160 Morning in America
Reagan nimbly adjusted to the political setbacks of 1982. Following the rejection of his Social Security proposals, Reagan appointed a bipartisan panel to consider changes to the program. In early 1983, the commission recommended a one-time delay in cost-of-living increases, a new requirement that government employees pay into the system, and a gradual increase in the retirement age from 65 to 67. The commission also proposed raising state and federal payroll taxes, with the new revenue poured into a trust fund that would transform Social Security from a pay-as-you-go system to one with significant reserves. Congress quickly passed the recommendations into law, allowing Reagan to take credit for strengthening a program cherished by most Americans. The president also benefited from an economic rebound. Real disposable income rose 2.5% in 1983 and 5.8% the following year. Unemployment dropped to 7.5% in 1984. Meanwhile, the “harsh medicine” of high interest rates helped lower inflation to 3.5%.
While campaigning for reelection in 1984, Reagan pointed to the improving economy as evidence that it was “morning again in America.” His personal popularity soared. Most conservatives ignored the debt increase and tax hikes of the previous two years. Reagan’s Democratic opponent in 1984 was Walter Mondale, Jimmy Carter’s vice president and a staunch ally of organized labor. In the Democratic primaries Mondale had faced civil rights activist Jesse Jackson and Colorado Senator Gary Hart, who rose to prominence in 1972 as George McGovern’s campaign manager and took office two years later as one of the “Watergate babies.” Jackson offered a thoroughly progressive program but won only two states. Hart’s platform—economically moderate but socially liberal—inverted the political formula of Mondale’s New Deal liberalism. Throughout the primaries, Hart contrasted his “new ideas” with Mondale’s “old-fashioned” labor-liberalism. Mondale eventually secured his party’s nomination but suffered a crushing defeat in the general election. Reagan captured 49 of 50 states, winning 58.8% of the popular vote.
Mondale’s loss demoralized Democrats. The future of their party belonged to post-New Deal liberals like Hart and to the constituency that supported him in the primaries: upwardly mobile professionals and suburbanites. In February 1985, a group of moderates and centrists formed the Democratic Leadership Council (DLC) as a vehicle for distancing the party from organizing labor and cultivating the business community. Jesse Jackson dismissed the DLC as “Democrats for the Leisure Class,” but the organization included many of the party’s future leaders, including Arkansas Governor Bill Clinton. The formation of the DLC illustrated the degree to which to the New Right had transformed American politics.
Reagan entered his second term with a much stronger mandate than in 1981, but the GOP makeover of Washington, DC stalled, especially after Democrats regained