Reagan Dividend–The Gift That Keeps On Giving

Every budget for the US economy submitted for the last 20 odd years has contained a real savings from the Reagan era that we continue to enjoy today and will continue to do so for years to come.  No thinking person could dispute that it was Reagan’s resolve and force of persuasion that brought us victory in the Cold War.  Yes, he ramped up military spending in the ’80’s to offset the egregious shortages in our military preparedness caused by the Carter cut backs following Viet Nam.  The military still was not popular with Americans at that time and we were facing a real problem with Stagflation under Carter.  The in creased cost for the military buildup did cause budget deficits for the short term. 

Reagan had to deal with an economy that was more than stalled, it was moribund when he took office but he brought an attitude of can do and hope with him to the White House.  It was no surprise that the Iranians released our prisoners they had held for over a year on the very day of his inaugural.   Despite intense criticism and no help from the Democrats in Congress he pushed for and obtained that increased spending and even raised the stakes with his SDI, Star Wars everyone called it, program.  The left sought only accommodation with the Soviets and wanted more money for their pet social programs. 

His strong efforts and obvious resolve did finally bring the walls down across Europe shortly after he left office in 1989.  Immediately everyone began talking about what could be done with the “peace dividend” because we could reduce our military spending.  The military budget did come down then and the cost curve for the future was moved lower.  That cost curve is still down from what it would have been but for our victory in the Cold War.  We are talking real dollars–billions every year in savings since roughly 1990.  

The War on Terror is expensive as all wars are.  We didn’t ask for this fight and we didn’t provoke it.  The US was not sending out the CIA or our armed forces to attack and kill Muslim innocents abroad.  Can you imagine what things would be like now if we had not prevailed in the Cold War?  The cultural clash we have with the Muslim world was brought to us outside the normal diplomatic, economic and ideological conflicts of the recent past.  Regardless of our disputes with the Soviets the Muslims would have attacked the Twin Towers.  Please imagine the pressures and tensions we would face now if the Soviets were still dominant in Eastern Europe as they were for four decades.  They usually had at least 50 divisions in East Germany and Poland at all times.  We never had more than 5 or so at any time. Those Soviet troops were equipped with thousands of tanks and thousands of heavy artillery not to mention their nuclear capabilities that could be brought to bear.  They were never hesitate to use their muscle to make trouble around the world.  There was the Berlin Wall under Kennedy, the Berlin Airlift under Truman and the Cuban Missile Crisis under Kennedy, then the Hungarian revolt and the collapse of it and the Czech revolt which was also crushed. 

Facing the threat of the Soviets and the Muslim terrorists at the same time would be an enormous challenge and the costs would make the current military budget pale.   The Soviets would be encouraging and arming the al-Qaeda at every turn if they were still in power.  They probably wouldn’t have given them any nukes but they sure would have given them training and the most sophisticated conventional weaponry they had available.  They would be fostering every Fifth Column communist group in the world and making any deal with the Muslims to cause us turmoil.  It is not a pretty picture to contemplate.  But that is what we would face if the Democrats had their way in the ’80’s because they were uniformly opposed to fighting back against the Soviets with a few exceptions like Nunn from Georgia and Jackson from Washington.  As Khrushchev said they were determined to crush us.  Gorbachev eased some and opened their society a bit but only because of the internal pressures brought to bear by the Reagan strategy of meeting the enemy head on and calling a spade and spade with no wishy-washy words.  He called them evil which they were and told them to tear down the Wall.  While the Russians today are not our best buds they are not our overt opponents threatening our very existence and they even cooperate after their fashion in the war on terror.  We are the beneficiaries each day of that dividend Reagan brought to us, never forget it. 

Why won’t they go ahead and shut down Fannie and Freddie as government sponsored enterprises and put them up for sale to the private market for whatever they will bring.  It is not a good thing when Government, Inc. owns and controls 80% of the mortgage lending business in the US.  Indeed that is a bad thing.

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Filed under Economics, Foreign Affairs, government, history, military history, Politics

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