Ronald Reagan left office in 1988 with the Cold War waning and the economy booming. Unemployment had dipped to 5 percent by 1988. Between 1981 and 1986, gas prices fell from $1.38 per gallon to 95¢. The stock market recovered from the crash, and the Dow Jones Industrial Average—which stood at 950 in 1981—reached 2,239 by the end of Reagan’s second term. Yet the economic gains of the decade were unequally distributed. The top fifth of households enjoyed rising incomes while the rest stagnated or declined. In constant dollars, annual chief executive officer (CEO) pay rose from $3 million in 1980 to roughly $12 million during Reagan’s last year in the White House. Between 1985 and 1989 the number of Americans living in poverty remained steady at thirty-three million. Real per capita money income grew at only 2 percent per year, a rate roughly equal to the Carter years. The American economy saw more jobs created than lost during the 1980s, but half of the jobs eliminated were in high-paying industries. Furthermore, half of the new jobs failed to pay wages above the poverty line. The economic divide was most acute for African Americans and Latinos, one third of whom qualified as poor.
Economically and fiscally, the triumph of the Reaganomics proved incomplete. The number of government employees actually increased under Reagan. With more than 80 percent of the federal budget committed to defense, entitlement programs, and interest on the national debt, the right’s goal of deficit elimination floundered for lack of substantial areas to cut. Between 1980 and 1989 the national debt rose from $914 billion to $2.7 trillion. Despite steep tax cuts for corporations and the wealthy, the overall tax burden of the American public basically remained unchanged. Moreover, so-called regressive taxes on payroll and certain goods actually increased the tax burden on low- and middle-income Americans. Finally, Reagan slowed but failed to vanquish the five-decade legacy of liberal economics. Most New Deal and Great Society programs proved durable. Government still offered its neediest citizens a safety net, if a now continually shrinking one.
Yet, the discourse of American politics had irrevocably changed. The preeminence of conservative political ideas grew ever more pronounced, even when Democrats controlled Congress or the White House. In response to the conservative mood of the country, the Democratic Party adapted its own message to accommodate many of the Republicans’ Reagan-era ideas and innovations. The United States was on a rightward path.