Today, the U.S. mourns the loss of one of its most influential leaders. Ronald Wilson Reagan, America's 40th president, died June 5 at the age of 93 after a lengthy battle with Alzheimer's disease.
For nearly a week, dignitaries and citizens alike have come by the thousands to pay their respects at both the presidential library that bears his name in California and the Capitol Rotunda in Washington, D.C., where his body has lain in state. After a state funeral at Washington's National Cathedral on Friday, he is to be buried at sunset at his California library.
We asked contributors to RealMoney and Street Insight for their comments about the legacy Reagan has left behind for both the economy and the markets. Comments are listed in alphabetical order, but if you'd like to go directly to what your favorite contributors said, just click on their names in the list below.
- James CramerTony CrescenziJames "Rev Shark" DePorreChristopher EdmondsMark HaefeleJohn RayJohn RutledgeHoward SimonsAaron TaskAdam Warner
We stopped and talked this weekend -- I think my wife, one of the most stoical people on earth, might have been tearing up -- because the Big Man, Ronald Reagan, had passed away, the man we both thought was responsible for so much of our good fortune in life.
For my wife Karen and me, the Reagan era always will be the era when we came to Wall Street and made something of ourselves financially. Both of us were poor, indebted and looking for a way to make a difference. We had come through the 1970s thinking that our country was somehow a loser: loser presidents, loser leaders, second-place to the Russians, certainly an unlikely place to get rich in. We accepted that we would not have even the money that our parents had. Just didn't seem possible with inflation and with the inability of our country to take on the Japanese and the Germans, let alone the Russians. If you made a lot of money anyway, what good did it do? You just paid it to the government in taxes.
Ronald Reagan changed all that. For me, as the son of a Republican and as someone who worked for Democratic candidates in high school and college and then after school, Reagan was different. First, he was the first -- and I can honestly say, the only -- Republican I ever voted for. Second, he was someone so terrific, so compelling, that I found myself talking politics with my dad for the first time ever without fighting.
For those of you who have never been on Wall Street, the period when Reagan was president was like no other. You could sense the optimism; the Street oozed optimism, right where pessimism had run in rivers through the canyons just a few years past. I remember when the market exploded upward in September 1982, when the combination of high rates and a stern monetary policy broke the back of inflation. I remember that Reagan owned that slaying of inflation. He also owned the recovery and made us all feel as if we could, well, get rich. That's something that none of us had even dreamed of a few years before.
It's funny, President Bush isn't getting much credit at all for the million or so jobs that have been created this year. But you always credited Reagan for anything good back then, because he was funny and compelling and interesting and optimistic. No one thought they'd just gotten lucky; they simply thought that Reagan somehow had made things better, whether through lowered taxes, or his blatantly pro-business, pro-riches view, or because he simply wanted you to feel good and was terrific at making it happen.
For me, my time at Goldman Sachs coincided with a rebirth of equities, with Reagan as midwife. There were tons of financings to do, tons of equity deals, and as the country was starved for capital back then, we got more than our fair share of the offerings -- and the sales fees that came with those offerings.
My wife, even more than I, just loved the guy. She loved putting on the tube when he was on -- she hasn't listened to a politician since then. When something big happened, she always wanted to know what Reagan would say and how he would say it. I found him spellbinding, myself, and as someone who hated the communists and communism, I felt that once Reagan had won on the economy, somehow he made you feel it was just a matter of time before he defeated the Russkies.
I am surprised at the outpouring for Reagan in the media today, surprised because I can't remember the media ever giving him a break even for a minute. They thought he was dumb; they thought he was simplistic, not simple.
But when you compare him with today's leadership, particularly with the current president who wants so much to be like Reagan and not like his father, you want to scream to President Bush that it wasn't just the cuts in taxes, it was the spirit the man engendered, the positive, nondivisive spirit that made rock-ribbed Democrats like me change my view and vote for the other team.
Goodbye, Mr. Reagan, you most surely will be missed by all, Republicans and Democrats, men and women, fathers and sons, mothers and daughters. What a great feeling it was to be an American when Reagan was president. Let's hope the time is not too distant when people feel that way all over the world about us, and most important, that we feel that way again about ourselves.
Sometimes the individual isn't powerful enough. Sometimes the message of Ronald Reagan, that the government is too big, is more of a riposte, a polemic, a debating tactic, than a reality. As the week of Reagan morning draws to a close, I would like to issue a challenge to those who believe the message of Reagan was that government is out of control or bad or somehow always ineffective, or certainly more ineffective, than the power of the individual.
There is no doubt in my mind that after the terrible Nixon years and the tumultuous Johnson years and the amazingly ineffective Carter years, Reagan's view of the supremacy of the individual in society -- not the government -- was appropriate. The governed had been forgotten in the zeal with which the federal government had extended itself.
Nevertheless, I have detected all too often this week a nostalgia for Reagan that borders on contempt for the government, and that's not the takeaway of this great man.
In fact, every time we minimize and demean the government, every time we belittle it and regard it as a necessary evil, we are missing the point that some problems in our society are simply too big and too expensive for the individuals to handle. And, when we wax nostalgic for Reagan, we often act as if we all are good guys and the government is the bad guy, waiting to Bigfoot us as we go on our merry way doing good, hiring people and making society great.
I guess sometimes we don't want the facts to get in the way of a good story.
In the last four years, we have seen the legacy of a smaller government, a less important and less respected government, on Wall Street. That image of the government's impotence produced the scandals that have made it so you no longer trust Wall Street. The shrinking of the government, the irrelevance of the government, the making-irrelevant of the government, is a direct result of the Reagan legacy taken too far. The lack of respect for the government, for the prosecution, for those in the Justice Department or the SEC fostered an atmosphere where anything went. I am not saying we are a society of bad apples needing to be checked by the government constantly; I am saying that the Reagan Revolution ushered in a world where we forgot that not all among us are as truthful and honest when it comes to money as we would like.
Let us not forget that under Reagan, the SEC was raised to a height of power as Reagan himself recognized that the public must be protected from the miscreants. It was Reagan's SEC that put an end to insider trading in this country. It was Reagan's SEC that produced the last big crackdown on white-collar crime, until the current one. So, please, let's not confuse smaller government with smaller prosecution and smaller law enforcement. The opposite was true under Reagan; the opposite must be true now.
As much as I respected Reagan for the optimism and the hope and the vision he gave us, I think that another false takeaway from the Reagan years was that you could cut taxes and everything would take care of itself. Reagan presided over some tremendous tax cuts, but when things got better, he tried to pay for those cuts with tax increases. I say "tried" because the defense buildup was so great, he couldn't. But the idea of any tax increase, ever, is now strictly verboten. Even though we have much better growth now, no one is talking like Reagan after that growth, trying to find a way to pay for it, except the Democrats, and nobody trusts them on the issue, anyway. Without either tax increases or cuts in government spending, we have no ability to balance the budget. And the idea that rates will stay down here forever is a little ludicrous. Reagan wasn't an ideologue; he had some discipline. We now have none. We are not true to his legacy on this point, either.
Finally, though, there is a point where I must disagree with Reagan the man and Reagan the policymaker and idealist. As much as I share his optimism, I can't let his optimism get in the way of a bad story when the story truly is bad. Anyone who spends a half hour of his time doing community work anywhere in this great country knows that the individual, however well-respected and motivated, can't take on the notion of the two nations we have become. There is a cohort in every city and town in this country, in some cases the cohort is in the majority, that needs help. And the help from the individual simply isn't big enough.
I spend several hours a week trying to cajole money out of companies to help individuals meet the cost of schools. I spend several hours a week trying to cajole individuals and companies to volunteer time and money to improve our public schools. It is clear to me that those efforts are not succeeding and won't succeed without monies from the government. We spend more money building highways and subsidizing rich farmers than we do building and maintaining decent schools for poor kids in this country. That's just wrong, and if the Reagan legacy is that we have too much government and too much interference from the feds in government, I am here to tell you that such a legacy is a stain on our society, not a blessing. If you spend 10 minutes in an inner-city school anywhere in this country, you will be appalled -- and it is not the individual's fault. We can blame the parents, particularly the young, out-of-wedlock parents, for being irresponsible, but punishing the children by sending them to worthless schools where they don't learn to read or write or add is not the answer.
Finally, under Reagan we gave the men and women in our armed forces everything they needed to wage war if they needed to wage war. We didn't do it on the cheap. We raised taxes to help support the effort -- and we didn't have a war on. I find it ironic that the so-called heirs to Ronald Reagan who run the government now, particularly Donald Rumsfeld, still believe that we can arm our men and women on the cheap and that we, a great nation, can really protect ourselves with 10 meager divisions and the national guard. We are sending the weekend warriors to die in Iraq because we are unwilling to sacrifice and raise the army to the stature that Reagan would have accorded it.
So, as we mourn this great president, we also must take a hard look at not just what was right with Reagan but what was the wrong takeaway from the Reagan years. The contrast this week between Reagan, the man we loved, and the Reagan legacy as allegedly followed by this current administration is a stark and, in many ways, a flawed vision of the man we laid to rest Friday. Fortunately, there is time to rekindle the flame; unfortunately, the lack of introspection by the current president and his lack of articulation of our hopes and promises leaves us all wondering what will happen next instead of giving us the confidence of the Reagan storyline: that things work out for the best and the good guys win in the end.
To many people, Ronald Reagan represented the best hope of restoring the American dream. The country had entered a slow but dangerous economic decline, mired in an unusual slump of high interest rates, high inflation and high unemployment. The national standard of living was clearly in decline as a result.
High interest rates reduced housing affordability and hurt many other key interest-rate-sensitive sectors of the economy, such as business investment. The decline in business investment resulted in a decline in U.S. competitiveness, particularly in the automobile industry, where low-cost producers such as Japan began to make inroads on U.S. manufacturers, grabbing market share along the way. High inflation cut into wages and salaries, eroding the value of disposable income, while unemployment made those days even more difficult to bear.
Throughout Reagan's campaign for the presidency, he offered a vision for better economic times. He repeatedly promised to adopt policies that ultimately would bring down both inflation and interest rates and thus restore economic prosperity to the nation. His economic plan would be dubbed Reaganomics, and it consisted of four key elements.
First, Reagan supported a restrictive monetary policy designed to purge inflation from the economy and ultimately result in lower interest rates. Lower interest rates, he argued, would spur investment and raise productivity levels, raising the nation's standard of living. Moreover, low interest rates would spur wider home ownership so that more families could realize the American dream. Initially, tight money policies also would help stabilize the value of the dollar and thus reduce the cost of imports and encourage foreign investment in U.S. assets.
Second, Reagan proposed a 25% across-the-board tax cut to lift consumer buying power, increase savings and investment, and encourage worker productivity. (This ultimately became the Economic Recovery Tax Act of 1981.)
Third, Reagan promised to reduce discretionary government spending.
Fourth, he endeavored to reduce layers of government regulations that he felt were impeding productivity and, hence, economic growth.
Reagan knew that when he asked people to ask themselves, "Are you better off now than you were four years ago?" the public's discontent with high interest rates, inflation and unemployment would be voiced in the polling booths. Reagan offered hope for a departure from the country's economic and spiritual malaise and ultimately delivered on his promises. His low-tax, low-regulation policies sowed the seeds for a sharp rise in business investment and innovation, resulting in a sharp rise in productivity, the essential ingredient for boosting incomes and the nation's standard of living.
Reagan's policies eventually would play a major role in laying the groundwork for the vigorous economic growth that occurred during the 1980s and the 1990s, when America's economic supremacy was restored. Today, the policies that Reagan championed have endured, helping to foster another era of economic resurgency and encourage another generation to pursue the American dream.
James "Rev Shark" DePorre
"I've spoken of the shining city all my political life. ... And how stands the city on this winter night? ... After 200 years, two centuries, she still stands strong and true to the granite ridge, and her glow has held no matter what storm. And she's still a beacon, still a magnet for all who must have freedom, for all the pilgrims from all the lost places who are hurtling through the darkness, toward home."
-- Ronald Reagan
One of traits that helped make Ronald Reagan a great president was his unwavering optimism. Even when times were tough, he had a way of reassuring us that we would find our way through and eventually be better off.
In the stock market, optimism is often viewed as being for amateurs. Many of the old wizened pros, who have seen it all, have a tendency to expect the worst and to be skeptical about the chances of a market boom. There have even been recent academic studies showing that pessimists tend to do better in the market than optimists.
I have found that Reaganesqe optimism is a very important factor in trading success. That doesn't mean unwavering belief in a perpetual bull market, but belief that there will always be a flow of trading opportunities. All traders go through tough times, but the ones who succeed in the long run are those who persevere and are confident that if they just keep working away and stay patient, they will eventually be rewarded.
Whatever you may think of Ronald Reagan's politics, his ability to articulate a vision for the U.S. (there are few campaigns better than the "Morning in America" theme in the history of modern politics) and to make citizens feel a rejuvenated sense of pride about our country made him a remarkable president.
While the economic legacies are mixed -- large deficits and tax cuts -- Reagan's lasting economic legacy is also tied to his exceptional communication skills. His ability to convince American businesses that we remain the world's dominant economic power prompted proactive business investments that pushed the U.S. to an even more pre-eminent position in global commercial markets. Coincidentally, Reagan's focus on military growth also lent strength to the domestic economy.
Many will criticize Reagan for the supply-side theories that some argue led to burgeoning deficits. However, what those detractors fail to recognize is that the positive Reagan legacy comes on a much deeper, philosophical level. His vision and ability to convince others to follow him led to new ways to view the domestic and global economy and new solutions to old economic challenges. While the specific fiscal and monetary policies of his successors varied widely, the paradigms under which we view economic policy -- both at home and abroad -- were forever changed by the Reagan revolution.
Street Insight Contributor
Each day in the markets we use imperfect information to make calculations of risk and reward. I wanted to alert you to one of the most fascinating studies of high-stakes risk/reward calculation I have ever read. It is the study of Ronald Reagan's foreign policy contained in the book From the Shadows by Robert M. Gates, former director of the CIA. The portrait of Reagan that emerges is far too nuanced for me to summarize, but it shows convincingly the impact one person can have on world history.
Most people think of Reagan in black-and-white terms. From the Polish crisis to the dangers of 1983, from Iran-Contra to the Reykjavik summit, Gates shows us a Reagan who was a realist and an idealist. He was a man who some people underestimated and others overestimated. Gates had an insider's view, and he focuses on how Reagan and his administration took limited intelligence data and formulated it into plans of action.
Street Insight Contributor
In 1983, I was a bank analyst covering a number of southeastern banks, including Union Planters. At that time, Union Planters was run by Bill Matthews, who had been brought to Memphis from First National Bank of Atlanta to rescue what was then a troubled bank. By 1983, Union Planters had regained much of its profitability along with its reputation, and Matthews' task was to map out how the bank would thrive in coming years.
During a visit I had with him that year, Matthews gave me a copy of a study he had commissioned, the conclusions of which he was using to map the company's strategy. This study, authored by a highly respected think tank, was highly pessimistic in its conclusions about the future of the banking industry. Interest rates were likely to remain very high, competition for commercial loans would become so intense as to make the business unprofitable, and an influx of foreign banks would reduce overall banking profitability.
Matthew's strategy was to eschew loans and emphasize liquid securities; interest rates were going to remain high, right? He also drove the bank into non-banking businesses such as data processing.
Rates continued to fall, and the economy started cooking. Loan demand perked up, and profitability in the banking system continued to rise. Bank stocks rocked in 1983 and 1984.
Results at Union Planters were abysmal, so much so that by the third quarter of 1984, Matthews was fired by his board. The company was forced to take a large write-off in the third quarter of that year, and Matthews' successor went out of his way to let the community know that the bank was back in the lending business.
A few weeks after Matthews was fired, on the other hand, President Reagan was re-elected in an Electoral College landslide.
I tell this story because that inflation/stagnation/banana-republic thinking was thick in the early 1980s, even after the lows in the bond and stock markets a year earlier. This thinking among the intelligentsia was so prevalent that a CEO like Bill Matthews, thinking logically and backed by the "experts," could bet the future of the company on such a doomsday scenario. President Reagan breezed right past this economic loser's mentality and never wavered in his faith in the American people and the economy that they comprised. He ignored the experts and the polls, as if to say, "I have more faith in you, my country, than you have in yourself."
A quarter of a century later, it's easy to forget what a monumental feat it was, at the time, for a politician to lead from such a position of optimism and faith. Thank you, President Reagan. May we never forget your legacy.
This morning, I made a CNBC spot on the Reagan Legacy, which gave me a chance to reflect on the wonderful experiences I had helping put together the Reagan Economic Plan. During the show, a reporter asked me what made President Reagan so special. That's easy: The Gipper was the real deal.
In a town where no one does what they say they are going to do, he shocked people by telling them just what he was going to do, and then doing it.
I had the honor of helping the Reagan transition team put together their economic plan. I wouldn't trade that experience for anything in the world.
Young people today need to understand that when Ronald Reagan was elected in November 1980, the American people were discouraged. Inflation was 15%, the top federal income tax rate was 70%, interest rates were 21%, the Dow was at 860, a wall separated the families of East and West Berlin, the Soviet Union was acquiring real estate, and the Khomeini government in Iran was holding a group of Americans hostage in Tehran.
Inflation is now 1% to 2%, tax rates are less than half as high, interest rates are low single digits, the Dow is above 10,000, and best of all, the Soviet Union and the Berlin Wall now only exist in the history books. The hostages, by the way, were released on the day Reagan was sworn in as president.
All this worked because President Reagan understood that to make things better, we all have to work. The real heroes in America are the factory workers, miners, waitresses, cabbies, teachers and homemakers who go to work every day to build a better life for their families, and that work, not government, was the answer. His genius was communicating to people that he respected them, understood their problems and believed in them. Thing was, he really meant it.
Christopher Wren, the 17th-century English architect and scientist instrumental in the rebuilding of London after its Great Fire, is memorialized in St. Paul's Cathedral, which he designed, with the following inscription: "Lector, si monumentum requiris, circumspice". ("Reader, if you seek his memorial, look around you.")
The public statements and opinions expressed this week confirm this as a tribute fitting to our 40th president. The world we live in today, one in which no credible alternatives are posed to democratic capitalism, is a monument to his simple faith in the power of the individual to do what is best when given the freedom to do so. Another of our great presidents, Abraham Lincoln, recognized this quality of the American spirit in his phrase, "the better angels of our nature."
No question propelled him to the White House faster in 1980 than, "Are you better off now than you were four years ago?" I believe the American electorate has employed this standard since in the elections of 1984, 1992 and 1996, retaining, removing and retaining the incumbent, respectively. It will be employed again this year.
How ironic that a man, so committed to reducing the role of government in everyday life, has left us with this litmus test: Did the government succeed either in acts of omission or commission to improve the life of its citizens?
TheStreet.com Editor and RealMoney Columnist
Like most of us, Ronald Reagan was neither all good nor all bad. His legacy includes helping facilitate the end of the Soviet Union, reducing the tax burden, restoring America's faith in free-market capitalism as well as our national pride and station in the world community.
He was also a wonderfully talented politician, who was able to communicate directly with the American people and win their support for a variety of policies. For those accomplishments, he should be (and is) lauded.
But his legacy also includes a massive redistribution of wealth, runaway government deficits, Iran-Contra, Latin American "death squads," funding the armies of Saddam Hussein (vs. the Iranians) and the Mujadeen in Afghanistan, and harmful policies of "benign neglect" of the dollar -- as well as sufferers of AIDS and mental illness. For those failings, he should be (and is) criticized.
The outpouring of sentimental longing that has engulfed the nation this week says a lot about the power of Reagan's personality and message, and how he fundamentally changed the course of American politics. But it also says as much about our times as it does about Reagan himself.
The specter of nuclear conflagration with the Soviets was a terrifying backdrop for much of the 1980s. But in hindsight, the Soviets were somewhat predictable, the "rules" of the Cold War understood by both sides.
By comparison to today's fanatical, nihilistic terrorist enemies, the Soviets seem far more manageable -- and comprehendible. (Hard to imagine Sting, or anyone else, writing a song today with the chorus: "I hope al Qaeda love their children too.")
Part of the emotional outpouring over Reagan's passing reflects our collective yearning for the strong yet pragmatic leadership he provided in that "simpler" era, even if it was far from simple or perfect.
Street Insight Contributor
I think the positives of Reagan's economic legacy are pretty obvious. His plan was the right medicine at the right time. The economy took off, interest rates tumbled, and stocks boomed. Probably most important of all, a great feeling swept over the country, and this played no small effect in the start of the bull market. The summer of 1984 remains perhaps the pinnacle of times here. "Born in the U.S.A." was on every radio station, and the U.S. Olympic team won like 5,000 gold medals. It really was "Morning in America," and we really were "the shining city on the hill."
On the negative side, the rising tide never lifted all boats, as the culture of corporate greed took hold and remains with us to this day. In 1982, the average CEO earned about 40 times his average worker. By 2002, that number rose to 530. That's just patently ridiculous, and there's not exactly a groundswell for change, to say the least. You can cry "capitalism" all you want to justify this, but "cronyism" is a better word.
I read a fascinating parallel the other day involving several of the presidents of the last century. I don't have the space to go into the whole thing, but just think of Reagan as the FDR of the right. Two decades later, LBJ took up the FDR mantle, brought it too far left for the country, and this ultimately begat Reagan. Now think of Bush II as the LBJ of the right, and history may be repeating itself, albeit in a mirror.
By this analogy, expect a charismatic, popular liberal to emerge in eight to 12 years or so (Edwards, anybody?), although that's really not Reagan's legacy, but rather the legacy of those who followed and distorted his original message, applying 1981 solutions to the 2004 world.
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