to start bargaining from that figure but started at the $60 billion. Three hours later we’d gotten nowhere. Finally I said I’ll split the difference with you and they refused that. Meeting over.

  April 29

  . . . upstairs to write the speech for tonight’s TV broadcast. Got it finished about 5 p.m. Went on at 8 p.m. I hope it gets results . . .

  April 30

  After the broadcast last night phone calls and wires to W.H. broke all previous records. By 3 p.m., telegrams were 2,723 for 373 against; phone calls, 4,745 for, 1103 against. Met with some of our members of the Gang of 17; they are going to begin putting a budget together in committee.

  May 4

  . . . [a poll indicated] my speech was to a smaller TV audience than usual; probably due to its last minute nature and no promotion. But people are confused on the whole budget issue and my ratings are way down.<
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  May 5-7

  Never got to this journal until today, Friday. Wednesday, things turned up. We got together with Sen. Pete Domenici’s budget committee and worked out a compromise budget package. It passed out of committee on a straight 11 to 9 party line vote. It’s a good budget and will trim the projected deficits down to $106 billion next year, $69 billion in 84 and $39 billion in 85. The Dems are screaming and lying like bandits charging us with cutting Social Security; we aren’t touching it.

  May 11

  Dems have come up with a House proposal for budget. It would add $151 billion in taxes and make most if not all its savings . . . in defense.

  May 18

  It looks as if the Senate is coming together on our budget program and the House is coming close to a compromise agreement.

  May 19

  Nancy is very depressed about her father’s health and understandably so. I want so much to speak to him about faith. He’s always been an agnostic; now I think he knows fear for probably the first time in his life. I believe this is a moment when he should turn to God and I want so much to help him do that.

  May 20

  Ron’s birthday. But here a frustrating day, much of it spent on the phone with members of Congress on the budget. Most are going to be with us, but some I talked to are dedicated, they say, to what we’re trying to accomplish but they won’t vote with us because the budget compromise isn’t exactly to their liking. A compromise is never to anyone’s liking; it’s just the best you can get and contains enough of what you want to justify what you give up.

  May 21

  My fight has started but it isn’t bloody, just messy. I’m on the phone all day calling Congressmen. The Senate is supposed to pass a budget, not too different from what I wanted, tonight. The House has 5 budgets before it, one of which resembles the Senate bill. It’s called the Bipartisan Recovery budget. They’ll be voted on next Monday; Don Regan called—inflation for the first six months is running 2.8 per cent and for the last year, 8 per cent.