1985: United States

THE PRESIDENCY

Ronald Reagan entered the second term of his presidency in buoyant spirits. 'You ain't seen nothin' yet,' he said on the night of his landslide reelection in November 1984. He even drew a grudging compliment from the opposition when House Speaker Thomas P. ('Tip') O'Neill, Jr. (D, Mass.), said on the eve of Reagan's inauguration in January, 'In my 50 years in public life I've never seen a man more popular with the American people.' But during Reagan's fifth year in office, the 'Teflon presidency'—so called because of the president's seeming ability to be untouched politically by adverse developments—had lost a little of its no-stick coating.

Reagan himself remained immensely popular, even as the U.S. economic recovery lagged. However, his revolutionary tax overhaul plan, to which Reagan devoted much energy, made slow headway, and his policies toward Central America and South Africa, plus an ill-fated visit to a military cemetery in West Germany, provoked sharp criticism. The record on international terrorism was mixed: continued frustration in Lebanon, but praise and celebration when the U.S. Navy helped bring the hijackers of a cruise ship to justice. Throughout the year, Reagan was forced to contend with a new Soviet leader, Mikhail Gorbachev, whose understanding of global public relations matched his own. A summit meeting with Gorbachev — Reagan's first meeting as president with his Soviet counterpart — was held in November, amid hopes that such a meeting would stimulate the U.S.-Soviet arms talks going on in Geneva.

Earlier in the year a personal concern intervened: in July the president underwent surgery for removal of a cancerous growth in his colon. Later, when skin cancer—albeit not a serious type—was detected on his nose, questions arose anew about Reagan's ability to complete his term in good health.

The Economy.

The economic numbers for 1985 were mixed. While unemployment stayed well below 8 percent and inflation stayed under 4 percent, growth in the gross national product was not nearly as great as in 1984. Meanwhile, huge deficits in the federal budget and the nation's trade balance were cause for economic—and political—concern.

Trade.

Facing a trade deficit for 1985 estimated at $150 billion (up from an already disturbing $123.3 billion in 1984), the administration found itself struggling to avert a major trade war. In Congress more than 300 protectionist bills were introduced, as business leaders and politicians responded to the 1.7 million domestic manufacturing jobs that had been lost to foreign competition since 1979. Reagan voiced his opposition to such measures, calling protectionism a 'one-way trip to economic disaster.' In an effort to head off tough protectionist legislation, the president announced in early September that the administration would take retaliatory action in selected instances of what he called 'unfair trading practices' by other nations that impede imports of U.S. products. At the same time Reagan reiterated his opposition to protectionism in general, saying, 'There are no winners in a trade war; only losers.'

The Deficit.

According to many accounts, the Reagan administration's greatest shortcoming continued to be its failure to curb the ballooning federal deficit, which was $55.2 billion in the 1981 fiscal year but had risen to $212 billion by fiscal 1985 (the 12-month period ending September 30, 1985). Congress was forced in November to pass legislation raising the national debt ceiling to almost $2 trillion—or about 120 percent higher than when Reagan took office on a platform of cutting federal spending—so that the government could continue to borrow money.

Attached to a longer term debt ceiling bill passed by the Senate on October 9 was an amendment requiring specified annual deficit reductions leading to a balanced budget by 1991; the amendment would shift power to cut the deficit directly to the president, by giving him authority to invoke automatic spending cuts if he and Congress could not agree on a plan to keep within the deficit ceilings set by the amendment. On November 1 the Democratic-controlled House of Representatives passed a budget-balancing measure that differed in some significant details from the Senate's. The two versions went to a House-Senate conference committee. President Reagan supported the Senate's deficit-reduction plan; at the same time he continued to oppose increasing taxes or making any significant cutbacks in military spending plans.

Tax Reform.

In late May, Reagan proposed to Congress and the nation a sweeping overhaul of the tax code. Calling the plan a 'second American Revolution,' the president promised that it would make taxes lower, fairer, simpler, and more productive. He also said that the tax burden on individuals would be lessened while that on corporations would grow. In abbreviated form, the proposal would reduce the number of tax brackets to three-15, 25, and 35 percent of income; raise the personal exemption to $2,000; end the deduction for state and local taxes (the most controversial provision); and limit the deduction for interest payments (except on home mortgages on prinicipal residences) to $5,000. The oil and gas industry, charities, and a few other interests would maintain their tax breaks, making the Reagan proposal less 'clean' a reform than the original Treasury Department plan proposed in late November 1984. Some critics said that the president's proposal was also more heavily weighted toward the wealthy than the earlier version. Despite frequent road trips to campaign for the plan across the country, Reagan had little apparent success in maintaining momentum for it, a development he blamed partly on the press but that other observers said was because the budget and trade deficits were seen as more urgent matters. By the fall, however, the House Ways and Means Committee had drafted a tax reform bill that differed in a number of ways from Reagan's plan.

Agriculture.

On the American farm, a complex economic problem suddenly grew more acute, as farm debt passed $200 billion, foreclosures remained at a high level, land values plummeted to as much as 60 percent below their 1981 peak, and crop prices dropped because of overproduction and declining exports. In early March, President Reagan vetoed legislation that would have given emergency aid to farmers, saying that the measure was a 'massive new bailout' and that the number of farmers in trouble did not justify adding to the federal deficit. Many Republican farm-belt lawmakers broke with the president in voting for the measure. No attempt was made to override the veto. The administration also decided, in late October, not to urge financial aid for the Farm Credit System, saying that such action would encourage other troubled sectors of the economy to seek similar assistance.

Cabinet and Staff Changes.

The beginning of a new term brought new faces to the Reagan administration. It also led to some staff reshuffling. The most significant move occurred in January, when Treasury Secretary Donald T. Regan and White House Chief of Staff James A. Baker traded jobs. Baker moved comfortably to the Treasury Department, where he supervised policymaking on tax reform, deficit reduction, trade issues, and the international debt crisis. Regan's corporate-style management was said to have caused him some trouble at the White House, a situation made all the more difficult by the departure of longtime Reagan aide Michael Deaver (to resume a career in public relations). Columnist Patrick J. Buchanan, known as an unflinching advocate of the president's ideology, joined the White House team in February as director of communications but ended up having less influence than his conservative backers had hoped.

Elsewhere in the administration, White House Counselor Edwin Meese 3d was confirmed in February as attorney general, replacing William French Smith; the Senate had spent much of 1984 considering the nomination, as alleged financial and ethical improprieties by Meese had sparked opposition to his appointment. (A special prosecutor cleared Meese of all charges in late 1984.) Once sworn in, Meese moved aggressively to put his stamp on the Justice Department. Potential appointees to federal judgeships and Justice Department posts began to be more carefully screened for their conservative credentials, and Meese committed the administration to intervening more actively in abortion cases, among others. President Reagan told a group of federal attorneys in October that he would use the remainder of his term in office to appoint federal judges who favored 'judicial restraint.'

Interior Secretary William Clark resigned to return home to California and was replaced by Donald P. Hodel, the former secretary of energy. Hodel was replaced at the Energy Department by John S. Herrington, a lawyer who had been closely involved with several Reagan campaigns. William J. Bennett replaced Terrel H. Bell as secretary of education; Bennett had been chairman of the National Endowment for the Humanities. Margaret Heckler, secretary of health and human services since early 1983, incurred the displeasure of Donald Regan and other White House aides and in October was appointed ambassador to Ireland; President Reagan described the move as a promotion. He nominated Dr. Otis R. Bowen, the former governor of Indiana, as Heckler's replacement on November 7.

At the Office of Management and Budget, Director David A. Stockman resigned in July to join a Wall Street Investment banking firm and to write his much-awaited memoirs. Stockman's departure was viewed by some with considerable dismay, as he was generally acknowledged to be a master of budget politics and of the details of the budget itself. However, Stockman also found himself frequently at odds with the administration and some of its backers. He enraged supporters of the military by denouncing the Pentagon's $18 billion annual pension program as so generous that it constituted 'a scandal' and 'an outrage.' He criticized farmers who had fallen into debt. Both before and after leaving office, he urged a tax increase to reduce the budget deficit, which was contrary to administration policy. Stockman was replaced by James C. Miller 3d, the Reagan-appointed chairman of the Federal Trade Commission.

Special Trade Representative William Brock became secretary of labor after the March resignation of Raymond Donovan, who was facing trial on fraud charges. Jeane Kirkpatrick, the outspoken U.S. ambassador to the United Nations, resigned in late January after apparently failing to achieve more authority in the administration. She was replaced by Vernon A. Walters, a highly experienced diplomat. On October 1, Admiral William J. Crowe, Jr., was sworn in as chairman of the Joint Chiefs of Staff, replacing General John W. Vessey, Jr., who retired. On December 4, John M. Poindexter was named White House national security adviser when Robert McFarlane resigned.

Foreign Policy.

U.S.-Soviet Relations.

The year opened with some encouraging signs on arms control. In March, 15 months after they had walked out of arms limitation talks in Geneva, the Soviets returned to the negotiating table for what President Reagan said he hoped would be a 'new dialogue' with the United States. Secretary of State George Shultz and Soviet Foreign Minister Andrei Gromyko had met in January in Geneva for preliminary discussions that paved the way for the new negotiations. The talks began as scheduled on March 12, despite the death just two days earlier of Soviet leader Konstantin Chernenko.

Epitomizing what was perceived as a new era in the Kremlin was Chernenko's replacement, Mikhail Gorbachev, a vigorous, relatively young leader who caused a dramatic change in the way the Soviets presented their case to the world. Gorbachev moved quickly to consolidate his power, and in July he agreed to a summit meeting with Reagan, to be held November 19-20 in Geneva. Both leaders waged a presummit propaganda war, with Gorbachev showing a flair for public relations that echoed Reagan's own. The Soviets took the initiative by proposing, in the fall, a 50 percent reduction in U.S. long-range and medium-range nuclear weapons and in Soviet long-range weapons. The Reagan administration received the proposal coolly, saying it was lopsided; the administration also did not accept the Soviet condition that the United States end research on its Strategic Defense Initiative ('Star Wars'), which the president spent much time promoting and repeatedly asserted was nonnegotiable. Nonetheless, on November 2, Reagan said that the United States was ready to accept a 50 percent cut in nuclear arms, by which he meant, explained White House officials, long-range missiles only. The announcement came a day after U.S. negotiators in Geneva presented to the Soviet side an arms control package that also included a call for the United States and the Soviet Union to scrap plans to deploy mobile, land-based nuclear missiles.

The November summit yielded no breakthroughs on arms control, beyond a vow to 'accelerate' the ongoing Geneva negotiations, and the two leaders conceded that 'serious differences' remained on various 'critical issues.' But they achieved an apparent personal rapport and agreed to meet again in 1986 and 1987.

Nicaragua.