Diary

My Problem with Ronald Reagan

So, with the primary having reached a bit of a lull before a slew of contests at the end of April, I thought I’d a break and turn attention to a historical question that’s been on my mind for awhile: the legacy of our fondly remembered president, Ronald Reagan.  Full disclosure:  I was born during Reagan’s presidency and am too young to remember it.  I get the sense from my parents that Reagan is so highly regarded primarily because he made people feel comfortable, feel good about being American, and these years were generally prosperous and enjoyable ones.  That’s all to the good.

Looking back on it though, I’ve come to the conclusion that Reagan’s reputation as a conservative is largely undeserved, and that he’s overrated.  I think this is significant because so many modern Republicans look back to Reagan as a kind of model of governance, something to return to and build on.  I think this is the wrong approach and that we can do better.

NB: I’m limiting my discussion to domestic policy, as I don’t have as much knowledge of or interest in foreign policy, and think the domestic record is a wide enough scope of discussion.

First off, from a conservative standpoint, there are several areas on which Reagan’s record is questionable, including but not limited to:

  • Legalizing abortion in California
  • Massive deficit spending during his presidency
  • Ban of automatic weapons
  • Granting amnesty

On all of these, there are valid arguments to be made in Reagan’s defense.  In the case of both amnesty and abortion, he later claimed lack of knowledge and foresight, and that he later regretted them.  I personally think we should hold our elected officials to a high enough standard that these are not acceptable excuses if knowledge and foresight are reasonably possible, as in both cases they were, but I agree that one can give the benefit of the doubt.  In the case of the automatic weapons ban, it was a clause that was slipped into a bill at the last minute, and the larger bill was protective of Second Amendment rights.  So that is also arguably excusable.  In the case of spending, his proponents typically say that Tip O’Neill reneged on agreements and that it’s his fault.  This seems like copping out and buck passing to me; I think if he really wanted to stop the spending, as president he could have. But again, I agree that there is a possible reasonable doubt.

So, none in the above are critically damning of Reagan, and with only the above criticisms, we could say that his legacy is debatable, at worst.  However, there is one Act which firmly convinces me that Ronald Reagan clearly sold out his espoused principles for expedience, with long lasting consequence.  Furthermore, the incident clearly demonstrates a lack of integrity, as his actions are in direct contradiction to his previously stated position, which was very clear.  Alright, enough build up; I’m talking about entitlements, specifically the Social Security Amendments of 1983.

First, the substance of the issue.  Social Security is a scam.  It has been accurately described as a Ponzi Scheme, where the early contributors will get out more and the later contributors get less or nothing.  Since early withdrawals are more than early contributions, such a scheme can only survive by regularly increasing the contributions to it ad infinitum.  The historical pattern of projected insolvencies followed by payroll tax hikes shows this is the case for Social Security.  Secondly, it has been sold as a funded system where the money to pay benefits is preserved in the Social Security Trust Fund.  This Trust Fund is in fact nothing more than an accounting gimmick.  Since it invests exclusively in Treasury bonds, the reclamation of those bonds, which are financed by taxes, is the only way that the Trust Fund can pay benefits.  Hence, current payroll taxes effectively go to the General Fund, current benefits are paid by all tax revenues, including payroll taxes.  There is no Trust Fund.  All of the academic literature on the subject correctly states that it is a pay-as-you-go system.  Furthermore, even if the system were funded, it provides a negative rate of return, and far less retirement income than one could secure from other sources.  Again, it’s a scam.

It is clear that Ronald Reagan understood this reality in 1964, from his famous Time for Choosing speech (excerpt below):

“They’ve called it “insurance” to us in a hundred million pieces of literature. But then they appeared before the Supreme Court and they testified it was a welfare program. They only use the term “insurance” to sell it to the people. And they said Social Security dues are a tax for the general use of the government, and the government has used that tax. There is no fund, because Robert Byers, the actuarial head, appeared before a congressional committee and admitted that Social Security as of this moment is 298 billion dollars in the hole. But he said there should be no cause for worry because as long as they have the power to tax, they could always take away from the people whatever they needed to bail them out of trouble.

“And they’re doing just that. A young man, 21 years of age, working at an average salary — his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he’s 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can’t put this program on a sound basis, so that people who do require those payments will find they can get them when they’re due — that the cupboard isn’t bare?”

In this passage, Reagan clearly states several of the problems with Social Security, and appears to understand them.  Fast forward to 1983.  The Social Security Trust Fund was facing a looming “insolvency” (in quotes because the very concept of solvency implies a funded system, which it is not), much like it is today, only closer.

The correct solution to this problem, the conservative solution, would have been to point out the inherent flaws in the system, and use them as an opportunity for lasting reform.  At a high level, this would involve guaranteeing payments to beneficiaries who are dependent on them, freezing accruals for middle age and younger workers, and reducing the payroll taxes so that workers could provide for their own retirement.  The program would be put on a long-term phase-out, and future generations would be spared from a false promise and an onerous tax burden.  This is what Congress should do today, and it is what it should have done in 1983, the year of my birth.

Of course, Congress did nothing remotely like that.  Instead, they raised the tax burden on working people, cut the benefits but kept accruals ongoing, and the Office of the Actuary projected that this would preserve the system for 75 years (it turns out it will be less than 50 years, due to optimistic assumptions).  The bill passed with massive bipartisan support, including the support of the Reagan administration.  Now, my expectation of what a conservative president would do in this situation is veto such a monstrous, entitlement perpetuating bill that prolongs a scam on working Americans.  Given that the bill had such support though, this may be unreasonable of me.  Perhaps a more realistic expectation would be a less combative approach, one that signs the bill but points out the problems of the system in the signing statement or public speeches, like he did 20 years earlier in his Time for Choosing speech.  But Reagan did not even do that.  His signing statement positively glowed and crowed about the excellent achievement this was, with no caution and no concern for the onerous tax burden and bad deal that it represented for working people in this country.  Here’s an excerpt from the signing statement:

“Today, all of us can look each other square in the eye and say, “We kept our promises.” We promised that we would protect the financial integrity of social security. We have. We promised that we would protect beneficiaries against any loss in current benefits. We have. And we promised to attend to the needs of those still working, not only those Americans nearing retirement but young people just entering the labor force. And we’ve done that, too.

“None of us here today would pretend that this bill is perfect. Each of us had to compromise one way or another. But the essence of bipartisanship is to give up a little in order to get a lot. And, my fellow Americans, I think we’ve gotten a very great deal.”

There you have it.  In two decades, Ronald Reagan had done a complete 180 degree turn on Social Security.  From rightfully decrying it as a scam and a fraud against working people, to raising taxes, prolonging it, and beaming at his accomplishment.  To my knowledge, this about turn has never been explained, but I think it should be.  More than anything, I think this whole episode shows Reagan for what he really is, which is not a reform conservative.  In truth, he’s most like a New Deal Republican who believes in government programs but wants to tinker with them, in the mold of an Eisenhower or John Kasich.

Conservatives really need to stop looking up to this man and venerating his legacy.