Financial Crisis Bailout Marks End of Reagan Revolution

The battle was long ago over, but last week marked Appomattox on Wall Street for conservatives.

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Here's the dirty little secret about the Reagan Revolution: It wasn't much of a revolution at all.

Its last tattered legions lay down their arms and banners at their Appomattox on Wall Street last week, but it was just a formality. Their cause was lost long ago.

Well before last week's final disintegration of Republican free-market principles, the much-ballyhooed conservative movement was, by its own metrics, an utter failure.

Government is bigger. Entitlement programs have expanded. The culture is more licentious.

In the 28 years since Ronald Reagan was elected—heck, make that the 44 years since Barry Goldwater was nominated—the Republicans have won a lot of elections because they are good at politics.

But even if John McCain should win in November, there is no denying it: Americans often vote center-right, but they live center-left.

To the (debatable) extent that the United States was drifting toward some kind of Western European-style social democracy in the late 1970s, the conservative movement stopped that drift.

But it never turned the ship around.

There are not three or four fewer huge federal departments in Washington; there are two or three more.

Abortion, feminism, and affirmative action, though under constant conservative rhetorical attack, survive.

The culture is less reverent, staid, and traditional than ever, as recreational drug use, alternative lifestyles, violence in media, and obscenity flourish.

And then last week, with the federal government intervening in the affairs of private business in a way unparalleled since World War II, the last myth of the conservative "revolution"—the notion that an unregulated, freewheeling market economy will beneficially police itself—disintegrated.

There was no Great Market Rally to bail us out of our financial and economic woes; it was we who had to bail out the market.

As Speaker Tip O'Neill's biographer, I had to reach a verdict about Reagan's revolution. After six years of work, I published my conclusion, in early 2001, that "the real Reagan 'revolution' was attitudinal."

Reagan's tremendous political skills rallied Americans at a critical moment in the Cold War. He shrewdly spurred, and deftly handled, the collapse of the Soviet Union. He fueled the revival of American values like patriotism, military service, and entrepreneurship.

But when it came to the role of government, the liberals won and Reagan lost. Yes, David Stockman did some cutting around the edges of programs like food stamps and welfare, but the great social insurance programs of the New Deal and the Great Society—Social Security, Medicare, and Medicaid—continued to grow and bloom.

When it came to actually dismantling big government, conservative heroes like Reagan, Newt Gingrich, and George W. Bush listened to their pollsters and lost their nerve.

On those rare occasions—like Bush's attempt to privatize Social Security or Gingrich's government-closing showdown over entitlements with Bill Clinton—Reagan's heirs were soundly defeated. Or they took the same compromising steps that Reagan did when he cut a deal with O'Neill that protected Social Security or when, after paring taxes in 1981, he then raised them seven times over the course of his presidency.

"There should be no doubt about what experience has demonstrated: The specific ideas necessary to make radical cuts in modern American government consistently fail the test of public acceptability," wrote the late Richard Darman, a Reagan lieutenant, after Gingrich's failures in 1995. "The reality is that the American government is as big as it is, acting in the areas that it does, primarily because a substantial majority of Americans wants it roughly so."

The Republicans have survived because they gave the voters what conservative columnist George Will once called the political equivalent of free pizza: both big government and tax cuts.

And, to be sure, nobody really cared about the resultant huge budget deficits—and towering national debt—until now. The Chinese and Arabs were willing to lend us the money and keep selling us our toys and oil. The unregulated financial markets appeared to be making us money.

But then, this week, as the CEOs and board chairmen and other great entrepreneurs scurried away with their multimillion-dollar severance packages, it was left to the federal government to engineer a trillion-dollar bailout that will leave our children with a national debt of $11.3 trillion and counting.

Forget what McCain has promised to the antitax zealots. If elected, he'll be signing tax hikes to pay for these bailouts, the war in Iraq, and the long-anticipated-but-always-deferred costs of baby boom retirements.

The big issue in this election is now who will pay those taxes: the titans of industry who got us in this fix, and whom McCain wants to protect, or the middle-class and working families that Democrats want to exempt from across-the-board tax hikes.