Miller Center

American President

A Reference Resource

Domestic Affairs

Reagan came to the presidency in 1981 with a straightforward and well-articulated domestic agenda. He promised to cut taxes, curb government spending, and balance the federal budget or at least reduce the deficit. His well-crafted Inaugural Address identified the major themes the new President hoped would define his administration. After noting the severity of the nation's economic crisis, Reagan declared that "government is not the solution to our problem; government is the problem." He took pains to reassure Americans that he did not want to "do away with government." Rather, he sought "to make it work—work with us, not over us; to stand by our side, not ride on our back." Reagan also promised to restore public confidence. Solving the nation's problems required "our best effort, and our willingness to believe in ourselves and to believe in our capacity to perform great deeds . . . And, after all, why shouldn't we believe that? We are Americans."

As a conservative, Reagan was committed to reducing the size and mission of government. But as a practical politician, he recognized the importance of reaching out to the Democrats, who controlled the House by a wide margin. His task was made easier because President Carter had been alienated from the Washington establishment. In the interval between the election and his assumption of office, Reagan met with House Speaker Thomas P. (Tip) O'Neill and important Washington figures such as Katharine Graham, publisher of The Washington Post. (Mrs. Graham and First Lady Nancy Reagan soon became friends.) By the time he took the oath of office, Reagan had laid the basis for a successful start to his presidency.

Organizing the Reagan Administration

Reagan had been thinking about prospective cabinet appointments weeks before he was elected. Four of his decisions were easy: his old friend and onetime Hollywood attorney William French Smith wanted to the key post of attorney general, and Reagan gave it to him. He also felt a sense of obligation to Richard Schweiker, whom Reagan has tapped as his prospective running mate in 1976 and who had backed Reagan ever after, and to Drew Lewis and Raymond Donovan, key players in his 1980 campaign. Schweiker was named to head the Department of Health and Human Services; Donovan and Lewis were appointed secretaries of Labor and Transportation, respectively. Reagan's most difficult choice was at the State Department. His old ally Caspar W. Weinberger, who as state finance director had rescued the Reagan governorship, wanted the job. Some members of Reagan's transition advisory committee preferred George Shultz. After an inconclusive telephone conversation with Shultz, Reagan instead chose Alexander Haig, who had been recommended by former President Richard M. Nixon, whom Haig had served as chief of staff in the final troubled days of Nixon's presidency. Weinberger was given an important consolation prize as secretary of Defense, in which he would become influential.

Other appointees, however, were less familiar to Reagan. The transition team suggested and Reagan approved the selection of Donald Regan, a Wall Street banker, as secretary of the Treasury, and Samuel Pierce, an African American lawyer, as secretary of Housing and Urban Development. Reagan accepted Vice President George Bush's recommendation of Malcolm Baldrige for Commerce secretary, Senator Bob Dole's suggestion of John Block as secretary of Agriculture, and Senator Paul Laxalt's choice of James Watt as secretary of the Interior.

Reagan gave an important signal of his practical nature—and his inability to hold grudges—in choosing James A. Baker III as his White House chief of staff. Baker had been a key member of President Ford's political team in 1976 when it beat back the Reagan challenge; he had managed George H.W. Bush's campaign against Reagan in 1980. Baker's rival for the post was Edwin Meese III, who had served Reagan since his governorship. But Reagan shared the apprehension of his closest aide Michael Deaver and his political consultant Stuart K. Spencer that Meese lacked the organizational skills needed for the job: he instead gave Meese the post of White House counsellor and designated Deaver as Baker's assistant. One of Deaver's main jobs was maintaining daily liaison with Nancy Reagan. Baker, Deaver, and Meese, sometimes called the Trio, proved a talented team. They were well suited to Reagan, who preferred to delegate much of the day-to-day issues to his staff and focus on selling his economic program to the American people and Congress. While he was sometimes criticized for being uninformed, Reagan had a grasp of the issues most important to them and, as his pollster Richard Wirthlin noted, a sure sense of the sentiments of his fellow Americans. He was also willing to make decisions.

Reagan's First Months: Triumphs and Near Tragedy

Reagan and his advisers, particularly Baker, made the economy their first priority from the outset. They were helped in this when Iran released the Americans held hostage in Tehran as Reagan was taking the oath of office. Had they not done so, Meese later observed, Reagan would necessarily have been preoccupied with this issue in his early weeks in office. Instead, Reagan and his team were free to concentrate on getting their economic plan through the Democratic-controlled House of Representatives. To win in the House, they needed every Republican vote and the defection of conservative, mostly southern Democrats—organized in a caucus called "The Boll Weevils" —who found it politically difficult to oppose the new President because Reagan had carried their districts by large margins.

Reagan's economic program had two major components: tax reductions and budget cuts, which took center stage, and monetary policy, which was as important but held a lower profile. Within weeks of becoming President, Reagan asked Congress to cut marginal tax rates over the next three years by 30 percent and to trim the budget for the coming year by $41 billion. He and his team confidently predicted that these actions would stimulate economic productivity.

But the budget cuts, while receiving huge media attention, were from the start peripheral as they targeted only a small percentage of federal spending, mainly Great Society-era programs designed to widen the nation's social welfare net. Reagan was simultaneously proposing massive increases in defense spending. He also followed the advice of David Stockman, his director of the Office of Management and Budget, to avoid reforming entitlement programs such as Social Security and Medicare that were the largest components of the budget. The budgets of these politically entrenched programs were determined by complex formulas written into the laws creating them. Trying to cutback these programs presented an enormous political challenge, as Reagan learned when the Senate unanimously rebuffed an early attempt to change the Social Security rules. In truth, Reagan had little interest in overturning such popular programs. As he made clear in his diaries, released nearly two decades after his presidency, Reagan's aim was to whittle away at Lyndon Johnson's Great Society while leaving Franklin Roosevelt's New Deal largely intact.

Reagan's tax and budget proposals were nonetheless controversial. Cutting programs designed to help the poor, liberals argued, placed those Americans at even greater risk. Critics from across the political spectrum warned that the combination of large tax cuts, minimal budget cuts, and increased defense spending was a recipe for an unbalanced federal budget and a larger national debt. Reagan's advisers, believers in supply-side economics, responded that the economic recovery engendered by Reagan's tax and budget cuts would expand the tax base and eventually achieve a balanced budget. But this outcome assumed that Congress would make the spending cuts that Reagan had proposed. Instead, Congress enacted most of the tax cuts but made a "Christmas tree" out of the budget bill. It came as a surprise to Reagan that Republican members of Congress loaded up the budget bill with pet spending projects as readily as Democrats did. The budget would have been out of balance even if the cuts proposed by Reagan had been enacted. As it turned out, the combination of lost tax revenues and higher spending sent the deficit ballooning.

Monetary policies, a key to the nation's economic health, had a lower profile early in the Reagan years. They were the domains of the Federal Reserve, which could act without presidential or congressional approval. Chairman of the Federal Reserve Paul Volcker, a Carter appointee who quickly won Reagan's confidence, aimed to bring inflation under control by tightening the nation's money supply. The result was higher interest rates for borrowing money, which squeezed small businesses and middle-class Americans. Volcker believed that this painful, economic medicine was necessary to break the back of inflation.

As Congress debated Reagan's tax and budget proposals—their passage still in doubt—tragedy nearly struck. After a speech at a Washington, D.C., hotel on March 30, John Hinckley Jr., a loner afflicted with mental problems, fired several shots at the President, one of which hit Reagan in the chest. At first, Reagan did not realize he had been shot and thought his ribs had been broken when he was hurled into the presidential limousine. (Reagan's press secretary, James Brady, was permanently injured with a bullet to the brain; a Secret Service agent and District police officer were also wounded.) Secret Service agents diverted the presidential limousine that was en route to the White House to a hospital, a move that probably saved Reagan's life. Reagan, gasping for breath but ever the trouper, walked into the hospital, then collapsed. Later he won the plaudits of the nation when his jokes on the operating table were relayed to the public, including a quip to an anxious Nancy Reagan, "Honey, I forgot to duck." On the operating table Reagan told the doctors he hoped they were all Republicans. The doctors appreciated Reagan's humor, but they were not laughing. The bullet had missed Reagan's heart by less than an inch.

Americans responded to Reagan's gallantry with an outpouring of support that helped the White House and its congressional supporters rally support for passage of the administration's tax and budget cuts. Of course, Reagan's program did not pass merely out of sympathy. Polls showed that the tax cuts were popular with voters, and the White House team, led by Baker, moved deftly to maximize its political advantage. Reagan provided an added incentive for the Boll Weevil Democrats in the House by promising not to campaign in the mid-term 1982 election against any Democrat who voted for both his tax and budget bills. After compromises that slightly lessened the tax cuts and restored some of the proposed budget cuts, Congress quickly passed both bills. The heart of Reagan's economic program was now in place. He had obtained a 25-percent reduction in taxes over three years. Supposedly, Congress had also made $38 billion in budget cuts but these were more than offset by other spending increases stemming from the administration's military spending and congressional pork-barrel projects.

Along with passage of his economic program, Reagan won an important victory in his first year when he challenged the nearly 12,000-member Professional Air Traffic Controllers Organization (PATCO). The controllers had called an illegal strike, threatening to bring the nation's air traffic to a standstill. Even though PATCO had been one of the few labor unions to support him for President in 1980, Reagan fired the strikers when they defied a back-to-work order. This left traffic control of the nation's skies in the hands of managerial staff, a few loyal controllers, and new hires. Some critics predicted a rash of dire accidents, but this did not happen and Reagan emerged from the controversy with the reputation of a strong leader who was able to make tough decisions. Firing the PATCO strikers also sent a clear message to corporate America, which was encouraged to bargain more firmly with organized labor and hold down wages that had skyrocketed in the inflationary decade of the 1970s.

The Reagan Recession

Reagan won the early victories that he and his advisers desired, but the momentum they generated proved difficult to sustain. The weakness of the economy was the principal reason. Even before Reagan's economic program was signed into law, the Federal Reserve had identified the loose monetary policies that had led to what economists called "The Great Inflation" of the 1970s as Public Enemy No. 1. When the Fed under Paul Volcker tightened interest rates to curb inflation, the economy plunged into recession and Reagan's popularity dipped with it. He reached a low-point—below what he would experience during the Iran-Contra scandal—in January 1983 when a Gallup survey gave Reagan an approval rating of 35 percent. Given the monetary circumstances Reagan inherited, it is unlikely that a recession could have been avoided. But the Reagan tax bill worsened the deficit. Reagan's prediction that the tax cuts would increase revenues missed the mark, at least during the 1981-1982 recession. The 1982 budget deficit was $113 billion—more than $30 billion more than when Carter left office. Unemployment rose to 11 percent, and Reagan was often picketed when he campaigned for Republican candidates in the 1982 midterm elections.

Leading Republicans, including Senate leader Howard Baker, urged Reagan to break with the Federal Reserve, but he refused to do so, believing that tight interest rates would eventually work. "Stay the course," Reagan proclaimed over and over again. Over time, despite the human costs of the recession, the Fed's policies did work. Tight money and reduced inflation laid the basis for a boom that began in 1983 and was still going when Reagan left the White House in 1989. Once the economy turned upwards, Reagan chided his critics, saying "They don't call it Reaganomics anymore." One reason for this was that Reagan himself no longer indulged the more extreme claims of supply-side economics. The President stopped talking about balancing the budget and in 1982 supported the Tax Equity and Fiscal Responsibility Act (TEFRA), a measure presented as a tax reform bill that was also a tax increase. Congress passed TEFRA, and Reagan signed it into law. In 1984, he supported another tax increase, again packaged as reform.

On another fiscal front, after failing in an aborted attempt to reduce some Social Security benefits, Reagan teamed with House Speaker Tip O'Neill to bring spiraling Social Security costs under control. Reagan appointed a commission, headed by Alan Greenspan, on which O'Neill and Senate leader Baker also had appointees, that came up with a monumental compromise that slightly raised the retirement age, boosted payroll taxes, and taxed the benefits of high-end recipients for the first time. Reagan signed the bill into law in the White House Rose Garden on April 20, 1983, at a ceremony attended by O'Neill, who said, "This is a happy day for America." This compromise preserved the solvency of the Social Security system for a generation.

Reagan's Troubles

Reagan's problems in 1982 and 1983 were not limited to the economy. Secretary of the Interior James Watt rankled environmentalists who found his opposition to federal environmental protections unacceptable. Watt declared that "We will mine more, drill more, cut more timber" and proposed to reduce federal funding for urban parks, lease federal lands off the California coast for oil and gas exploration, sell federal land to pay off the deficit, and give states the right to regulate environmentally hazardous strip-mining. Environmental groups opposed Watt's proposals, almost all of which died on the vine or were blocked by Congress. After making comments that even Reagan loyalists found offensive to ethnic groups and handicapped persons, Watt resigned under pressure in October 1983.

The administration also angered civil rights organizations on a number of fronts. Reagan made ill-considered remarks about Martin Luther King, Jr., in 1982 as Congress debated making King's birthday a national holiday. The same year the Reagan administration supported a lawsuit brought by Bob Jones University of South Carolina against the Internal Revenue Service over its long-standing policy of denying tax breaks to segregated schools. The policy originated in 1970 in an effort to combat the development of segregated private schools, which had become popular among whites in the wake of public school desegregation in the South. The IRS policy, though, also affected religious schools such as Bob Jones University, which enrolled a few minority students but forbade interracial dating and marriage.

Counsellor to the President Ed Meese and Attorney General William French Smith persuaded Reagan to order the Justice Department to withdraw its support for the IRS policy, but failed to calculate the political consequences. Many Americans—black and white—protested the administration's actions; even some of Reagan's political aides disagreed with the policy change. Reagan backtracked and supported legislation to maintain existing policies. While this legislation languished in Congress, the Supreme Court ruled against Bob Jones University and in favor of the IRS.

In both the James Watt and Bob Jones controversies, Reagan demonstrated a practicality that blunted liberal opposition to his environmental and civil rights policies but also raised questions on the right. Some social conservatives were dismayed by Reagan's retreat on Bob Jones. On economic issues, the more extreme supply-siders became disillusioned with Reagan for his embrace of tax increases after the initial tax cuts and for his refusal to cut Social Security or other entitlement programs. But in following a middle course, Reagan had the approval of a majority of Americans, as demonstrated by his rising approval ratings after the recession ended.

The Reagan Boom

Reagan's confidence in the innate strength of the U.S. economy was validated in 1983 with the beginning of an almost unprecedented economic boom. The gross national product increased by 3.6 percent in 1983 and by 6.8 percent in 1984; by comparison, the GNP had shrunk in 1982 by 2.5 percent. Unemployment sank from 9.5 percent in 1983 to 7.4 percent in 1984. Inflation, tamed by the end of 1981, remained under control through 1984, helping to generate lower interest rates. The stock market boomed in the early 1980s, with the Dow Jones industrial average rising nearly 33 percent in Reagan's first term.

What explains this turn-around in the American economy? There are conflicting views. Reagan's supporters point to the 1981 tax cuts. Other Reagan admirers trace the economic boom to the administration's 1982 tax increases to counter the growing budget deficits. The Federal Reserve, blamed by some for the recession because of its tight-money policy, was praised by others for deciding in 1982 to relax its controls over the money supply. On the margins, Reagan's massive defense spending added to the economic boom, which was also propelled by larger macroeconomic trends in business, industry, technology, and the workforce.

The Reagan boom raised more people out of poverty than any similar boom since World War II, but the economic revival of the mid-1980s did not touch all Americans equally. One study revealed that while annual income for American families grew by 3.5 percent during Reagan's first term, middle-class families saw only a 1-percent gain, compared to affluent Americans (those in the top quintile of the income bracket) who saw their incomes rise by 9 percent. In contrast, American families with incomes in the bottom quintile saw their average incomes decline by 8 percent; black families and households headed by women were particularly hard hit by declining incomes. Finally, child poverty increased to levels exceeding those of the mid-1960s.

While the economy expanded, so did the federal government's budget deficits and the national debt. Despite Reagan's tax increases in 1982 and 1984 (and eventually 1986) and the limited cuts in spending, Reagan never sent Congress a balanced budget, even if Congress had approved it exactly as it came from the budget office. In fact, Congress added many pet spending programs that made the deficit worse. Between 1983 and 1989, the budget deficit was always at least $153 billion; in 1986, the federal budget deficit climbed to more than $221 billion. Likewise, the national debt increased during the Reagan years from $914 billion to $2.6 trillion; the annual service (interest) paid on the debt by the government more than doubled—from $71 billion to $150 billion—while Reagan was in office. Subsequently, however, when the budget was balanced in the 1990s after the collapse of the Soviet Union, conservatives made the point that the deficits of the Reagan years were "wartime deficits" caused largely by the sharp increase in the defense budget. The United States has always run deficits during wartime and the Cold War, although not usually a shooting war, was expensive. In this view, the deficits accomplished something far more important than adding to the nation's debt, contributing to the end the Cold War and eventually the disappearance of the Soviet Union.

Reagan's Second Term

Reagan's impressive victory in the 1984 presidential election was followed by White House staff changes that had important consequences during the second term of his administration. The triumvirate of Counsellor Ed Meese, Chief of Staff James Baker, and Deputy Chief of Staff Michael Deaver, integral to the administration's first-term success, left the White House. This trio understood Reagan's strengths and weaknesses and also—Baker in particular—understood the political currents on Capitol Hill. But Baker was burned out from the rigors of his job and from the in-fighting with administration conservatives, to whom Meese was a hero. After Reagan's 1985 inauguration, Attorney General William French Smith resigned and returned to California; he was replaced by Meese. Shortly thereafter, Deaver departed for the private sector. In the most important change, Baker swapped jobs with Treasury Secretary Don Regan, in a move they had worked out together that the President almost casually approved. Reagan afterward regretted this switch but believed at the time that the alternative was to lose both men to private careers. In addition to wanting to escape the stresses of the White House, Baker hoped the experience of Treasury would help his political career. Regan, for his part, had become bored with Treasury and longed for a more powerful role at the center of government.

These staff and cabinet changes on balance proved detrimental. While Baker performed well at Treasury, Meese had a mixed record as attorney general and was often engulfed in controversies. Regan floundered in his new position—Nancy Reagan would say later that he "liked the sound of 'chief" but not of 'staff'"—and lacked his predecessor's political skills. Regan saw himself as a chief executive and the President as chairman of the board and took it upon himself to make decisions that Baker and Deaver would not have made without consulting the President. Regan failed to engage Reagan on several crucial matters, adding to the President's detachment from day-to-day decision-making.

Second-Term Prosperity

During Reagan's second term, the economic boom that had begun in 1983 expanded vigorously. The Gross National Product grew annually between 1985 and 1989 by at least 2.7 percent; in 1988, that growth reached 4.5 percent. Unemployment, meanwhile, fell from 7.1 percent in 1985 to 5.2 percent in 1989. Inflation stabilized, and interest rates remained low as well. The stock market reached new heights. Even a corrective crash in 1987—in which the market plummeted 500 points in a single day—amounted only to a minor setback. As a consequence of the boom, real estate, high-tech, financial, and retail industries grew rapidly. Growth was also encouraged by Reagan's tax policy; the marginal tax rate that was 70 percent when he took office had been reduced to 28 percent by the time he left.

The economic outlook was not completely rosy, however. When John F. Kennedy was President, he had supported tax cuts on the theory that "a rising tide lifts all boats." The validity—and limitation—of this belief was demonstrated in Reagan's second term, when millions of poor people, many of them Latino or African American, saw their incomes rise above the poverty line. At the same time, however, wealthiest Americans and corporations benefited most from the economic expansion, and the gap widened between the richest Americans and the middle class. The federal budget deficit also continued to balloon. Between 1985 and 1989, the federal government never ran a budget deficit smaller than $149 billion; in 1986, the deficit was more than $220 billion. When Reagan left office in 1989, the national debt totaled $2.6 trillion, nearly three times larger than when he began his tenure in 1981.

Increased government spending contributed to the increase of the deficits and the mounting national debt. After failing to win significant spending cuts from the Democratic-controlled Houses in his first term, Reagan largely abandoned the effort in his second. So domestic spending continued to grow, while the lower tax rates failed to provide enough revenue to compensate. The defense buildup also contributed to the deficits. The cost of financing the debt absorbed funds that the government might have used to modernize the nation's infrastructure, especially its transportation system. The ballooning national debt made the American government and economy more dependent on foreign investment. Foreign imports helped American consumers by lowering the cost of goods and keeping inflation down; the other side of this coin was a massive trade imbalance.

The 1986 Tax Law

The Reagan administration's most celebrated domestic achievement during its second term was the Tax Reform Act of 1986. Faced with ever-larger budget deficits and a growing national debt, the administration had raised taxes in 1982 and 1984 and won legislation in 1983 that restored financial solvency to the Social Security program. The federal budget still was not balanced, however, and Reagan's advisers contemplated other measures to increase revenues. In 1984, the Treasury Department began pulling together a proposal that would lower corporate and individual tax rates but broaden the federal government's tax base—and enlarge its revenues despite rate reductions—by closing loopholes that allowed individuals and corporations to avoid taxes and eliminating deductions that the government considered tax shelters.

This plan emerged as the essence of Reagan's tax reform proposal, which he made public in May 1985 by calling for "fairness, growth, and simplicity" in the tax code. Unsurprisingly, individuals and corporations facing the loss of their loopholes—many of them Republican allies of the President—complained loudly about the initiative. But several factors favored its passage. First, Reagan's political advisers believed that tax reform could serve as the second term's domestic policy centerpiece. Second, the Baker-Regan job switch actually sped reform along. Regan, the originator of the plan, was now in the White House where he made sure the President stayed focused and supportive of tax reform. At the same time, Baker, from his perch at Treasury, used his political skills to sell the program to Congress. Finally, the tax reform proposal won public support, largely because dissatisfaction with inequities in the tax code had grown considerably since Reagan had come into office.

Reagan toured the country throughout 1985 and 1986 to build support for tax reform, which he touted as tax justice. Because of its complexity, the legislation moved slowly through Congress. But Capitol Hill's tax policy experts—Senator Bob Packwood (R-OR) and Representative Dan Rostenkowski (D-IL)—supported and helped shape the Reagan proposals. The President signed the Tax Reform Act in October 1986. Because the highest tax cuts were in the top bracket, some critics of the law saw it as weakening the concept of progressive taxation in which the wealthiest bear the heaviest burden. While the Tax Reform Act did introduce more equity by closing some loopholes in the tax code, savvy lawyers and tax experts soon found others. The impacts of the law did not fall equally on all industries: real estate investment, for instance, was subject to heavier taxation, which in turn contributed to the problems of the savings-and-loan industry. Nor did the tax bill produce sufficient new revenue to make much of a dent in the federal budget deficit.

Reagan's Mixed Record on Deregulation

Ronald Reagan took office in 1981 promising to curb the growth of government regulations, especially those that affected private industry and businesses. He believed that a web of regulation was strangling private enterprise in the United States and harming the nation's economy. Reagan was not the only politician to address the explosion of federal regulation and the public discontent it produced. In the late 1970s, liberals and conservatives in Congress worked with President Jimmy Carter to deregulate the airline, trucking, railroad, and financial industries, mainly by eliminating government regulations that restricted competition.

Despite Reagan's anti-regulatory rhetoric, the administration's success in eliminating and simplifying regulations was mixed. His success varied from agency to agency; in some of them, Reagan appointees managed to slow the promulgation of new regulations, while in others the bureaucracy held sway. One issue on which Reagan's action matched his rhetoric was the end of price controls on oil, which he ordered upon entering office. Prices fell immediately. Reagan also ordered the relaxation of regulations guiding corporate mergers, setting off a flurry of both hostile and friendly takeovers.

These actions had public support. But Reagan's decision to reverse regulations designed to limit air pollution, to protect the public from carcinogens and hazardous waste, and to oversee nuclear power plants generated a political backlash. Labor unions, consumer advocacy groups, and concerned citizens—with congressional support—launched counter-attacks in the courts that forced the administration to retreat from many of its deregulatory efforts. As a result, most of the Nixon, Ford, and Carter-era regulations designed to protect the environment and American workers remain in place.

Reagan and the AIDS Epidemic

In the mid-1980s, a new public health epidemic—Acquired Immune Deficiency Syndrome (AIDS)—struck the United States. AIDS was a virus, transmitted through sexual contact, intravenous drug use, and blood transfusions that destroyed the human body's immune system and left its victims defenseless against other diseases or viruses. Its main victims in the mid-1980s were drug users and gay men. Medical doctors had no cure for AIDS, which at the time was a virtual death sentence. By 1985, nearly 4,000 persons had died because of the virus; four years later, the Center for Disease Control reported more than 46,000 AIDS deaths and estimated that nearly 800,000 Americans were infected.

The initial public reaction to the epidemic was marked by fear and ignorance. People knew so little about the disease—one widespread misconception held that AIDS could be transmitted via contact with toilet seats—that victims were apt to be shunned rather than treated with compassion. Societal prejudices against homosexuals also colored the reaction to the epidemic. AIDS became known as a "gay disease," which led many Americans to conclude it afflicted a minority of the population. A smaller number of Americans who equated homosexuality with deviancy saw AIDS as a form of divine or natural retribution. This view was expressed in 1983 by columnist Patrick J. Buchanan: "The poor homosexuals. They have declared war on nature and now nature is exacting an awful retribution."

President Reagan did not recognize the magnitude of the AIDS crisis; he thought of the disease, as his White House physician put it, "as if it were measles and would go away." Reagan's attitude began to change on July 24, 1985, when he telephoned his friend, the actor Rock Hudson, in a Paris hospital to offer him his condolences. Reagan had been told that Hudson had inoperable cancer; later that day, as he noted in his diary, he learned from a television report that Hudson had AIDS. The Reagans invited Hudson to a White House dinner in August; he came but died less than two months later. In September 1985, Reagan called fighting AIDS one of the administration's "top priorities." On February 5, 1986, he paid a surprise visit to the Health and Human Services department (HHS) to speak out against AIDS, calling it "one of our highest public-health priorities," and ordered his Surgeon General, Dr. C. Everett Koop, to prepare a report that focused on prevention. In October 1986, Koop issued his report, which starkly outlined the gravity of the epidemic and three steps for prevention: abstinence, monogamy, and condoms.

The Reagan administration found it difficult to speak with one voice on AIDS. Social and religious conservatives within the administration and outside it objected to Koop's explicit endorsement of condoms and what they saw as his implicit acceptance of pre-marital sex. But Reagan's HHS secretary, Margaret Heckler, was in the forefront of those who sought aggressive government action. As early as 1983, she called AIDS her "number one priority" and with Reagan's backing won congressional authority to transfer funds within HHS from other programs to use on AIDS research. Spending for AIDS became a contentious priority during the rest of Reagan's presidency; by 1989, the federal government was spending $2.3 billion a year on research and AIDS prevention.

While Reagan spent more on AIDS and spoke out against the disease earlier than his critics generally acknowledge, he is still faulted for not using the full power of the presidential "bully pulpit" to rouse the nation about the dangers and causes of the disease. At the urging of Nancy Reagan, he did so on May 31, 1987, saying, "There's no reason for those who carry the AIDS virus to wear a scarlet A." Reagan's critics on the left said that the speech was too little, too late. Some social conservatives criticized Reagan for giving the speech at all.