After a 28-year binge of drunken optimism and blind nationalism – often punctuated by chants of “USA, USA!” and “We’re No. 1!” – Americans are waking up with a painful hangover, facing a grim “morning in America,” not the happy vision that Ronald Reagan famously sold them on.

As the United States begins to assess how the nation got into its trillion-dollar bailout mess, a true understanding must go back three decades or so when Reagan deployed his well-honed communications skills and the Republican Right mastered the dark arts of propaganda to get the American people to shed the annoying strictures of rationality.

In the 1970s, there had been stumbling efforts by three presidents – Richard Nixon, Gerald Ford and Jimmy Carter – to begin confronting stubborn structural problems, such as a growing dependence on foreign oil, environmental damage, and excessive military spending which had sapped resources away from a productive economy.

Nixon helped create the Environmental Protection Agency; he imposed energy-conservation measures; he opened the diplomatic door to communist China; and he initiated “détente” with the Soviet Union. But his presidency foundered on the rocks of his political paranoia that led to the Watergate scandal.

President Ford tried to continue many of Nixon’s policies, particularly winding down the Cold War with Moscow and slimming down the bloated Pentagon budget, which had fed what President Dwight Eisenhower dubbed the “military-industrial complex.”

However, confronting a rebellion from Reagan’s Republican Right in 1976, Ford abandoned “détente”; he let hard-line Cold Warriors (and a first wave of young intellectuals called neoconservatives) pressure the CIA’s analytical division; and he brought in a new generation of tough-minded operatives, such as Dick Cheney and Donald Rumsfeld.

After winning in 1976, President Carter injected more respect for human rights into U.S. foreign policy, a move some scholars believe put an important nail in the coffin of the Soviet Union, leaving it hard-pressed to justify its repressive internal practices.

At home, Carter proposed a comprehensive energy policy and warned Americans that their growing dependence on foreign oil represented a national security threat of the first order, what he called “the moral equivalent of war.”

However, powerful vested interests managed to exploit the shortcomings of all three of these presidents to sabotage any sustained progress. For instance, Carter’s prescient energy address was widely mocked as the “MEOW speech.”

Soon, the American people were persuaded to turn away from their real-world challenges and enter a land of make-believe. Don’t worry, they were told. Be happy.

Reagan as Piper

The lead piper in this parade away from America’s tough choices was Ronald Reagan who insisted in his First Inaugural Address in 1981 that “government is not the solution to our problem; government is the problem.”

As President, Reagan attacked the federal regulatory system and cut taxes so recklessly that his budget director, David Stockman, foresaw red ink “as far as the eye can see.” Reagan also justified fattening the Pentagon’s budget by citing dire warnings that the Soviet Union was on the rise (despite CIA analysis at the time that it was in sharp decline).

To marginalize dissent, Reagan and his subordinates stoked anger toward anyone who challenged the era’s feel-good optimism. Skeptics were not just honorable critics, they were un-American defeatists or – in Jeane Kirkpatrick’s memorable attack line – they would “blame America first.”

Under Reagan, a right-wing infrastructure also took shape, linking new media outlets (magazines, newspapers, books, etc.) with well-financed think tanks that churned out endless op-eds. Plus, there were attack groups that went after mainstream journalists who dared disclose information that poked holes in Reagan’s propaganda themes.

Significantly, too, Reagan credentialed a new generation of neocon intellectuals, who pioneered a concept called “perception management,” the shaping of how Americans saw, understood – and were frightened by – threats from abroad.

Many honest reporters saw their careers damaged when they resisted the lies and distortions of the Reagan administration. Likewise, U.S. intelligence analysts were purged when they refused to bend to the propaganda demands from above. [See Robert Parry’s Lost History.]

In effect, Reagan’s team created a faux reality for the American public. Civil wars in Central America between impoverished peasants and wealthy oligarchs became an East-West showdown. U.S.-backed insurgents in Nicaragua, Angola and Afghanistan were transformed from corrupt, brutal (often drug-tainted) thugs into noble “freedom-fighters.”

While Reagan played the role of the nation’s kindly grandfather, his operatives refined their skills at dividing the American people, using “wedge issues” to deepen grievances especially among white men who were encouraged to see themselves as victims of “reverse discrimination” and “political correctness.”

Yet even as working-class white men were rallying to the Republican banner (as so-called “Reagan Democrats”), their economic interests were being savaged. Unions were broken and marginalized; “free trade” policies shipped manufacturing jobs abroad; old neighborhoods were decaying; drug use among the young was soaring.

Wall Street Greed

Meanwhile, unprecedented greed was unleashed on Wall Street, fraying old-fashioned bonds between company owners and employees.

Before Reagan, corporate CEOs earned less than 50 times the salary of an average worker. By the end of the Reagan-Bush-I administrations in 1993, the average CEO salary was more than 100 times that of a typical worker. (That CEO-salary figure is now more than 250 times that of an average worker.)

The era’s financial imbalances had other effects. Bloated with hundreds of billions of new dollars, the military-industrial complex recycled some of that money back into right-wing and neocon think tanks, which then justified more spending on “defense.”

The super-wealthy finance industry kicked back money to both Republicans and Democrats – as well as to friendly think tanks – to ensure that “free-market” ideology flourished and regulatory “barriers” were removed in the name of progress.

Much of this momentum continued through Bill Clinton’s presidency. Indeed, some of Clinton's biggest achievements involved collaborating with congressional Republicans on deregulation and trade agreements initiated during the Reagan-Bush-I era.

In the 1990s, the Republican Right also continued building its media infrastructure, expanding into talk radio, TV and the Internet.

By contrast, the American Left mostly ignored building media, making the Right’s investment even more striking since defense of liberal positions nearly disappeared from large swaths of the nation. [See Parry’s Secrecy & Privilege.]

The consequences of this imbalance became more obvious when the right-wing media and the Republican congressional majority harassed Clinton through the final years of his presidency. Increasingly, the mainstream press joined in, bending to the dominance of the conservative message.

Although Clinton still managed to turn the gigantic federal deficit into a surplus, his presidency was rated as a disappointment, if not an embarrassment.

In Campaign 2000, the media’s hostility was transferred to Democrat Al Gore, with distortions about Gore appearing in the New York Times and the Washington Post as well as the New York Post and the Washington Times. [See Neck Deep.]

Meanwhile, Republican George W. Bush – though a plutocrat born to privilege – was pitched to the voters as some sort of everyman. He was praised, too, for surrounding himself with “adults,” such as Cheney and Rumsfeld.

When Gore still managed to beat Bush in the national popular vote and stood a good chance of overcoming Bush’s narrow lead in the swing state of Florida, much of the U.S. press corps acted as if Bush deserved the White House and that Gore should concede.

An unprecedented intervention by five conservative Republicans on the U.S. Supreme Court stopping a court-ordered recount in Florida was welcomed by much of the American news media, which saw its principal role as protecting Bush’s fragile “legitimacy” and uniting the country behind his presidency.

That attitude grew stronger after the 9/11 attacks when the major news organizations wanted to demonstrate their “patriotism” in line with rank-and-file Americans. The Bush-Cheney power grabs after 9/11 received scant media criticism as did the run-up to the invasion of Iraq in 2003.

Like in the Reagan era, the neocons played a key role with their “perception management,” painting the “war on terror” as a frightening conflict between good and evil, in which Islamic militants “hate our freedoms” and seek to hem in the United States with a “caliphate” stretching from Spain to Indonesia.

The hyping of this Islamic threat fit with the neocon exaggerated depiction of the Soviet menace in the 1980s – and again the propaganda strategy worked. Many Americans let their emotions run wild, from the hunger for revenge after 9/11 to the war fever over Iraq.

When old allies like France urged caution, angry Americans poured French wine into gutters and renamed “French fries” as “Freedom fries.” When the rare expert dared question Bush’s case for war – as former weapons inspector Scott Ritter did – the major media joined in attacking the skeptic’s patriotism.

Arguably, the descent into this dark fantasyland – that Ronald Reagan began in the early 1980s – reached its nadir in the flag-waving early days of the Iraq War, but the journey continued. It carried the country through Campaign 2004 when John Kerry’s Vietnam War heroism was mocked and he was dismissed as “looking French.”

Reality began to reassert itself with the bloody insurgency that resulted from Bush’s conquest of Iraq and with his administration’s inept response when Hurricane Katrina flooded New Orleans.

Gradually, Americans were waking up from a long sleepwalk, but the nation still stumbled from disaster to disaster, from an exploding federal debt to the bursting of the real-estate bubble to the fact that the anti-regulatory fervor has left the country on the brink of a new Great Depression.

Ironically, many of the same Wall Street hotshots who had so disdained government – whose high-flying lifestyle was built on Reagan’s ideology that “government is the problem” – now found themselves turning to Washington for a $700 billion bailout.

But the future remains unclear. One might think that the American people would now be wide awake, having learned their lessons and eager to throw out both the neocons, who engineered the foreign policy debacles abroad, and the anti-regulators, who precipitated the economic catastrophe at home.

Yet the perception managers appear to have at least one more trick up their sleeves. They are turning John McCain, the self-proclaimed foot soldier of the Reagan revolution who championed the neocon cause overseas and the deregulators’ schemes in the domestic economy, into a reformer who can change the system.

If recent opinion polls are to be believed, tens of millions of Americans still want to believe.

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth' are also available there. Or go to Amazon.com.

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