9.2 Reagan and Conservatism

The conservative movement of the 1980s, often called the New Right, joined several groups. Fiscal conservatives wanted lower taxes, less regulation and a smaller federal government. Anticommunists wanted a tougher stand against the Soviet Union. Social conservatives, many of them evangelical Christians, wanted to defend what they saw as traditional family values and opposed abortion, the Equal Rights Amendment and the bans on school prayer. Rev. Jerry Falwell's Moral Majority, founded in 1979, helped turn evangelicals into a powerful voting bloc, often called the religious right.

Conservatives argued that liberal programs had backfired. In their view, welfare encouraged dependence, high taxes discouraged work and investment, and regulations raised costs for businesses. In his first inaugural address in 1981, Reagan declared that in the current crisis, government was not the solution to the country's problems but was itself the problem.

Reagan's economic program, nicknamed Reaganomics, rested on supply-side economics. This is the idea that cutting taxes, especially for businesses and high earners, gives people more reason to work, save and invest, so the economy grows and everyone benefits. Critics called it 'trickle-down' economics.

The Economic Recovery Tax Act of 1981 cut income tax rates by about 23 percent over three years and lowered the top rate from 70 to 50 percent. The Tax Reform Act of 1986 cut the top rate to 28 percent while closing many loopholes. Reagan also pushed deregulation, loosening government rules on savings and loan banks and broadcasting and pressing Congress to end price controls on natural gas, a goal it finally met in a 1989 law. This built on airline and trucking deregulation that began under Carter. When air traffic controllers went on an illegal strike in 1981, Reagan fired more than 11,000 of them, a blow that weakened organized labor.

The Federal Reserve under Paul Volcker raised interest rates sharply to break inflation, which helped cause a deep recession in 1981–1982, with unemployment near 11 percent. Inflation then fell to about 2 to 5 percent a year, and the economy grew strongly from 1983 to 1990.

But Reagan raised military spending at the same time that he cut taxes, and Congress resisted deep cuts to domestic programs. Federal deficits soared, and the national debt nearly tripled, from under $1 trillion to almost $3 trillion. Programs for the poor, such as food stamps and housing aid, were trimmed, but Social Security was shored up with higher payroll taxes in 1983, and Medicare stayed. Federal spending stayed above 20 percent of the economy all decade. Historians still debate how much the 'Reagan Revolution' really shrank government.

• George H. W. Bush (1989–1993) promised 'no new taxes' but agreed to a 1990 budget deal that raised some taxes, angering conservatives.
• Bill Clinton (1993–2001), a 'New Democrat,' moved his party toward the center. He won approval of NAFTA (in effect 1994) and signed the 1996 welfare reform law, which replaced the main cash welfare program with block grants to states, time limits and work requirements. Late in his presidency the budget ran surpluses.
• In the 1994 midterms, Republicans led by Newt Gingrich campaigned on the Contract with America, which promised tax cuts, welfare reform and a balanced budget. They won control of both houses of Congress, the House for the first time in 40 years.
• Debates over the financial system flared after banking rules were loosened in the 1990s and after the 2008 financial crisis, which led to the Dodd-Frank reform law (2010). The Affordable Care Act (2010) renewed arguments over the safety net.

Fierce debates over social values, sometimes called the culture wars, continued. Groups like Focus on the Family promoted traditional gender roles and family structures, while feminists defended abortion rights and women's growing role in the workforce. During the AIDS epidemic, the activist group ACT UP (founded 1987) used protests to demand faster government action, while many religious conservatives, citing traditional teachings on marriage and sexuality, opposed gay rights measures. Arguments over immigration, affirmative action, multiculturalism and same-sex marriage, which the Supreme Court legalized nationwide in Obergefell v. Hodges (2015), divided Americans for decades.