Working- and middle-class Americans, especially those of color, struggled to maintain economic equilibrium during the Reagan years. The growing national debt generated fresh economic pain. The federal government borrowed money to finance the debt, raising interest rates to heighten the appeal of government bonds. Foreign money poured into the United States, raising the value of the dollar and attracting an influx of goods from overseas. The imbalance between American imports and exports grew from $36 billion in 1980 to $170 billion in 1987.62 Foreign competition battered the already anemic manufacturing sector. The appeal of government bonds likewise drew investment away from American industry.
Continuing an ongoing trend, many steel and automobile factories in the industrial Northeast and Midwest closed or moved overseas during the 1980s. Bruce Springsteen, the self-appointed bard of blue-collar America, offered eulogies to Rust Belt cities in songs like “Youngstown” and “My Hometown,” in which the narrator laments that his “foreman says these jobs are going, boys / and they ain’t coming back.”63 Competition from Japanese carmakers spurred a “Buy American” campaign. Meanwhile, a “farm crisis” gripped the rural United States. Expanded world production meant new competition for American farmers, while soaring interest rates caused the already sizable debt held by family farms to mushroom. Farm foreclosures skyrocketed during Reagan’s tenure. In September 1985, prominent musicians including Neil Young and Willie Nelson organized Farm Aid, a benefit concert at the University of Illinois’s football stadium designed to raise money for struggling farmers.
At the other end of the economic spectrum, wealthy Americans thrived under the policies of the New Right. The financial industry found new ways to earn staggering profits during the Reagan years. Wall Street brokers like junk bond king Michael Milken reaped fortunes selling high-risk, high-yield securities. Reckless speculation helped drive the stock market steadily upward until the crash of October 19, 1987. On Black Friday, the market plunged eight hundred points, erasing 13 percent of its value. Investors lost more than $500 billion.64 An additional financial crisis loomed in the savings and loan (S&L) industry, and Reagan’s deregulatory policies bore significant responsibility. In 1982 Reagan signed a bill increasing the amount of federal insurance available to savings and loan depositors, making those financial institutions more popular with consumers. The bill also allowed S&Ls to engage in high-risk loans and investments for the first time. Many such deals failed catastrophically, while some S&L managers brazenly stole from their institutions. In the late 1980s, S&Ls failed with regularity, and ordinary Americans lost precious savings. The 1982 law left the government responsible for bailing out S&Ls out at an eventual cost of $132 billion.65