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Tuesday, June 08, 2004 - Page updated at 12:00 A.M.
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Economy still reflects influence of Reagan

By Adam Geller
The Associated Press

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NEW YORK — As president, he crushed one of the few labor unions whose endorsement he won as a candidate.

He had almost no schooling in economics but confidently marshaled sweeping reforms, motivated partly by a decades-old grudge over the whopping tax bills he incurred as a World War II-era film star.

President Ronald Reagan's agenda for the economy and business was wide-ranging and far from subtle. But those broad brush strokes of policy were lasting, helping to redefine economic conservatism and recast government's relationship with business and labor in ways that are still very much in effect today, experts say.

"We live in the age of Ronald Reagan. We live in the wake of Reagan's reforms," said Jules Tygiel, a San Francisco State University history professor and author of a soon-to-be-published biography of Reagan.

Nearly two decades after he left office, the Reagan presidency's lasting impact on business is one of the few things that scholars on both sides of the political aisle can agree on.

His policies still provoke passionate discussion, whether about the aggressive tax cuts and deficit spending of Reaganomics, the administration's embrace of deregulation and pullback from corporate and environmental policing, or its aggressive stance against organized labor.

History has not proven that Reagan's ideas were right or necessary, but their import is demonstrated by the fact that the discussion is nowhere near over, economists and scholars say.

"There's no question that it was a fundamental turning point," said James Galbraith, a University of Texas economist who led the Joint Economic Committee of Congress during the administration and makes no secret of his disdain for many of Reagan's policies.

Until Reagan arrived in Washington, the political debate largely cast fiscal conservatives and their demands for balanced budgets against liberal thinkers who favored the use of deficit spending as a means for reaching full employment.

But the debate was reshaped by an administration that drew together two groups from the periphery who put little priority on controlled spending — "supply siders" who argued that lower tax rates would spur people to work harder, save and invest more and economists who said the key was to control inflation.

Their arguments helped provide Reagan — determined to cut taxes and increase defense spending — with the economic rationale for doing both. It also forced a new era of cuts in other types of government services and spending.

Some of Reagan's accomplishments resulted from picking up the ball left him by former administrations. But he proved to be particularly adept at doing so.

"In some sense the herd was turning and he got out in front of it," said Eugene Steuerle, a senior fellow at the Urban Institute who coordinated 1986 tax reform efforts for the Reagan Treasury Department.

President Carter, for example, had been active in deregulating industry. But Reagan took such efforts a step further, moving the government out of oversight in several sectors, most controversially the savings-and-loan industry, which would later explode in scandal.

Through much of the 1970s, the mind-set in Washington was shifting from massive government spending and the notion that the answer to most problems lay with government.

Reagan commandeered that shift. His administration's effort to cut non-defense spending, and his belief in giving business more room to work, saw the administration cut back on funding for the Securities and Exchange Commission and Environmental Protection Agency, Tygiel said.

Those cuts continue to constrain the regulatory power of those agencies, scholars said.

Other changes were less shaped by the times, and more purely of Reagan's own making.

One of the most often cited is his facedown of the Professional Air Traffic Controllers Association, the union of air-tower workers who went on strike in the summer of 1981.

Because they were government employees, the strike was illegal. But the union — whose mostly conservative membership of military veterans had endorsed Reagan — gambled that a work stoppage would draw attention to its demands and force the administration to get serious.

Reagan did: When the union refused to send workers back, he fired them. The move set a bold new tone for businesses in their dealings with organized labor.

"It was completely radical that you would not just defeat a union but abolish it," said Nelson Liechtenstein, a professor of history at the University of California, Santa Barbara.

Businesses followed Reagan's example, breaking a union of copper workers in Arizona, paper workers in Maine and others.

As Liechtenstein and others see it, that set off a snowball effect partly responsible for a long decline in union membership.

Such bold moves arguably make Reagan one of the century's most important presidents in economic terms.

"There's no question that Reagan is to modern America what Roosevelt was" in the three decades following World War II, Tygiel said. "Reagan came in with a clear-cut economic program and the consequences of that are what we live in."

Copyright © 2004 The Seattle Times Company

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