David Warsh: Biden's policies, like Reagan's, are a big gamble, but based on experience
On Wall Street, with flag-draped New York Stock Exchange at right
SOMERVILLE, Mass.
Might Democrats retain control of the White House through 2032? When I ventured that possibility the other day, my sagacious copy editor observed that one party had won three consecutive terms only once in the 70 years since Harry Truman left office on Jan. 20, 1953 – during the dozen years after Ronald Reagan was elected in 1980, reelected in 1984, and succeeded by Vice President George H. W. Bush in 1988.
I’ve been thinking ever since about why it might happen again. I know, I said I planned to write for a while mostly about economic topics, but what’s more economics than this?
It is not easy to recall how unlikely a Reagan’s victory seemed in the months running up to the 1980 election. True, he had served two terms as governor of California, but he had run unsuccessfully for president twice; he’d announced at the last minute in 1968 before running again, in 1976. His right-wing instincts were so little trusted by the Republican Party’s Establishment that Henry Kissinger sought to persuade him to accept former President Gerald Ford as his running mate. He was 69, an additional factor against him.
Similarly, Reagan’s policy initiatives – big tax cuts for the well-to-do, a willingness to tolerate the Federal Reserve Board’s high interest rates, deregulation for everyone, and an expensive confrontation with the Soviet Union – were thought to be dangerous and, at least by the Democrats, were expected to fail. Not much about America’s future was clear in 1980, except the widespread dissatisfaction with President Jimmy Carter. (Former Republican John Anderson was also on the 1980 ballot, as an independent; Reagan still would have won if he hadn’t been, but it wouldn’t have been the landslide it turned out to be.)
Then two years into Reagan’s first term, the economy took off, inflation fell, financial markets boom and China entered global markets. Over the course of the decade, the Cold War ended, and the government of the Soviet Union collapsed. Vice President Bush succeeded Reagan and fought a successful war in Iraq. Bush was defeated in 1992 because of a lack-luster economy, but the next 24 years – the presidencies of Bill Clinton, George W. Bush and Barack Obama – were dominated, one way or another, by the “Washington Consensus” on economic policy that had formed during the Reagan years.
What similarities does Joe Biden share with Reagan? His candidacy was unexpected, for one thing; twice before Biden had run for president and failed to come close, in 1988 and 2008. At 78, Biden was even older than Reagan when elected. Most important, after nearly 50 years in the Senate, Biden is thoroughly wed to a movement, if that turns out to be what is unfolding, that has been in the making for as long or even longer than his service to it.
What movement? If Reagan’s gospel was that government was the problem, Biden’s credo seems to be that government spending is the solution to a variety of present-day problems – a fraying social safety net, deteriorating infrastructure, diminished U.S. competitiveness in global markets, and diminished opportunity. Gerald Seib, political columnist for the news pages of The Wall Street Journal, made a similar point to the one I’m making here the other day when he observed that not since Reagan’s presidency has a new administration opened with “a gamble as large as the one in which President Biden is now engaged” – an effort to change “not just the policies but the path of the country” with borrowed money.
Why might voters’ minds have changed in significant numbers about such fundamental matters as their enthusiasm for taxing and spending? Experience is one reason: Free markets and austerity failed to redress the problems they promised to solve. Indeed, they seem to have made them worse. Changing circumstances are others. Global warming has become manifest. A new kind of Cold War, this one with China, has emerged. And the Republican Party is deeply divided.
A shift of opinion on this scaled scale would, of necessity, entail a massive realignment of financial markets. As it happens, I have been reading The Day the Markets Roared: How a 1982 Forecast Sparked a Global Bull Market (Matt Holt Books, 2021), by Henry Kaufman. Kaufman was the authoritative Salomon Brothers economist whose forecast, on Aug. 18,1982, that interest rates would soon begin dropping ignited a stock market rally that hasn’t ended to this very day. Toward the end of his book, Kaufman mourns what he sees as a system of capitalism giving way to a system of “statism,” especially as the Treasury Department and the Federal Reserve System come under collaborative management in pursuit of White House goals. There is plenty more to be borrowed, he says — certainly enough to readjust in the future the currently skewed rates of return among stocks, bonds and commodities. Financial markets might yet sigh.
Saying how the battles of the next 10 years might play out would be a foolish venture. Forecasting who might be the Democratic and Republican Party nominees in 2024 and 2028 is considerably more pointless than guessing who will meet in the Super Bowl next year since there are far more variables involved. But there is nothing foolish about acknowledging the existence of tides of public opinion that ebb and flow. Reagan’s presidency was a “triumph of the imagination,” wrote former New York Times reporter Richard Reeves, in 2005. Might someone say the same of Biden in 2045?
David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column first ran.
David Warsh: Our two show-biz presidents
SOMERVILLE, Mass.
Over the course of 230 years, citizens of the United States have elected only two professional entertainers to the presidency: Ronald Reagan and Donald Trump. Both possessed an actor’s gifts: good looks; physical presence; a communicative face, in one man an infectious grin, in the other a much-photographed glower.
True, they took very different paths to the office. Reagan began as film actor, union president, and pitchman for General Electric Co. He turned to professional politician in his fifties, winning two terms as governor of California. Trump, a real estate developer and marketer, became a television personality in his fifties. Beginning in 2004, he played a puffed-up, airbrushed version of himself for 14 seasons on The Apprentice.
True, too, Reagan and Trump have left very different marks on the office. Reagan started out shakily, with Alexander Haig, Donald Regan, James Watts, and Ann Gorsuch, and wound up surrounded by good men, including Nichols Brady, James Baker and George Shultz. After being forced to fire National Security Adviser-designate Michael Flynn, Trump started out with some good men around him, Jim Mattis, H.R. McMaster, Rex Tillerson, and Gary Cohn surrounded by the likes of John Bolton and William Barr.
But the most important attribute they have in common is often overlooked. Their success as entertainers in an age of new media made them shrewd judges of what their respective audiences expected of them.(Reagan was host of a popular weekly drama series, General Electric Theater, from 1954 until 1962, and honed his speaking skills visiting company installations.) Reagan proved able to expand his base dramatically and became a transformational president (Barack Obama agrees.) Trump himself is apt to catastrophically fade, once deprived of his props. But the legacy of the campaign he ran in 2016 is likely to dominate politics for another 20 years.
I count three major issues in 2016 (leaving aside the hate-mongering of lock her her up): immigration, trade and foreign wars. Forging a new consensus on those issues will be an issue for several presidential cycles. For a sensible survey of the often irreconcilable rights and responsibilities of the three basic constituencies – the would-be migrants, the polity they seek to join and those who are being left behind – see Exodus: How Migration is Changing Our World (Oxford. 2013), by Paul Collier, a distinguished development economist. (I haven’t read Refuge: Rethinking Refugee Policy in a Changing World [Oxford, 2017].) Earlier Collier wrote the best-seller The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It (Oxford, 2008).
For a somewhat sterner view, read The Great Escape: Health, Wealth, and the Origins of Inequality (Princeton, 2013), by Angus Deaton, a Nobel laureate in economics. Or wait for The Narrow Corridor: States, Societies, and the Fate of Liberty, by Daron Acemoglu and James Robinson, in September. Then ask yourself if you think the U.S. is substantially different from Canada and Australia, where so-called “merit systems” prevail for allocating immigrant positions. Trump proposed something of the sort last week, a plan prepared by his son-in-law and a principal adviser, Jared Kushner.
Similarly, global trade will resume, but the contest with China for dominance won’t go away. The bad feelings on both sides from having come to the brink of a long-lasting trade war will take many years to subside. No one, not even William Overholt, author of a series of prescient books about the sleeping giant, most recently China’s Crisis of Success, can confidently predict the path relations will take. They’ll develop against the backdrop of whatever U.S. Trade Rep. Robert Lighthizser and his Chinese counterpart manage to achieve.
As for foreign wars, Trump’s relative caution with respect to North Korea, Venezuela, and Iran gives the lie to his habitual braggadocio. Don’t expect future presidents to be any more willing to intervene abroad militarily. Read America’s War for the Greater Middle East: A Military History (Random House, 2017), by Andrew Bacevich, if you doubt it. Perhaps all will campaign on promises to repair America’s seriously damaged diplomatic and intelligence services.]
Ronald Reagan’s presidency offered a genuine buoyancy. Trump offers mainly jingoism, chicanery and abuse. But both men sensed that voters were nearing a turning point in the zig-zag of American history. Sooner or later, legitimate Republican conservatives will turn on their usurper and his enablers. But for the present, Trump’s GOP is the party of innovation, even if it means trying to recapture the past.
Whether or not Trump is re-elected depends mainly on whom the Democrats nominate to run against him, and how that candidate chooses to run. Never mind the evangelicals. He or she can win with only a small portion of Trump voters in a Democratic coalition. In contrast, Reagan won a second term by a landslide, 525 to 13 electoral votes.
David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this essay first appeared.