Secrets From the Reagan Revolution, Part II

Above the initials ZU, we are dealt with as follows:

“Your beloved Ronald did more damage to the U.S. than any other politician in the history of the country.”

The reader refers to our interview yesterday with two men who played prominent roles in Ronald Reagan’s 1980 election, Elliott Curson and Jeff Bell.

No small feat that, working more damage than any other politician in the history of the country. The competition is brutal, and Olympic-level.

But continue:  

He moved the Republicans to a party based on reactionary social issues as a smoke screen to cover preferential treatment of the mega-wealthy. Now we have an oligarchy, and never in history has an oligarchy peacefully given up power. In a sense, he single-handedly undid the American Revolution. Of course, for the few extra dollars you received in tax savings, you will all look the other way and either make believe this never happened or blame it all on those “evil socialists”!

We don’t seem to recall receiving much in the way of tax savings. Regardless, we don’t blame “evil socialists” for the American body politic’s indifferent state of repair. No, we cast a much wider net. And many of the leading suspects precede Ronald Wilson Reagan. Some by a good deal.

Another president with a “Wilson” in his name springs to mind. That one signed the Federal Reserve into existence over 100 years ago. He also horse-collared America into the war to end all wars. That led to “the peace to end all peace.”  

And in the spirit of bipartisanship, it was Nixon who severed the dollar’s tethering to gold. Today the U.S. national debt clocks in at $20 trillion. Coincidence?

But perhaps we shouldn’t be too hard on anyone in particular. We are all slaves to the circumstances of our day. And no one can calculate the effects of their actions to more than one or two decimal points. History is read backward but lived forward.

“Institutions have a way of evolving over time,” our co-founders Addison Wiggin and Bill Bonner write in their best-seller Empire of Debt.

“After a while, they no longer resemble the originals. Early in the 21st century, the United States is no more like the America of 1776 than the Vatican under the Borgia popes was like Christianity at the time of the Last Supper, or Microsoft in 2009 was like the company Bill Gates started in his garage.”  

No, it isn’t…

Below, Part II of our conversation with Elliott Curson and Jeff Bell. You’ll find more about Ronald Reagan’s battle with his party establishment, David Stockman’s role in the Reagan White House, the coming showdown between Donald Trump and Hillary Clinton and more. Read on…


A conversation between Brian Maher, Elliott Curson and Jeff Bell

Brian Maher: Yesterday, we talked a lot about the campaign ads you two gentlemen produced for Ronald Reagan in 1980. They turned his campaign around, and many credit those ads for saving Reagan’s candidacy.

We also talked about Reagan’s advocacy of a gold standard and some of the resistance he faced from the establishment. Reagan even filmed a pro-gold campaign ad that he asked not be aired because he didn’t want to alienate certain people.

Today we’re going to get a bit more into Reagan’s agenda, and who opposed it within his administration. We’ll also see where our own David Stockman fit into all this. Then we’ll talk a bit about this year’s election and the leading candidates.

Jeff, it seemed like the Republican Party establishment tried to block a lot of Reagan’s economic agenda right off the bat, especially his supply side economic agenda.

Jeff Bell: That’s true. They didn’t like a lot of what Reagan had in mind. At one point, they tried to have the 3-year tax cut of 10% a year changed to 1 year tax cut at 10%, for example.

Brian Maher: They thought tax cuts were inflationary. That was one of the main arguments.

Jeff Bell: Yes, they did. It’s hard to imagine that letting people keep more of their money was going to kick off a major bout of inflation. Of course, it didn’t. What it did do was cause a huge rally in the dollar. Cutting taxes helped with the inflation problem by strengthening the dollar so much. The dollar actually had to be brought back down to planet Earth in the 1985 Plaza Accord, negotiated by Treasury Secretary James Baker.

Brian Maher: Who would you say were the main obstacles to Reagan’s economic plans? Would you care to name some names in the Republican establishment who really stood in his way?

Jeff Bell: There were so many, including people in the administration, that it’s just hard to single anyone out. It’s probably better to tell you who in the high command liked the economic plan rather than who disliked it. I should mention that David Stockman lost enthusiasm for supply side economics and went over to the other side. That was probably because he was the Budget Director and didn’t want the deficit blowing up on his watch.

For a combination of reasons, David stopped being an advocate of the tax cuts. Some of the White House staff were not that enthusiastic. The center of advocacy of the economic plan was in the Treasury Department led by Don Regan.

Brian Maher: Let’s stick with DavidStockman for a second. We have a relationship with David here at The Daily Reckoning and he’s written extensively about his experiences in the Reagan White House, plus and minus. How was your relationship with him, Jeff?

Jeff Bell: I got to know David quite well. I remember I drove down from the New York area to Washington one time. We talked the entire time. I think it was right after the election, and he was heading into a big meeting with Reagan and his advisers. So I was briefing him on the various players, who was good, who wasn’t so smart, who to watch out for, etc.

I felt very close to David. I got to talk to him a lot at the Republican convention in ‘80. To the naked eye, Dave was a big supporter of Jack Kemp’s supply-side economics. It could be that he pulled away from it because of the nature of the position that Reagan had chosen for him, which was Director of the Office of Management and Budget. That put him in charge of the federal budget. And his primary interest was to cut the federal budget. Others of us emphasized cutting taxes over spending cuts.

I think David always understood that government money-printing is the original sin of monetary policy. He still has a very dark view about political elites and what can be expected from them. I’m a little more optimistic. I just think that something like the Trump nomination poses as many opportunities as it does dangers.

Brian Maher: Trump, ha,we’ll get to him in a minute.Sticking with Stockman for the moment, you’d agree that he was more interested in budget cuts initially than the tax cuts, correct?

Jeff Bell: That’s for sure. I guess you could say that was his beat. Obviously, the tax cuts are the things that people are going to remember. I think he did a good job in keeping domestic spending under control.

Brian Maher: If you read David these days, he lowers his horns against what he calls the whole bubble finance crony capitalist scheme on Wall Street.

Jeff Bell: Yes, it’s very interesting. And he brings a lot of passion to his work. After a certain time, even the real growth is going to start to disappear if everything gets bound up with bubble economics. It doesn’t seem like it can go on forever, that’s for sure.

Brian Maher: OK, getting back to Reagan, did anyone lead him astray or sabotage him? Did Bush have anything to do with it?

Jeff Bell: No. I think Bush, as vice president, Bush was a team player. He didn’t try to step on Reagan. Others did. Others were very skeptical of Reagan, including many in Congress. But Bush was not a problem as his vice president. Reagan picked him and he immediately changed his position on abortion. He also changed his position on the tax cuts, which he’d earlier called voodoo economics in the primaries. He was a team player. I don’t think Mr. Bush was particularly an ideological man, but he was loyal to Reagan as his vice president.

Brian Maher: What about others like Don Regan and James Baker?

Jeff Bell: Regan was an important player. Baker did a great job as Secretary of the Treasury. Jim Baker is the first to say that he was skeptical of Reagan’s economic agenda and his tax cuts. He has been Bush’s campaign manager in the 1980 primaries. He was skeptical of Reagan’s supply-side element, but he came around. He realized he has been wrong to be skeptical.

As both Chief of Staff and as Treasury Secretary, he may not have fully understood or agreed with supply-side economics, but he pushed for both the tax cut of ‘81 and the Tax Reform Act of 1986. By then, he was Treasury Secretary and Regan had become Chief of Staff. The two of them were instrumental in getting those bills to fruition which, of course, cut the top rate on income from 70% to 28% over the Reagan years. That was an accomplishment so amazing and so unexpected at that time that I still marvel at it.

Brian Maher: Was Reagan a great president?

Jeff Bell: I think it’s fair to say that he was … People who worked with him did not necessarily think he was a great man. What amazes me, in looking back on my experiences with him, was how many times he was right about things that his advisers didn’t agree with.

I mentioned yesterday the consensus against a confrontational policy towards the air traffic controllers. And when he walked out of the summit in Reykjavik with Gorbachev, none of his advisers wanted him to do it, even the most conservative ones. Yet, he turned out to be right, again and again.

He was very self-effacing. He wasn’t a man who found it easy to be intimate. If you start getting into personal things, he might tell an old Hollywood story, a joke, but he was very thoughtful. He read a lot about ideas and political philosophy. That’s what led him to drift away from the Democratic Party and towards being the leader of the conservative movement.

One thing about Reagan was that he was very much in touch with his voters. Reagan answered a lot of his personal letters. He would get a lot of correspondence. I was with him when he was California governor for a few months in 1975. I couldn’t understand why he would spend so much time answering his mail.

I later realized that he didn’t want to talk to politicians. He wanted to talk to average people who appealed to him, and he learned from them. His secretary, Helene Von Damm, actually produced a book based on these letters called “Sincerely, Ronald Reagan”.

The Panama Canal issue was another example of Reagan connecting directly with voters. That’s not one that Reagan started out wanting to emphasize, but when he would mention the giveaway of the Panama Canal, the audiences would explode.

He realized he had touched some kind of nerve. It wasn’t that the Panama Canal was an all-important issue. It’s just that it symbolized, for a lot of voters, what was going wrong in the Cold War, that we were giving away too much.

Now Trump is in many ways doing the same thing, with the way the immigration issue resonates with a lot of his followers. You can just see the wheels turning in his head when he’s addressing one of his rallies.

Elliott Curson: I had a feeling with Reagan that he didn’t have to become President of the United States to feel good about himself. He was secure with who he was and the presidency didn’t define him the way it might define others.

Brian Maher: His name keeps popping up here, so let’s finally get to Donald Trump. Elliott, let’s say Trump comes to see you tomorrow and asks you to do an ad. What would be your advice for him?

Elliott Curson: I’d say look at the commercials we did with Reagan in 1980. Would you be open to doing the same thing, explaining issues without shouting and screaming? That’s what he does in his commercials now.

The good thing about Trump is that he communicates. He gets straight to the point. He’s not afraid. He’s not trying to play it down the middle so he can reach everybody. He knows he’s not going to win everybody. He says, “I’m going to throw it out there. I’m going to see who follows me.”

There’s a possibility that Trump could come around on an issue and say, “I was against this but I was wrong. This is what I think and this is what we have to do.” That could possibly win him some converts.

I think there’s a correlation between Trump and Reagan in the fact that Reagan was always underrated. When he ran against Brown for California governor, the candidate the opposition wanted to run against was Reagan. They thought he was one guy they certainly could beat. They didn’t. Then they said Reagan was unelectable as president in 1980. Wrong again.

You can bet that a lot of Democrats were pulling for Trump to win the Republican primaries for the same reason. They figured he’d be a cakewalk in the general election. A lot of them might be having second thoughts about that now. Some polls are starting to show Trump slightly ahead of Hillary.

Brian Maher: What’s your take on Trump, Jeff?

Jeff Bell: I think that people who are saying “Never Trump” are going to come around. For one thing, if they’d try to start an independent movement, they don’t have a popular base. The establishment and the more conventionally conservative candidates didn’t win the primaries. Trump won most of them. Cruz won 4 or 5. Rubio, the only one he won was the Puerto Rico primary. The only one that Kasich won was his home state.

It’s all coming down to a race between Trump and Hillary. A lot of the more conservative voters who were saying, “Never Trump” have to choose a side.

Elliott Curson: One more thing, if I may. I would say to Trump, if I was doing his campaign, let these other people come in. Give them a face-saving reason to join your team. Throw them a bone, so to speak.

Brian Maher: OK, Elliott, what if Hillary Clinton comes to you tomorrow and asks you to run a campaign commercial for her? Assuming you’d want her to be elected, what would be your advice?

Elliott Curson: The same advice for any campaign, really. I think Hillary has so much baggage, aside from all the negative publicity about the e-mail scandal, and we don’t know how that’s going to turn out. But when people see her, she’s always shouting, which is very unnerving, very disconcerting.

The first thing an advisor has to do with Clinton is to make her look human because she has a hard time relating to people. She has a very difficult time getting people to believe her on anything. Her focus isn’t clear and she’s all over the place. She has to know what she stands for before any consultant could help her.

Brian Maher: Hillary probably thought she was going to cruise into the nomination with no resistance. She did not count on the Bernie uprising. It’s made her work a lot harder than she intended.

Elliott Curson: That’s because Sanders comes across as authentic, as Reagan did. They feel that he says what he believes, not what he thinks people want to believe. Everything about him is so apolitical.

Brian Maher: One of our editors, Jim Rickards, thinks there’s a chance that Hillary might not even make it to the nomination because of the e-mail scandal. Even if she doesn’t get prosecuted, this could be enough bad press surrounding it that she may have to ultimately drop out. He thinks they’re keeping Joe Biden on ice in case she doesn’t make it to the finish line.

Elliott Curson: Well, Joe Biden has said he’s not a candidate, but who knows, really. Obama is staying right by Biden’s side. He’s glaring down on him like a kid who did something wrong. He thought Biden would carry on his legacy.

Also, I noticed that Al Gore hasn’t come out to endorse anybody. He said I will support the Democratic nominee, but maybe he feels that there’s a chance he could get in.

Jeff Bell: Having run for office before is usually a plus because candidates know the process. Of all the candidates, Hillary is the only candidate who had run before. Everyone was a first-time candidate on the Republican side. It’s highly unusual for somebody in Republican presidential politics to win the nomination without experience. It’s usually somebody who had run before and finished second, or somebody with a big name.

Thinking ahead to the general election, we’ve seen exit polls from the Democratic primaries where about a fifth of the Sanders’ voters said they’d vote for Trump. It shows that voters don’t want more of the same. They want to try something new, and that plays right into Trump’s hands. I just don’t think that Hillary lines up with the political mood of 2016.

Elliott Curson: I agree with that. There is that anti-establishment feeling among the Sanders voters as well as Trump backers.

Brian Maher: Well, we’ve covered a lot of terrain here. Reagan, gold, Trump, Hillary and more. I appreciate you two gentlemen taking the time to join us today. But one last thing before you go. Who is going to win the election this fall? Elliott?

Elliott Curson: My crystal ball is in for repairs.

Brian Maher: Taking the fifth, eh? OK, how about you, Jeff?

Jeff Bell: I’ve been wrong about so many things in the last year, I’m officially out of the prediction business. But if I had to guess, it’s not going to be Hillary, it will be Trump. But I’m ready to be surprised because life is more fun that way.

Elliott Curson: I certainly wouldn’t rule Trump out.

Brian Maher: Elliott Curson, Jeff Bell, the two gentlemen who helped propel Ronald Reagan to the presidency in 1980, thank you so much for joining us today here at The Daily Reckoning.

Jeff Bell: Thank you, Brian.

Elliott Curson: Thank you.

Regards,

Brian Maher
for The Daily Reckoning

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