1062 ★ CHAPTER 26 The Triumph of Conservatism
28 percent. These measures marked a sharp retreat from the principle of pro-
gressivity (the idea that the wealthy should pay a higher percentage of their
income in taxes than other citizens), one of the ways twentieth- century societ-
ies tried to address the unequal distribution of wealth. Reagan also appointed
conservative heads of regulatory agencies, who cut back on environmental
protection and workplace safety rules about which business had complained
for years.
Since the New Deal, liberals had tried to promote economic growth by
using the power of the government to bolster ordinary Americans’ purchasing
power. Reagan’s economic program, known as “ supply- side economics” by pro-
ponents and “ trickle- down economics” by critics, relied on high interest rates
to curb inflation and lower tax rates, especially for businesses and high- income
Americans, to stimulate private investment. The policy assumed that cutting
taxes would inspire Americans at all income levels to work harder, since they
would keep more of the money they earned. Everyone would benefit from
increased business profits, and because of a growing economy, government
receipts would rise despite lower tax rates.
Reagan and Labor
Reagan inaugurated an era of hostility between the federal government and orga-
nized labor. In August 1981, when 13,000 members of PATCO, the union of air
traffic controllers, began a strike in violation of federal law, Reagan fired them all.
He used the military to oversee the nation’s air traffic system until new control-
lers could be trained. Reagan’s action inspired many private employers to launch
anti- union offensives. The hiring of workers to replace permanently those who
had gone on strike, a rare occurrence before 1980, became widespread. Manufac-
turing employment, where union membership was concentrated, meanwhile
continued its long- term decline. By the mid- 1990s, the steel industry employed
only 170,000 persons— down from 600,000 in 1973. When Reagan left office, both
the service and retail sectors employed more Americans than manufacturing,
and only 11 percent of workers with non- government jobs were union members.
Reaganomics, as critics dubbed the administration’s policies, initially pro-
duced the most severe recession since the 1930s. A long period of economic
expansion, however, followed the downturn of 1981–1982. As companies
“downsized” their workforces, shifted production overseas, and took advantage
of new technologies such as satellite communications, they became more prof-
itable. At the same time, the rate of inflation, 13.5 percent at the beginning of
1981, declined to 3.5 percent in 1988, partly because a period of expanded oil
production that drove down prices succeeded the shortages of the 1970s. By the
end of Reagan’s presidency in 1989, the real gross domestic product had risen by