Why Attempts to Compare Donald Trump to Ronald Reagan Fall Flat
They both appealed to working class Americans, but Reagan was committed to serious reforms.
Sen. Tom Cotton recently delivered a speech on the future of the Republican Party, and it was noteworthy on a number of levels. Cotton has become increasingly comfortable giving voice to strident populism, and his remarks were very much in line with those delivered by President Donald Trump at his 2017 inauguration.
One purpose of the speech was to connect today’s right-leaning populist impulses with the revered 40th president of the United States, whose library had invited Cotton to offer his reflections on the state of the GOP. Cotton was explicit in stating his view that the vision for America he shares with Trump is in full continuity with that of Ronald Reagan.
It’s a bold claim. It is also telling that, having made it, Cotton suggested there is ample evidence in their records to make this connection, though his speech did not offer a list of specific examples.
There are, of course, some similarities between the Reagan and Trump presidencies. Both men cut taxes, and pursued, to varying degrees, deregulation to promote growth and business formation. But so too did George W. Bush, and no one thinks that he has much in common with Trump.
Cotton and others believe there is a special connection between the 40th and 45th presidents based on their shared ability to attract the votes of working-class Americans. Unstated by the senator in his speech, but present in the background (and explicitly advanced by others), is the contention that, like Trump, Reagan was reluctant to reform the nation’s main entitlement programs—especially Social Security and Medicare—out of his concern for the welfare of working families.
This argument strikes a particularly dissonant chord because the historical record says otherwise. It is not that Reagan was unconcerned about working Americans. But he believed these Americans would be served best by a strong and dynamic economy, and not with expanded and financially unsustainable government benefits. His great skill was to make this case in a way that was appealing to a broad coalition of Americans, including the working class. In this regard, one could say the two presidents were alike in that both cultivated a special political connection with traditionally Democratic voters who were instrumental to their political victories.
But Reagan did not allow his determination to win the support of these Americans to deter him from pursuing controversial reforms of entitlement programs, including within Social Security and Medicare. For, unlike Trump, Reagan was a determined budget-cutter, and championed serious changes to just about every major domestic program in the federal portfolio. While he famously fell short of his fiscal objectives—his terms were marked by historically large annual budget deficits—Congress did enact a surprising number of major entitlement program changes during this period, many with long-lasting effects, and he was aggressive in his push for many more that were never approved because of congressional opposition, not for lack of resolve on his part.
None of this can be said of the Trump era.
As a candidate, Trump made it clear he had no interest in politically controversial adjustments to the nation’s main benefit programs. In fact, he used his opposition to any significant changes to Social Security, Medicare, and even Medicaid as a way to distinguish himself in the crowded field of candidates for the 2016 GOP nomination. Trump claimed he could eliminate the national debt by cutting foreign aid and “waste, fraud, and abuse,” and by reversing trade agreements. On this latter point, he conflated trade deficits with budget deficits and contended, erroneously, that lowering the quantity of imported products would somehow balance the federal budget. (Of course, he also never explained precisely how he would narrow the nation’s trade deficit, and, perhaps not coincidentally, it widened while he was president.)
It is not surprising that Trump’s farfetched budgetary musings did not hurt him with GOP voters. Most Republicans are basically no different than Democrats in their indulgence of wishful thinking on fiscal matters. They want to believe that rising federal debt has nothing to do with middle-class entitlements, which makes them susceptible to claims that adjustments to these programs are unnecessary, and also unjust. When Trump stated he could cut taxes, increase defense spending, wall off the major domestic spending programs, and still eliminate all federal debt in seven years, he was telling voters exactly what many of them wanted to hear. Of course, once in office, Trump never even made a show of developing such a plan, which also did not seem to matter to Republican voters.
While it is tempting to dismiss all of this as the usual sort of unserious excess that is commonplace in American politics, Trump’s unconditional and widely reported commitment to protect the major benefit programs if elected had a real effect on policymaking.
In 2017, with Trump in the White House, Republicans were in a position to pursue serious reforms if they were of a mind to do so. They controlled Congress, and Paul Ryan, as speaker of the House, had been a long-time proponent of building more competition into Medicare (a concept known as “premium support”) to lower program costs. He might have been able to move through Congress the first pieces of such a scheme if the president had been open to it. But Trump’s unequivocal opposition to any and all Medicare changes during the campaign made it impossible to even discuss the idea.
Instead, the GOP wasted months on an ill-fated mission to repeal and replace the Affordable Care Act (ACA). When that failed, Republicans in Congress were unable to agree on anything significant—with the exception of a deficit-increasing tax cut—before Democrats took over the House after the 2018 midterm election. At that point, it was inevitable that the Trump presidency would come and go without meaningful changes of any kind to the nation’s major domestic spending programs.
Reagan’s presidency was very different. He presided over an era of intense reform activity, which is clearly how he liked it. As a candidate in 1980, he did make repeated commitments to safeguard Social Security’s “integrity.” In this respect, he was no different than every other successful political candidate since the 1930s. Unlike Trump, however, he also made it clear he wanted to cut federal spending alongside his planned tax cuts, and made that a central theme of his platform. He was not eager to mount a frontal assault on the nation’s most popular benefit program, and never thought that this was necessary, or advisable, in any event. He was convinced, however, that he needed to slow the pace of federal spending growth to help revive the economy, and he was determined to achieve that goal, including by restraining benefit commitments.
In 1981, with Social Security’s trust funds headed toward insolvency, Reagan’s first budget included direct benefit cuts to the program, which he and his advisers argued would strengthen rather than weaken it (and thus be consistent with his campaign pledge). Among other things, he proposed trimming benefits for burial services, delaying the inflation adjustment to benefits by three months, and reducing payments to new retirees who joined the program before age 65. Further, he proposed a major overhaul of disability benefits to reduce the number of workers who qualified for assistance, which he then pursued through aggressive administrative changes.
Not surprisingly, the political backlash from Democrats was swift and intense, and also effective. Much of Reagan’s first-year spending agenda eventually made it through Congress, but not the adjustments proposed for Social Security. Democrats used opposition to those changes in the 1982 midterm election to defeat scores of incumbent Republican House members, and thus add to their majority.
Nonetheless, Reagan persisted. Having failed to secure any Social Security reforms during his first year, he appointed a bipartisan commission in December 1981, headed by Alan Greenspan, with a mandate to find consensus on changes that would shore up the finances of the trust funds, which were then nearing depletion. He and his top aides used this forum, and the crisis of impending insolvency, to secure as much reform as was achievable with Democrats firmly in control of the House. Among other things, the rescue plan that was approved by Congress in 1983 increased the normal retirement age from 65 to 67, with a four-decade transition. This adjustment was the most consequential provision of the agreement, and among the most important benefit changes ever enacted by Congress. By itself, raising the retirement age cut the 75-year deficit in the trust funds by one-third.
The 1983 reform plan also subjected Social Security benefits to income taxation for the first time, with the added revenue returned to the program’s trust funds. Many Democrats viewed this as a win for using tax increases, as opposed to benefit cuts, to improve program solvency. But it is possible to see it as a back-door spending cut too. The change effectively reduced Social Security benefits for higher-income retirees by percentages tied to their tax brackets. In effect, this reform was equivalent to cutting benefits for the affected retirees by roughly 25 percent, with the proceeds used to reduce the trust funds’ actuarial deficit.
Reagan also agreed to a payroll tax hike as part of the bipartisan rescue package for Social Security, but he did not agree to push the Social Security payroll tax rate above the level it was scheduled to reach eventually anyway. Under the law that existed before the 1983 amendments, the payroll tax rate for Social Security was to rise gradually to accommodate the rising costs of an aging population, eventually reaching a combined employer-employee rate of 12.4 percent in 1990. The package Reagan agreed to bumped up the pace of tax rate increases between 1984 and 1990 but it did not increase the ultimate rate above 12.4 percent, where it has remained since 1990. Reagan’s small concession on payroll tax rates was clearly instrumental in securing bipartisan consent for the whole plan, including the permanent increase in the retirement age to 67, which has been a far more consequential change in the program.
Reagan’s presidency was also a time of significant reform of Medicare. In 1982, the Republican Senate worked with key Democrats to allow beneficiaries nationwide to get their Medicare coverage from privately administered Health Maintenance Organizations (HMOs) instead of the traditional program. The HMOs were paid fixed monthly amounts for each enrollee to finance all Medicare-covered services. Any savings achieved by the HMOs through more efficient provision of patient care could be used to provide supplemental benefits, and thus make the private plans more attractive to potential participants.
Once authorized in law, private coverage in Medicare—known then as “risk contracting”—took off. It eventually evolved into today’s Medicare Advantage program, which now accounts for more than 40 percent of all program enrollment.
In 1983, Republicans in Congress also were central to devising a bipartisan plan to convert how hospitals were paid by Medicare. Instead of using reported costs as the starting point for reimbursement, the new legislation, which was controversial while it was under consideration, mandated the calculation of diagnosis-related rates for inpatient stays in advance of hospital admissions. Under the new rules, known as the prospective payment system (PPS), Medicare calculated what it would pay for the services hospitals provide based on the reasons for all admissions, and the payments were not adjusted by the number of days patients spend in the facilities. The changed incentives from this switch revolutionized the industry and led to many years of efficiency-improving adjustments in how hospitals care for their patients.
There was other consequential legislation during these years beyond Social Security and Medicare. In 1981, states were given more flexibility in Medicaid to set their own rates for hospital stays and other services, without interference from the federal government. In 1986, Congress approved a sweeping modification of the retirement program for federal retirees, Prior to the reform, federal workers participated only in a defined benefit program that faced financing challenges. The reform allowed the employees to set aside a portion of their wages in fully funded, and invested, personal retirement accounts managed by the Thrift Savings Plan (TSP), with the government matching the contributions to encourage take up. The savings program is supplemented by a smaller, and thus more affordable, defined-benefit annuity than was the case under the prior system. The reformed retirement plan is widely viewed as successful and a model for other public and private employers. At the end of 2021, the TSP was managing accounts with a total value exceeding $800 billion, with an average individual account balance of $181,000 for employees hired after 1983.
None of this would have been possible if Reagan had signaled to his aides and allies in Congress that he preferred a play-it-safe agenda. That clearly wasn’t his way. He ran for president because he wanted to change major features of the government’s vast portfolio of programs, and he did so with vigor, and much success, until he left office.
Trump, on the other hand, let it be known early and often that he was not interested in big changes to the major benefit programs, which, quite predictably, led to a period of stasis rather than reform. He had full control of Congress for two years—a political advantage that Reagan never enjoyed—and still he produced far less by way lasting reforms.
In short, on entitlements (and much else), the Reagan and Trump eras played out in very different ways, and the reason is self-evident.
James C. Capretta is a senior fellow and holds the Milton Friedman Chair at the American Enterprise Institute.