The Conservative Crack-up

excerpted from the book

The Paradox of American Democracy

by John B. Judis

Routledge Press, 2001, paper

p180
The Conservative Crack-up

Reagan's victory and his first term did decisively tilt American politics away from the liberal spirit of the sixties and from the model of democratic pluralism that the New Deal had established. It also witnessed the consolidation on K Street of a new power base in American politics.

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Business Defectors

Beginning in the early I970s, business leaders, bankers, and lobbyists in Washington had united against what they believed to be a revolutionary threat from the labor, consumer, and environmental movements. With the dissipation of that threat-which was wildly overstated to begin with-the potential for internal discord within business ranks recurred. In I986, high-tech and service industries fought with rust belt companies over the bipartisan tax simplification bill-hotels and software developers were happy to get rid of loopholes in exchange for lower corporate tax rates, while Charls Walker's auto and steel companies wanted to hang onto their credits and subsidies. Businesses and banks also argued about whether the corporate raiders and junk bond specialists should be disciplined. And they quarreled about the deficit, with Fortune 500 CEOs and top-tier investment bankers urging a tax increase to cut the deficit, while small business and Wall Street speculators held out against any tax increases.

But what really turned business leaders against each other and against the Republican conservatives was the continuing difficulty of adjusting to a post-Bretton Woods world. In the I980s the country faced yawning trade deficits, concentrated in manufacturing, and growing budget deficits. The trade deficit rose from $27 billion in 1979 to $159 billion in 1987. In 1979 the trade deficit had largely been brought about by oil imports. By 1987, more than half the deficit was in manufactured goods from Japan (S57 billion) and Western Europe ($27.5 billion), while the deficit with OPEC countries was only $13.7 billion.

The trade deficit stemmed from Japanese trade barriers, which kept out American steel, semiconductors, and automobiles, and from the failure of American companies to keep up with their competitors in new technology and work organization. During the I980s, Japan's leading automobile companies became capable of producing better cars for lower costs, irrespective of wages. From I980 to 1988, the United States lost 6 percent of the world market in automobiles, 36 percent in computers, 6-percent in microelectronics, and I7 percent in machine tools. In the early I950s the nation had produced almost I00 percent of its consumer electronics, but by the late I980s its share of this rapidly growing market was 5 percent.

Reagan's supply-side plan promised to eliminate the budget deficit by I983, but the deficit soared from $40.2 billion in r980 to $I49 billion in 1988. The nation accumulated more federal debt in the Reagan years than it had accumulated during the previous two hundred years. From I980 to I990, federal debt went from 34 to 59 percent of GNP, and interest payments on the debt rose from 9 to r5 percent of the budget, contributing further to the annual deficits and posing the threat of interest rate rises that could have brought about economic collapse. In the past, budget deficits had played a useful role in mitigating economic downturns, but the deficits of the I980s depressed the economy as much as they stimulated it. These deficits ensured that the real interest rates (the nominal rate minus inflation) that banks charged business borrowers would remain unusually high. From I966 to I980, real interest rates hovered around I.25 percent; from I98I to 1990, they were generally above 5.5 percent and as high as 8.I percent. By the mid-l980s, business leaders were beginning to pressure the administration to hold down the deficit.

In I988, as the Federal Reserve began raising interest rates in response to rising deficits and falling unemployment, economic growth began to slow; it stopped altogether in the summer of I990. The economy would not fully recover until I996.

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Popular Disaffection

When Ronald Reagan left office in January 1989, he was as popular as ever, but not the party or the movement he had helped bring to power. While Reagan's backers insisted that the 1980s were the best of times-Wall Street Journal editorial page editor Robert Bartley would write a book, The Seven Fat Years, to praise Reagan's years in office-the public shared business's perception that the economy was in decline. By the late 1980s, as the Japanese began buying up prime real estate, including Rockefeller Center, and major movie studios, panic was setting in. It was evidenced in best-selling books like Paul Kennedy's The Rise and Fall of the Great Powers and Kevin Phillips's The Politics of Rich and Poor, both of which portrayed America as being in inexorable decline.

In 1989 pollsters Stanley Greenberg and Celinda Lake found that 55 percent of Americans believed the country was going on the "wrong track" and only 36 percent on the "right track." Eighty-eight percent thought "foreign investors buying up American companies and land" was a serious problem; go percent worried about "America's trade imbalance with foreign countries"; and 87 percent were concerned about "the loss of America's lead in technology." Most Americans blamed the Republicans for this decline. In 1986 the Republicans lost the Senate. In 1988 they would have lost the presidency if the Democrats had not nominated Massachusetts Governor Michael Dukakis, a remarkably inept candidate. And in I990 the Democrats increased their margin of control in Congress.

The public also became skeptical about Reagan's message of economic individualism and his claim to be restoring political self-rule. Wall Street was wracked with a series of scandals that raised questions about whether business, left to its own devices, would act in the public interest. Dennis Levine, Ivan Boesky, and Michael Milken were the lead actors in a drama that began in May 1986 when the Securities and Exchange Commission accused Levine-a trader at Drexel Burnham Lambert- of making $12.6 million on insider profits and ended four years later with junk bond king Milken being sentenced to jail for ten years. The savings-and-loan debacle, which cost taxpayers and depositors hundreds of billions of dollars, showed the fruits of Reagan era deregulation.

A spate of scandals on K Street demonstrated that the alternative to government administration was not self-rule, but the empowerment of Washington's lobbying community. During Reagan's second term, Michael Deaver, Lyn Nofziger, and other former top Reagan aides and cabinet officials were indicted for using their connections in government illegally to reap millions as lobbyists and consultants. In Deaver's first year as a lobbyist in 1985, he gleaned $4.5 million in contracts, primarily from foreign governments and companies. And the slap on the wrist that the Toshiba Co. and a Norwegian firm received from Congress for selling critical submarine technology to the Soviet Union-due largely to Toshiba's massive lobbying effort on Capitol Hill-showed the power of K Street and the indifference of its lobbyists to America's national interests.

During the late 19805 the public became increasingly convinced that lobbyists representing "special interests" or "big interests" were running the government in Washington for their own benefit. The University of Michigan election studies showed a steady climb of voters who believed that "government is pretty much run by a few big interests looking out for themselves" from 55 percent in 1984 to 64 percent in 1988 to 75 percent in 1992. (By contrast, it was 29 percent in 1964.) In the spring of 1992, one poll found that 83 percent of Americans believed that "special-interest groups have more influence than voters," 74 percent believed that "Congress is largely owned by special-interest groups," and 69 percent believed that "the current incumbents will never reform the political system." In 1992, third-party candidate Ross Perot would crystallize this public disgust with lobbyists and special interests into a viable presidential candidacy. At the same time, there was a growing conviction that government had to do something about the nation's economic and social problems. In an ABC/Washington Post poll, the proportion believing that "government should do more to solve our country's problems" rose from 38 percent in January 1985 to 45 percent in September I990 to 49 percent in June 1992. These sentiments represented a repudiation of the Reagan revolution and seemed to provide an opening to a new democratic pluralism.

There was also a visceral disgust with the individualism that Reagan encouraged. Prosperity in the age of Reagan was also inordinately concentrated among the wealthiest Americans, while many poor and working- and middle-class Americans did worse than before. (From 1979 to 1989, the earnings of men in the highest fifth of the income brackets increased by 9 percent while men in the lowest three-fifths saw their earnings decline by 6 to 11 percent. From 1983 to 1989, the top 0.5 percent of the population reaped 55 percent of the increase in household wealth.) The contrast between boarded-up factory towns and Wall Street opulence fed a growing revulsion with the ethic of greed and individualism that flourished during the age of Reagan. As Kevin Phillips put it in The Politics of Rich and Poor:

The I980s were a second Gilded Age, in which many Americans made and spent money abundantly. Yet as the decade ended, too many stretch limousines, too many enormous incomes and too much high fashion foreshadowed a significant shift of mood. A new plutocracy . . . had created a new target for populist reaction.

The counter-reaction took the form of a growing idealism and altruism. In 1981 the percentage of students describing themselves as "conservative" outnumbered those calling themselves "liberal"-by 19.6 to 18.1 percent-for the first time since I966 when the survey reported in The American Freshman began. These numbers stayed relatively even until I989, when the percentage calling themselves "liberal" began to climb. By 1992, 5.4 percent more students described themselves as "liberal" than "conservative." The proportion of students who wanted to "become involved in programs to clean up the environment" climbed from 26.1 percent in 1989 to 33.6 percent in I992. During the same period, the proportion of those who wanted to "help promote racial understanding" grew from 35.3 percent to 42 percent.

There was also an organized backlash to the Reagan years. Both the environmental and consumer movements picked up new members in response to Reagan's attempt to sell off federal lands, privatize the parks, and gut the Environmental Protection Agency and the Federal Trade Commission. The ten leading environmental groups, including the Sierra Club, the World Wildlife Fund, the Natural Resources Defense Council, and Greenpeace, took in $2I8 million in I985; by I990, they were bringing in $ 5I4 million. Membership in these groups went from 3.3 million in I985 to 7.2 million in I990. Local organizations also sprouted up. In 1986, the Citizens Clearinghouse for Hazardous Wastes, which grew out of the Love Canal incident, oversaw activities of I,700 local organizations trying to combat chemical contamination; by 1990, it boasted about 7,000 groups.

The environmental groups adopted a range of political approaches- from the more sedate Environmental Defense Fund to the radical Greenpeace and Earth First! to the Green parties. Greenpeace alone went from 240,000 members in 1980 to 1.5 million members a decade later. The growth of the movement reflected a growth in public support for environmental protection. One 1990 Gallup Poll revealed that 76 percent of Americans considered themselves "environmentalists." A poll the same year by the New York Times/CBS found that 74 percent of Americans believed that "protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost"-up from only 45 percent who agreed with this statement in 1981.

In November 1988, Nader and the consumer movement, which had failed two years earlier to defeat a referendum in California restricting the right to sue corporations, successfully passed an initiative in California that rolled back automobile and property insurance rates. It was the movement's first initiative victory and led to efforts in other states to curb insurance costs. Feminist and civil rights organizations also prospered. In 1988 these organizations successfully lobbied Congress to override Reagan's veto of a bill that strengthened the hand of government in punishing institutions that practiced racial and sexual discrimination.

There were even signs of life in the labor movement. Unions that organized public workers and workers in the service sector actually began to increase their membership. From 1980 to 1993, the Service Employees International Union (SEIU) increased its membership by 400,000. The United Food and Commercial Workers increased the number of unionized workers in retail grocery stores from 67 percent in 1988 to 72 percent in 1993 and in meat packing from 50 to 65 percent. The American Federation of County, State, and Municipal Employees (AFCSME) grew so rapidly that it was on the verge of displacing the Teamsters as the largest union. Several major unions, including the Teamsters and the United Mine Workers, ousted corrupt leaders and installed reform administrations.

For all these harbingers of a new progressivism and democratic pluralism, however, there were equal indications that the country might not be ready for a new era of reform. The growth of the environmental, consumer, and civil rights organizations during the late 1980s was largely in the size of their budgets and in their paper memberships. Outside of public and some other service employees, union membership continued to decline-down to only 16 percent of the nonagricultural workforce by 1992. Liberals in the late 1980s did not have a mobilized citizenry behind them. On the other side, while conservatives and their business allies had lost their governing majority, they remained a considerable force on K Street and in the government.

During the Bush years, liberal groups blocked legislation that deeply offended their constituencies, but, outside of a civil rights bill and a small and belated increase in the minimum wage, they failed to pass any legislation of their own. A renewal of the Clean Air Act passed, but only after its key provisions were shaped by business lobbyists who wanted to delay the implementation of tougher standards. The bill that most clearly epitomized the new balance of forces was Bush's heralded I990 budget, which split the conservative movement. It contained no reform initiatives. It cut some social programs while modestly increasing others. It raised taxes across the board, but unlike the Reagan budgets did not egregiously favor the wealthy or business. Fiscally speaking, it was an important corrective to the bloated budgets of the 19805, but it failed to alter the balance of political or social forces in the country.

The Reagan years and the business counteroffensive also left their mark on popular sentiment toward reform. In 1964, on the eve of the Great Society, 76 percent of Americans said they could "trust the government in Washington to do what is right" either "most of the time" or "just about always." By 1992, this percentage had fallen to 29 percent. This was an indication of dissatisfaction with the Bush administration, but it also reflected a residual distrust of government itself that a new administration would find it difficult to overcome.

Paradox of American Democracy

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