In retrospect, the 1980s, like the 1890s, would be widely remembered as a decade of misplaced values. Buying out companies generated more profits than running them; making deals, not making products, became the way to get rich. The merger of Nabisco and R.J. Reynolds Tobacco Company in 1988 produced close to $1 billion in fees for lawyers, economic advisers, and stockbrokers. “Greed is healthy,” declared Wall Street financier Ivan Boesky (who ended up in prison for insider stock trading). “Yuppie”—the young urban professional who earned a high income working in a bank or stock brokerage firm and spent lavishly on designer clothing and other trappings of the good life—became a household word. Television shows like Dallas and Dynasty chronicled the activities of the very rich for a mass audience.
A family of affluent “yuppies”—young urban professionals—posing in their New York City apartment with their child-care worker and baby.
Figure 26.3 CHANGES IN FAMILIES’ REAL INCOME, 1980-1990
The wealthiest American families benefited the most from economic expansion during the 1980s, while the poorest 40 percent of the population saw their real incomes decline. (Real income indicates income adjusted to take account of inflation.)
Taxpayers footed the bill for some of the consequences. The deregulation of savings and loan associations—banks that had generally confined themselves to financing home mortgages—allowed these institutions to invest in unsound real-estate ventures and corporate mergers. Losses piled up, and the Federal Savings and Loan Insurance Corporation, which insured depositors’ accounts, faced bankruptcy. After Reagan left office, the federal government bailed out the savings and loan institutions, at a cost to taxpayers estimated at $250 billion.
Supply-side advocates insisted that lowering taxes would enlarge government revenue by stimulating economic activity. But spurred by large increases in funds for the military, federal spending far outstripped income, producing large budget deficits, despite assurances by supply-siders that this would not happen. During Reagan’s presidency, the national debt tripled to $2.7 trillion. Nonetheless, Reagan remained immensely popular. He took credit for economic expansion while blaming congressional leaders for the ballooning federal deficit. He won a triumphant reelection in 1984. His opponent, Walter Mondale (best remembered for choosing Congresswoman Geraldine Ferraro of New York as his running mate, the first woman candidate on a major-party presidential ticket), carried only his home state of Minnesota and the District of Columbia.